Melville warehouse project wins $8.7 million in IDA tax breaks

A New Jersey-based developer has won $8.7 million in tax breaks from Suffolk County for a warehouse project after more than a year of back and forth with local unions and politicians.

Hartz Mountain Industries Inc. secured final approval for the 15 years of tax incentives in a 5-2 vote by the county’s Industrial Development Agency. The aid will support a 411,000-square-foot warehouse proposed for Spagnoli Road in Melville.

The developer, which traces its roots to the sale of singing canaries and pet products, applied for the tax breaks on May 10, 2021. But 10 days later, the IDA board tabled the request amid allegations from local unions that Hartz Mountain was using out-of-state contractors and construction workers to build two warehouses at 235 Pinelawn Rd., also in Melville.

That project, on the site of the former Newsday headquarters, won nearly $17 million in tax breaks over 20 years in a 4-2 vote with one absence by the IDA board in November 2020.

The Spagnoli Road warehouse didn’t come before the IDA again until April after Hartz Mountain and the unions appeared to make peace. The agency then granted preliminary approval for the tax-break package but a month later couldn’t muster the votes to act on a final approval resolution.

Last week, all seven board members attended the IDA board meeting and asked questions of a Hartz Mountain executive and an independent economic development consultant before casting their votes.

The consultant, Kevin Gremse of the National Development Council in Brooklyn, said the Spagnoli Road property is vacant land and generates $163,905 per year in property taxes. Even with the tax breaks, Hartz Mountain will pay $754,757 per year, on average, in Payments In Lieu of Taxes, during the 15-year life of the IDA deal.

He also said the warehouse would eventually employ 250 people.

James P. Rhatican, vice president of land use and development at Hartz Mountain, said without the IDA’s help the project wouldn’t be built in the short term because only one of the two Pinelawn Road warehouses has a tenant.

“We’ve been marketing [the other Pinelawn Road facility] for over a year now and it has not been leased, and it has the benefit of an incentive package from the IDA,” which translates into lower rents for prospective tenants, he said. “So, we would not build the [Spagnoli Road] project because we would be competing against ourselves with the Spagnoli Road project having no incentives versus a project that has them.”

IDA board member Joshua Slaughter, a union official, responded that he wasn’t convinced that Hartz Mountain needs the tax breaks and would vote “nay” on the final approval resolution.

Board member Brian Beedenbender, a business executive and former county legislator, also voted “nay,” saying he was concerned about the warehousing market becoming oversaturated.

Later, IDA executive director Anthony J. Catapano said Hartz Mountain could have potentially received a larger sales-tax exemption on construction materials and equipment because inflation has increased the project's total cost from $98 million in 2021 to $106 million today. However, the developer decided not to amend its aid application, he said. 

By James T. Madore

james.madore@newsday.comJamesTMadore

James T. Madore writes about Long Island business news including the economy, development, and the relationship between government and business. He previously served as Albany bureau chief.