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The Town should be charging hotels a permit fee. But it’s choosing not to

08/13/2015 2:30 PM |

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The chapter of town code that regulates Riverhead Town’s rental dwelling units has been in place since 1996. It states that “any commercial hotel/motel business operating exclusively and catering to transient clientele,” shall pay a “biannual” rental permit fee.

Originally $200 per application, it was later raised in 2006 to the current $500 per application — plus $50 for each unit.

Despite this, Supervisor Sean Walter and town attorney Bob Kozakiewicz say the town will not require hotels to get rental permits or to pay those fees.

Mr. Walter and other Riverhead Town Board members say they don’t think hotels should be made to get rental permits, or be required to pay the rental permit fee, because they are catering to transient guests who stay only a few days and not to people who intend to reside there, as they would in a rental apartment.

“I don’t think that the town ever envisioned hotels having rental permits,” Mr. Walter said, adding that hotels are intended for transient guests who aren’t staying long-term.

There are now five hotels in town — Hyatt Place, Hotel Indigo, Hilton Garden Inn, Holiday Inn Express and East Wind Country Inn — that together account for 453 units.

Lee Browning, owner of both the Hilton Garden Inn on Route 58 as well as a Marriott Residence Inn proposed next to it, said he’s been in Riverhead for about eight years and has never paid a rental permit fee or even heard of one being required for hotels.

He said Brookhaven and Islip towns, as well as towns in Nassau County, also don’t charge hotels a rental fee.

“They do charge a couple hundred thousand dollars of real estate taxes,” Mr. Browning said of Riverhead. “I’m getting ready to build a second hotel and my guess is that the fee for the building permit will be probably between $50,000 and $75,000.”

Hotels also pay a number of county fees and taxes, he said, including a multi-family permit, an occupancy tax and sales tax.

If the town were requiring hotels to pay the rental permit fee, those five hotels together would pay a total of $25,150 — though how frequently that amount would be paid is not entirely clear.

Former councilman Vic Prusinowski was on the Town Board in 1996, when the rental permit law was created in an effort to combat substandard rental properties. He said hotels were included because, at the time, “there were some hotels and motels that were doing emergency housing, and the conditions were bad, back in 1996.”

Mr. Prusinowski said that, at the time, the town had difficulty getting search warrants for hotels that were used as emergency housing, which is why they were added to the rental dwelling law.

“The idea wasn’t so much to collect money; it was that when you did a rental application, you agreed to an annual inspection,” Mr. Prusinowski said. “It was all about getting access to the property for inspections.”

The original fee was $200 per application, with no additional fee per room, as there is now.

Since 2007, the rental code has also specified that the rental permit fee would be paid on a “biannual” basis, which means twice a year. The town has only charged the fee once every two years, which is “biennial.”

While officials say this is a mistake in the law’s language and that rental permit fees should be biennial, they have yet to correct it.

The town did draft a revision aimed at correcting the “biannual/biennial” confusion and the language that requires hotels and motels to get rental permits and held a public hearing on the measure in April, but never adopted it.

The revision also called for big increase in the amount of the rental permit fee, which a majority of Town Board members say they favor.

“I think that probably is an oversight,” Mr. Walter said when asked why the changes in the rental permit law weren’t adopted.

He still supports the changes, as does everyone else on the Town Board.

“The Town Board does need to increase the fees because what we found is that it costs us more than what we were collecting just to implement the rental dwelling law,” Mr. Walter said.

The proposed change called for a permit fee increase of more than 60 percent for most rental dwellings. The fees would rise from $150 to $250 for one-unit rentals; $200 to $350 for two-unit rental dwellings; $250 to $450 for three-unit rentals; and $325 to $550 to four-unit rental dwellings.

For dwellings with more than four units, the fee increased from $500 to $750, plus $50 for each unit in excess of five, under the proposal.

The 2015 town budget anticipates about $80,000 in rental application fees this year. In 2013, the actual revenue from rental application fees was $122,375, according to the budget.

“That’s ridiculous,” Councilwoman Jodi Giglio said when told that the rental law revision hasn’t been approved. “When we have a public hearing, we should be ready to discuss it and put it up for adoption quickly.”

Ms. Giglio, who is an owner of the Summerwind Square apartments on Peconic Avenue, has said she will abstain from voting on this issue because of the conflict of interest.

The proposed revision included a new definition of “dwelling unit” designed to eliminate hotels from having to pay the fee.

However, the proposed revision still contained the language that says “any commercial hotel/motel business operating exclusively and catering to transient clientele” shall pay a biannual biennial fee of $750 per application, (up from $500) plus $50 for each unit” — still requiring the town to charge hotels for rental permits, plus per-room fees.

Mr. Kozakiewicz said this is one of several changes that still need to be made to that proposal before it can be adopted.

The town has been charging the rental permit fee to motels, according to town documents, which indicate that a total of $11,050 was collected from six motels this year.

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EDITOR’S NOTE, Thursday 3 p.m.: This article originally ran in the paper Aug. 13 paper version of the Riverhead News-Review. On Thursday morning, the town released a resolution which will be voted on Tuesday that will change the code.

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