Riverhead hotel developer seeks 20-year tax break

The developer leading a town square revitalization in Riverhead is seeking tax relief, including a 20-year break he says is key to the success of his boutique hotel.

Joe Petrocelli is building a 94-room Tapestry Collection by Hilton hotel on Main Street. The $35 million development will also include a restaurant, coffee shop and retail space adjacent to the new town square.

He has asked the Riverhead Industrial Development Agency to consider exemptions on $1.36 million in sales tax and in $147,028 in mortgage recording taxes. He is also seeking an enhanced payment in lieu of taxes, or PILOT, that would reduce taxes on the property for 20 years, according to an application filed with the IDA.

At an IDA hearing Monday, the developer’s team said the project is integral to downtown revitalization and would provide tourism and jobs, but would not be economically viable without tax incentives. Some residents said they opposed a 20-year tax break amid concerns about long-term impacts, as well as proposed salaries associated with future jobs at the hotel.

Eric Russo, an attorney for Petrocelli, said the hotel is a “huge risk” financially. “Business in terms of retail and restaurants is at a low point at the moment, and they’re trying to motivate and demonstrate that we can bring people here.”

Petrocelli echoed those concerns, adding that current economic forces mean it’s more difficult to attract developers. “It’s a tough market. I believe we have a good shot at it with this hotel,” he said Monday. “There’s a lot of risk here because it’s Riverhead.”

Petrocelli is also the master developer for the overall town square project, which includes a public plaza, playground and outdoor amphitheater. The town recently won $2.4 million in state funding for the accessible playground, Newsday recently reported.

Claudette Bianco, of Baiting Hollow, said developers should pay their complete share of taxes. “Offering tax breaks to highly profitable corporations represents an unnecessary corporate handout,” Bianco said at the hearing.

IDA Vice Chair Lee Mendelson said the hotel property, which is town-owned pending the closing of the sale to Petrocelli, does not currently generate taxes. “Immediately upon development, the PILOT payment — should a PILOT be granted — becomes instantly accretive to the town budget,” Mendelson said.

The standard tax break is 10 years and includes a 50% tax break in the first year. It declines 5% annually over that period, according to the IDA. Petrocelli asked for an enhanced package, calling the standard PILOT “insufficient” due to the “level of investment required and the timing of returns” in the application.

The IDA application did not include a proposed PILOT schedule or dollar amount for the property tax abatement. Several residents said those details should be disclosed before any benefits are approved.

Board Chairman Jim Farley said the IDA plans to hold another hearing once a tentative PILOT deal is drafted, which will be released publicly.

The project will create approximately 54 full-time and 20 part-time jobs averaging $38,480 per year, plus 210 construction jobs, according to the application.

Critics said proposed wages, which range from $18,200 for a part-time housekeeping role to $90,000 for a general manager, are insufficient.

“It's no secret that Long Island is an expensive place to live but at minimum ... public incentives should support jobs that provide workers with a living wage,” Suffolk Legis. Greg Doroski (D-Mattituck) said.

The developers said many salaries listed in the IDA application exclude potential tips employees may earn.