Riverhead IDA faces questions over 20-year Peconic River hotel tax break, extends public comment

Riverhead IDA officials faced questions Monday night about a proposed 20-year tax abatement for the controversial Peconic River Hotel — a centerpiece of the Town Square revitalization project — with residents pressing for more details about the value and need for the assistance.

In an unusual procedural change, chairman James Farley said the agency would hold another public hearing once a formal payment-in-lieu-of-taxes agreement, or PILOT, is drafted, giving residents a chance to review the tax-break schedule before the IDA takes a final vote.

J. Petrocelli Development Associates is seeking a $147,028 mortgage recording tax exemption and an estimated $1.36 million exemption from state and local sales taxes on construction and equipment purchases.

The developer is also requesting a 20-year enhanced property tax abatement through a payment-in-lieu-of-taxes agreement, or PILOT, according to its amended application. The application does not disclose the value of the proposed 20-year tax abatement or the PILOT schedule.

The hotel applicant stated in its application, which can be viewed in full on the Riverhead IDA’s website, and during its presentation at the meeting that the 20-year enhanced property tax abatement rather than a standard 10-year PILOT is necessary to “ensure the project’s long-term viability.”

The company cited high upfront costs, interest rates and operating expenses in saying the project would not be economically viable without IDA assistance.

Several community members questioned the total dollar value of the 20-year PILOT, how it compares with the IDA’s standard 10-year tax abatement and whether the additional 10 years of assistance is necessary.

Laura Jens-Smith of Laurel, chair of the Riverhead Democrats, asked why assistance was needed after year 10 and whether the IDA had identified the minimum assistance needed for the project.

“If the financial difficulty is primarily the timing of returns during the early years of the hotel, the standard declining pilot already provides its greatest assistance during those early years and gradually reduces the assistance as the project matures,” Ms. Jens-Smith said. “What happens financially after 10 years to this project that requires taxpayers to continue providing enhanced assistance for another 10 years, and what analysis demonstrates that?”

Mike Foley of Reeves Park said he supported the hotel project but urged the developer to seek a standard 10-year PILOT, saying he believed the hotel could become profitable within that period and that the additional years could increase the taxpayer burden. 

“Don’t go for 20 years, Joe, go for 10,” Mr. Foley said, addressing builder Joe Petrocelli, who was present during the hearing. “If you went for 10 now, you would get the gratitude and appreciation of the town, saying this is a business guy that’s going to do right for our town.” 

The application projects 54 full-time jobs, 10 part-time jobs and 210 construction jobs, with annual payroll for the permanent positions of about $2.46 million.

Suffolk County Legislator Greg Doroski questioned whether the wages associated with those jobs provide enough economic benefit to justify the assistance.

He said the average annual wage for the 64 permanent jobs the Peconic River Hotel project would create is $38,000, which breaks down to $18.50 an hour — only $1.50 above Long Island’s minimum wage. Only five of the estimated 64 jobs are projected to make over $50,000 a year.

The legislator requested that the IDA release a year-by-year PILOT schedule and an economic impact analysis so the public can weigh costs and benefits.

“It’s no secret that Long Island is an expensive place to live, but at minimum, and it’s my belief, that public incentives should support jobs that provide workers with a living wage,” Mr. Doroski said. “The wages outlined in this application will not allow people to live in this community. At its core, industrial development is about job creation.” 

The Peconic River Hotel received unanimous approval of its site plan and special permit application in August.

The latest proposal from Mr. Petrocelli, who developed the Long Island Aquarium, calls for a five-story, 69,738-square-foot hotel on a 0.42-acre site at 117-127 East Main St. The building would include a 116-seat restaurant, coffee shop, retail space, hotel common areas, amenities and lower-level parking.

The project, which has been in development for eight years, now proposes 94 rooms, with 80 guest rooms and 14 suites. Originally, the proposal included 76 hotel rooms and 12 condominiums, but the developer has since removed the residential units from the plan.

Construction of the hotel must be completed within the next three years. The site plan approval is valid for 36 months, with the possibility of one 12-month extension by the Town Board.

“It’s a tough market. I believe we have a good shot at it with this hotel,” Mr. Petrocelli said. “It’s not an easy project, it’s a costly project, and we’re here to get it done.”

Monday’s meeting was a continuation of a Sept. 28 hearing that drew no members of the public. The IDA subsequently extended the public comment period and reopened the hearing. The earlier hearing was announced in a legal notice published in the Sept. 17 edition of the Riverhead News-Review.

Kathy McGraw of Northville opposed the tax abatements, arguing Mr. Petrocelli is a successful contractor who can afford to build without shifting costs to taxpayers. She also criticized the IDA’s website and administrative transparency, noting a lack of posted minutes and public hearing notices. 

Prior to the Monday meeting, the IDA website remained substantially out of date. Its public-hearing page listed no notices after February 2024. By Monday, the public hearing notices from the Sept. 28 meeting were added. Its meeting-schedule page now lists 2026 and 2027 meetings, which were not there previously. Its most recent posted meeting minutes are from July 2025.

“Your website is truly an embarrassment,” Ms. McGraw said. “A complete dereliction of duty to keep the public informed.” 

The IDA closed Monday’s hearing without approving or denying the request. A date for the next hearing has not yet been announced.

Following the public comments, Mr. Farley addressed both the change in the agency’s process and concerns about transparency.

He said the board is transitioning to a two-step process in which it holds an initial hearing before the PILOT schedule is finalized. A second hearing will be held once a formal PILOT agreement is drafted, allowing the public to review the terms before a final vote.

Kimberly Biondi is the IDA’s new administrative director and is charged with improving the agency’s web presence and regulatory filings. The board is also in the process of hiring a director of development who would focus on identifying companies and businesses that would be a “good fit” for Riverhead.

“If we’re rowing the boat without an oar, I’m sorry; we’ll get the second oar in soon,” Mr. Farley said. 

While the IDA is listening to concerns about the hotel project, board members stressed that the agency’s primary role is to review requests for financial assistance rather than revisit land-use decisions already made by the town.

“There is no done deal … we’re an independent agency, we take that seriously,” said vice chairman Lee Mendelsen. “For all the money I’m getting paid, which in case anybody is wondering we each get paid zero for all the work that we do, we do it because we love Riverhead and we care about this town.”