IDA holds public hearing on application for tax breaks on downtown apartment building

The developer of a proposed 165-unit apartment complex on East Main Street made its pitch for tax exemptions from the Riverhead Industrial Development Agency at a public hearing Monday night at Riverhead Town Hall. 

The $82 million development by Heatherwood, a 40,000-square-foot structure on the 1.4-acre site at 203-213 East Main Street will provide market-rate rentals of 52 studios, 80 one-bedroom and 33 two-bedroom apartments, according to the developer’s application to the Riverhead IDA. 

Rents will range from about $2,400 per month for studio apartments to $3,000 per month for one-bedroom apartments and about $3,600 for the two-bedroom units, Sean Sallie, Heatherwood’s developer of Planning and Development told the IDA board Monday night.

“We’re very confident that the demand is there. We think it’s going to be an excellent project,” Sallie said.

He detailed the developer’s contributions that he said will provide public benefits to the community. Among them, Sallie said, is the on-site parking that will be built, though the town code does not require on-site parking because the site is within the downtown parking district.  The development will provide 162 on-site parking spaces, which Sallie said will consist of “two podium levels of structured parking.”

The developer is paying “roughly $700,000” to the Riverhead Water District to replace existing, old water mains on East Main Street and East Avenue, plus $300,000 in “key money” to the water district, Sallie said. The Riverhead Sewer District is requiring the developer to pay for the installation of a sewer line and an additional pump for a nearby sewer district pump station, Sallie said. The developer is also paying about $500,000 in park fees, he said, referring to the per-unit fee required by town code to provide money  for town parkland and recreational facilities.

“So it’s a considerable amount of public benefit and it goes above and beyond the demand placed on or placed by our or generated by our development,” Sallie said.

The developer is seeking an enhanced real estate property tax benefit: abatement (reduction) of real estate property taxes during the construction period and for 25 years after construction, according to the IDA application. The IDA real property tax benefit reduces property taxes otherwise due on project improvements. The abatement is typically phased out over the term of the lease and project agreement with the IDA. 

The Riverhead IDA’s standard tax exemption policy provides for the abatement of property taxes for a 10-year period, generally starting with a 50% real property tax abatement on the property’s increased assessed value in the first year; 45% real property tax abatement in the second year; 40% abatement in the third year; and thereafter declining 5% per year, so that by the end of the 10-year period the property owner is paying the full tax. 

The IDA may provide “enhanced” abatements for projects “considered significantly and strategically important to the economic well being of Riverhead, Suffolk County, and the Long Island Region,” the IDA’s Uniform Tax Exemption Policy states. Enhanced benefits may include a longer abatement period and/ or larger abatement amounts.

The amount of the real property tax abatement being sought by Heatherwood is not indicated on the application.

State law allows the IDA to exempt benefitted projects from mortgage recording taxes and state and local sales and use taxes.

Heatherwood is seeking a $357,656  mortgage recording tax exemption on a $47,687,511 mortgage.

It is also seeking a $2,896,895 state and local sales/use tax exemption.

The project will create approximately 150 construction jobs having an average annual salary of $75,000 and three full-time permanent jobs with an average annual salary of $69,000, according to Heatherwood’s application.

Heathwood, which Sallie called “the largest ground-up developer of multifamily properties in both Nassau and Suffolk counties on Long Island,” owns, operates and maintains all of its properties, he said. “We have over 70 years of experience in the residential real estate business and we’ve never sold a multifamily community. We area  vested long-term partners,” Sallie said.

The Town Board granted final site plan approval to the project on Oct. 3. “We are eager to put a shovel in the ground and the granting of requested financial benefits from the IDA would allow us to take this next step,” Sallie said.

Reeves Park resident Mike Foley questioned the developer’s need for IDA benefits. “This is going to be a very profitable project, with or without public assistance,” Foley said.

Mike Florio, CEO of the Long Island Builders Institute spoke in support of the project, which he said is the type of multifamily housing needed on Long Island. 

“If these developments were burdened with full tax value, there would not be enough return on investment for their capital partners to finance and these projects would not get built,” Florio said.  “​​The IDA support benefits the entire region, creating a huge multiplier effect with a critical mass of residents living in the downtown, supporting local businesses that stimulate tremendous economic activity,” Florio said. “This would be the final step in a very long process to get here,  get the approval of this board.  I believe by enabling new multifamily development that would otherwise not be able to secure private financing, we can increase the options and availability of housing stock, ease the burden of a lack of overall supply to stymie us on Long Island.”

Jonathan Brown, attorney for the Riverhead Fire District, said the fire district commissioners oppose real estate tax abatements that affect the fire district taxes.

The multistory apartment complexes downtown will have a “severe impact” on the fire service in Riverhead, both in terms of apparatus needs and manpower training, Brown said. 

Ike Israel of Richmond Realty said the downtown needs the project. “We need market rate apartments in downtown Riverhead. Right now, there is a horrible perception of what’s going on. Look at this,” he said, pointing to the architect’s rendering of the proposed building. This is beautiful. We need the investment,” Israel said. “The developers have been on Long Island a long time. It’s now finally that they’re coming to Riverhead — with 7% interest rates. We need to figure out how to help them. How to help keep Riverhead continuing to revitalize,” he said. 

The hearing was adjourned to the IDA’s next public meeting, to provide an opportunity for the applicant to submit additional information requested by the IDA. 

“I just want to say that was a pretty good presentation from the applicant,” IDA Chairperson James Farley said. “Thank you very much and good public comments. I think everybody wants to get downtown Riverhead going, keep it moving forward. We just need to get a consensus here as to the best way to go about it. Let’s get that information,” Farley said.