WE NEED YOUR HELP — Support your hometown newspaper by making a donation.

Town IDA mulls tax breaks for West Merrick Road self-storage project

Posted

The Town of Hempstead Industrial Development Agency is considering tax incentives for a 140,000-square-foot, $25 million storage facility planned for West Merrick Road, on the site of what is now a Honda dealership vehicle storage lot and maintenance building.

Storage Deluxe, a self-storage real estate investment firm operating under the shell company 750 Merrick Road LLC, is seeking a 10-year, payment-in-lieu-of-taxes deal, as well as sales and mortgage recording tax exemptions for the facility, which will employ four full-time workers. It is the same project that drew criticism at a village Board of Zoning Appeals hearing in November 2018, when fears were raised that the developer would apply for tax breaks.

During a live-streamed, remote call meeting on May 13, residents, a lawmaker, school official, members of the IDA and representatives of Storage Deluxe weighed in on the deal, which has raised the possibility of increased taxes following the controversial 2016 PILOT agreement given to Green Acres Mall and its Commons annex.

Resident Denise Riggio said her mo-ther’s school taxes in Elementary School District 30, where the property is located, went up roughly $1,000 because of the Green Acres tax breaks, and she sought assurances that that wouldn’t happen again. She also questioned the need for another storage facility in an area where two have recently been erected on a half-mile stretch of Merrick Road.

“I’m trying to understand what real benefit Valley Stream will gain from this except four minimum-wage jobs,” she said.

“Providing tax break incentives as a means to attract storage facilities to Long Island was not an effective use of taxpayer resources prior to the pandemic and is certainly not an effective use of taxpayer resources now,” State Assemblywoman Michaelle Solages, a Democrat from Elmont, said in a statement issued shortly after the hearing. “The promise of just four full-time employee positions by the end of the second year is not sufficient to justify this PILOT agreement. Our community needs businesses that can contribute to the tax base.”

She called on the IDA to reject the deal.

Speaking for the company, attorney Daniel Deegan, of the Uniondale-based Forchelli Deegan Terrana LLP law firm, said that under the terms of the PILOT, the property would begin with payments roughly equal to what it pays now in property taxes, at around $200,000 a year, and those would soon double. By the end of agreement, he said the annual payments would increase to roughly $700,000 before the property was returned to the tax rolls, which he considered a “net positive impact” for the District 30. He added that the village mayor and board of trustees had voiced support for the project.

It is currently unknown how much Storage Deluxe would pay in taxes on the property if it was unable secure an agreement and went forward with construction.

The proposed facility would differ from neighboring self-storage warehouses by catering to commercial entities, such as construction contractors and firms that deal in large volumes of physical documentation, according to Jonathan Orr, an acquisitions and development associate for Storage Deluxe. He said internal market research had identified a need for commercial self-storage in the area, and despite the economic disruptions posed by the coronavirus, he believed the need would still exist as businesses begin to reopen.

“We believe as things start to turn around in the next few months that our facility will give an opportunity to people   . . . a cheap and affordable solution for small- and medium-size businesses, most of which will be local, to store with us as they get back on their feet,” he said.

The chief point of contention amid the discussion, however, was the true nature of the tax hikes surrounding the Green Acres PILOT deal.

Nassau County Legislator Bill Gaylor, a Republican from Lynbrook, said he believed that state law could preclude the sharing of PILOTs made to District 30 with the Central High School District, which collects its tax revenue from Valley Stream’s three elementary school districts. He was concernced the resulting shortfall would ripple out to districts 13 and 24, which they would have to make up through taxes.

“The way the state law is written, a PILOT isn’t counted as though it was taxable dollars,” he said of the payments. “That was why in School District 24 . . . and School District 13 . . . those residents felt the impact of the Green Acres PILOT.”

IDA Chief Executive Officer Fred Parola strongly denied that assessment, noting that PILOTs are treated as tax dollars, and cited a 2017 report from the office of State Comptroller Tom DiNapoli, which he said had “vindicated” his agency in the controversy. He accused school officials of lying about their role in the hikes, and said the resulting fallout had sparked a backlash against the IDA that remains today.

The 29-page report revealed that while both District 30 and the Central High School District had under-budgeted the PILOTs they would receive by as much as $1.8 million, it also identified a complex series of interactions resulting from the removal of Green Acres from the tax rolls, which impacted the formula the districts use to calculate their share of revenue going to the high schools. The cumulative effect led to an average homeowner seeing a tax increase of roughly $1,000 in District 30 and around $500 in districts 13 and 24.

The report advised school districts to more accurately calculate the PILOT revenue they are due, but also asked IDAs to better identify the indirect effects of the tax incentive agreements they make.

The discussion prompted questions of whether lessons learned from Green Acres would be incorporated in the deal.

“What steps have been taken to ensure that same debacle doesn’t occur again because of this?” Riggio asked.

Brian Phillips, assistant superintendent of business for School District 30, asked whether the agreement would account for the elementary districts’ revenue-splitting formula, which considers the total property values in each respective district.

“Will the property value be coming off the roll?” he asked.

"Our view is it's always preferable for the district to keep the property on the tax rolls," he later told the Herald. 

Parola acknowledged that given Valley Stream’s status as a consolidated school district, of which there are three in the state, it posed unusual challenges.

“This is new territory,” he said. “We have to explore this.”