Atlantis says Aquarium would close without tax break

01/04/2016 10:26 PM |

Rendering of the Preston House with five story hotel, front view.

Without tax incentives from the Riverhead Industrial Development Agency, the Long lsland Aquarium in downtown Riverhead would pay close to $1 million a year in taxes and would not be able to stay open, according to Bryan DeLuca, the executive director of Atlantis Holdings, the company that owns the complex containing the aquarium, the Hyatt Place hotel, Treasure Cove Marina and Jerry and the Mermaid.

“We are operating on razor thin profit margins,” Mr. DeLuca said.

He spoke during an IDA public hearing Monday on the application of Atlantis Holdings and Joe Petrocelli for additional IDA tax incentives for what they are calling “Phase Three” of their downtown project.

Located at the corner of Ostrander Avenue and East Main Street, the proposal calls for an upscale restaurant in the Preston House across the street from the aquarium and a five-story, 20-room “boutique” hotel behind it. The Preston House is more than 100 years old and is in the process of being restored by Mr. Petrocelli, the co-founder of the aquarium.

Mr. DeLuca and Mr. Petrocelli said the aquarium, originally called Atlantis Marine World, never met the attendance projections originally made for it, and drew about half of what was projected when it opened in 2002. Attendance dropped every year after that until 2007, when it leveled off, they said.

They said that while downtown Riverhead has improved since the aquarium was built, it still hasn’t been able to generate the type of foot traffic they hoped.

Atlantis currently receives a 100-percent property tax abatement on the aquarium and the Hyatt, but that figure represents 100 percent of the value of the improvements on the property, and only applies to town, county, school and fire district taxes. They still must pay property taxes on the underlying land and for special districts like water and sewer districts.

Mr. DeLuca said Atlantis pays about $350,000 in property taxes, despite the “100 percent” property tax abatement. He says they’d otherwise be paying about $900,000 in annual property taxes.

“We couldn’t afford it,” he said. “We would have to close the doors on the aquarium.”

Likewise, he said, Atlantis pays about $1 million per year in electric and gas bills.

“It’s staggering and its choking us,” he said.

Atlantis co-founder Joe Petrocelli and attorney Eric Russo at Monday's IDA meeting.

Atlantis co-founder Joe Petrocelli and attorney Eric Russo at Monday’s IDA meeting. (Credit: Tim Gannon)

Mr. DeLuca said Mr. Petrocelli pays for most of the costs through his construction company and has never taken a salary for himself at the aquarium. The aquarium also funds and houses, rent-free, the nonprofit Riverhead Foundation for Marine Research and Preservation.

Mr. Petrocelli said he’s got “too much invested in it” to turn back now.

“We need Phase Three,” he said. “I think we’re going to need Phase Ten.”

The aquarium received the above-mentioned 100-percent property tax abatement when it was first proposed, and then in 2009, asked for and received another 10-year, 100-percent tax abatement for the aquarium and the Hyatt, which had yet to be built at the time.

They also got abatements on mortgage recording tax, and on sales tax used on items used in the construction of the project.

Their new application seeks a 10-year “100 percent” property tax abatement on the new project, as well as another 10 years for the aquarium, and a refinancing of the existing debt from the aquarium and Hyatt. They also seek the above-mentioned mortgage tax and sales tax abatements on the new project.

The IDA decided to hold the hearing open for written comments until Jan. 10, and then reconvene for a special meeting on Jan. 12 to discuss the application further and possibly make a decision.

The IDA members seemed to support the project, saying that it has been the agency’s practice to give 100-percent tax abatements to projects in downtown Riverhead, such as Summerwind, Suffolk Theater and the Woolworth apartments.

John Peragine, the owner of PeraBell Food Bar on East Main Street, backed the project at Monday’s meeting. He said having customers from the Hyatt go to his restaurant has enabled him to stay open in the winter.

Gary Wood, an associate professor at Suffolk Community College’s culinary arts program, also supported the application, noting that many of his students have received internships at the Hyatt.

A nearby neighbor to the project voiced opposition Monday night.

Christine Palmer, whose son Colin read a letter from her, said her family owns two lots directly behind the property where the hotel is proposed. The aquarium “has proved hostile to the neighborhood that houses it,” and “has meant trash thrown in yards, minimum-wage service jobs, day and night time noise, traffic congestion and parking nightmares.”

She said on the day her mother passed away, a representative from the aquarium came not to offer condolences, but to ask about buying the property, and indicated they would be building right up to the property, she said.

Jane Stark, the widow of the late Judge Thomas Stark, said many people have indicated they can’t even go to the bakery downtown because the aquarium has taken all the parking spaces. She said she objects to having a five-story hotel built.

Top Photo Caption: Rendering of the Preston House with a five-story hotel, front view.

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