Southampton Inn expansion wins $1.64M in tax breaks from Suffolk IDA

A plan to expand a luxury hotel in Southampton Village has secured final approval from the Suffolk County Industrial Development Agency for $1.64 million in tax breaks.

The IDA signed off on the incentives, clearing the way for a 40-room hotel on Hill Street next to the 90-room Southampton Inn. The new hotel is being developed by 71 Hill Street LLC, which shares the same ownership as the Southampton Inn.

Plans call for a new, $29 million hotel and include a heated pool. The project also includes eight one-bedroom workforce apartments created through the conversion of an existing office building, along with the refurbishment of another building on the property.

The property is expected to command peak summer room rates of about $800 a night, according to a market analysis prepared by the owner.

Consultants for the IDA said the project is expected to generate a net public benefit of about $2.5 million over 15 years, driven in part by increased revenue from Suffolk County’s 5.5% hotel occupancy tax.

The project had attracted criticism from some residents and some public officials.

“I still feel that the project was probably too large and did not allow for enough affordable housing,” said Ed Simioni, a Southampton village trustee who voted against the project’s special permit last year. “My position has not changed at all.”

Some Southampton residents raised concerns about the hotel worsening traffic. A village trustee who voted against the project’s special permit said it should have included more affordable housing. The project has received preliminary approval from the village’s planning board.

A now-former IDA board member said in January that the high room rates could undercut the need for public assistance. The Suffolk IDA’s board, which recently welcomed two new members, was unanimous in its final vote on Thursday.

"We're very excited for the new hotel product, workforce housing and a phenomenal new commercial opportunity within the village," Dede Gotthelf, owner of the Southampton Inn and managing partner of 71 Hill LLC, said in an interview.

Gotthelf said the hotel could open next year or in 2028.

The approved incentive package includes a $1.3 million sales tax exemption and a $141,454 mortgage recording tax exemption. A 15-year payment in lieu of taxes, or PILOT agreement, is projected to save the owner about $170,657 over the term, according to an analysis by Grow America, the IDA’s consulting firm.

Project backers said the development would be unlikely to advance without the relief, citing the cost of required infrastructure upgrades. It also includes a $2.5 million on-site sewage treatment plant.

The project includes a mix of workforce housing, with seven of the eight apartments reserved for households earning up to 130% of the area median income and one unit set aside for a household earning less than 80%.

Two additional basement apartments in the hotel will house up to eight hotel employees.