IDA hearing set for Monday on application by developer of new Rt. 58 hotel, a Marriott Residence Inn

A 140-suite Marriott Residence Inn planned for Route 58 will be the subject of a public hearing before the Riverhead Industrial Development Agency Monday.

Developer Lee Browning, principal in the companies that own the 7.1-acre site, which is already developed with a Hilton Garden Inn hotel, is asking the IDA to grant real property tax abatements and exemptions from mortgage, sales and compensating use taxes.

The IDA is considering granting its “standard benefits” to the project, according to IDA executive director Tracy Stark. Those benefits include a 10-year real property tax abatement that starts out as a 50-percent reduction in property taxes on any increase in assessed value due to the new construction, she said. The tax abatement declines by 5 percent per year over the 10-year period.

IDA property tax abatements have drawn the wrath of school district officials and residents, who complain about the loss of potential tax revenues. Stark says many people misunderstand the IDA benefits. The real property tax abatement applies only to the assessed value of the improvements constructed and do not affect taxes on the property’s current assessed value.

The IDA granted a tax abatement for the Hilton Garden Inn project, which this year is paying $32,445 in property taxes. In addition the hotel pays an additional $108,751.52 in taxes under a contractual agreement with the IDA, which collects the payment in lieu of taxes, known as a PILOT, and distributes it directly to the taxing jurisdictions, Stark said. The full market value of the site is currently $10.89 million, according to town tax records.

That was one of three tax abatements granted by the agency for recent projects on Route 58, which saw a huge development boom in the past 10 to 12 years. The others were the Holiday Inn Express — where the tax abatement expired in 2009; its tax bill this year is $186,708 — and 21st Century Oncology.

Supervisor Sean Walter in an interview yesterday reiterated his opposition to tax breaks for Route 58 development.

“I’m not in favor of IDA benefits on Route 58. I’ve never been in favor of them,” Walter said. “I know [Browning] wants them. He tells me needs them to make it work,” he said. “But IDA benefits are supposed to be used as an incentive for development that won’t otherwise happen. When you’re talking about Route 58, that’s just not the case. They should be reserved for areas like downtown where we need to provide incentives.”

The IDA board, which is appointed by the town board but is an independent body, has the final decision on applications for benefits. ID

The 114,090-square-foot, suites-only Residence Inn will be built on about two-and-a-half acres of the existing 7.1-acre site located on the north side of Route 58 at the terminus of the Long Island Expressway. The new hotel will also have 7,500 square feet of meeting space, according to IDA documents. The total project cost is estimated at nearly $26.9 million.

Browning is not seeking financing through the IDA but told the board this month his bank financing is contingent on the benefits being granted.

Browning originally got site plan approval in 2007 to construct two hotels on the site, but deferred building the second facility after the crash of 2008. He amended the site plan slightly in 2011 and obtained a new approval from the planning board in 2012.

Correction:  As first published, the article did not include information about the payment by the owner of the Hilton Garden Inn hotel under a PILOT agreement with the IDA. Its PILOT payment this year, combined with the real property taxes paid directly to the town, bring the total taxes paid by the hotel property to $141,196.52 in the current tax year.  Also, the original article misstated the year in which the Holiday Inn Express abatement expired; it was 2009 not 2014.