The Riverhead Industrial Development Agency unanimously approved a request for tax breaks by the owners of the Suffolk Theater Monday evening.
Members of the IDA board said the tax breaks requested — a property tax exemption and sales tax exemption for purchasing equipment and supplies to complete the theater’s renovation — will be recouped by the additional sales tax generated when the theater opens.
The property tax break is a 10-year abatement that has the owners of the theater, Bob and Dianne Castaldi, pay the land value of the property while abating the payments on the improved accessed value of the property, said board general counsel Richard Ehlers.
Town assessors estimate the value of the property will go up from $62,000 to $426,700 after the renovations, Mr. Ehlers said, adding that tax abatements will not lower the tax base.
The property tax breaks amount to about $49,000 assuming current tax rates, he said. The sales tax exemption would only apply to construction equipment purchases and would total about $48,000, Mr. Ehlers said.
The Castaldis purchased the theater from the town in 2005; the building at the time “was pretty much as mess,” Mr. Castaldi said during the public comment section of a public hearing held before the vote.
Unforeseen issues in the renovations have caused the cost of the repairs to jump higher than expected, he said. Mr. Castaldi could not provide an exact cost of the renovations so far, but said the number is “in the millions.” The IDA cites the remaining project cost as being about $1.58 million.
Mr. Castaldi said he didn’t come to the board sooner for assistance because he didn’t think it would be necessary.
The theater still needs to have air conditioning installed, which is holding up the duct work that needs to be done. Without the ducts, the kitchen and basement are being delayed, and the fire marshall will not give the building a certificate of occupancy, Mr. Castaldi said.
Last month, the theater held a conference for business owners and artists called ”Arts Mean Business” while the theater lacked a CO. They were issued a violation and fined by the town as a result.
Mr. Castaldi said they are “diligently trying” to open the theater by the end of December, though he said it could possibly open later. He told the board the theater would definitely be open by spring 2013.
The only other person to speak at the public hearing was Councilman James Wooten, who said that while he supports the Castaldis and believes the theater will be a success, he has concerns about “balancing” the tax breaks allotted to businesses.
Instead of a 10-year abatement, Mr. Wooten suggested a 5-year plan with a “sliding scale.” Board members said that Mr. Castaldi may not be profitable after the first 5 years, and said the Castaldis’ savings will be repaid when the theater brings other business to downtown.
“Downtown has been an eyesore for a long time and we need to do something to get another anchor down there to help downtown get better,” said board member Lou Kalogeras. “It’s not a lot of money.”