The developer of All Star Arena, an indoor athletic facility in Coram, will pay more in taxes in the future, and possibly retroactively, after it leased space to a CrossFit studio without approval, the Brookhaven Town Industrial Development Agency decided Wednesday.
According to agency rules, tax benefit recipients must have potential tenants approved by the IDA before leases are signed.
The IDA board discussed removing 3 percent of the property at 635 Middle Country Rd. — the 2,500 square feet used for the CrossFit 631 studio and 900 square feet in a vacant Chinese restaurant — from the project’s tax reduction agreement, after an attorney for the developer made the proposal to amend the original IDA agreement.
The board will also consider retroactively increasing the taxes on the property, if allowed under the law, to March 1, when CrossFit 631 moved in.
J. Timothy Shea Jr. of Hauppauge, the attorney for developer Parviz Farahzad of East Setauket-based Little Rock Construction & Properties Inc., argued that rescinding the tax reduction agreement would cause the sports arena to close.
“This is the best approach to solving the problem . . . and make sure that it stays open and stays as a functioning property,” Shea said about the amended agreement.
In 2013, the IDA granted the developer a sales tax exemption on the purchase of construction materials to redevelop the shopping plaza, a mortgage recording tax exemption, and a 10-year property tax break that reduced the site’s property taxes by 50 percent for the first year with increases of 2 percent annually for the remaining period. In year 11, taxes would go up to the full assessed value.
Farahzad has spent more than $9 million to purchase and make improvements to the 57,000-square-foot sports arena, Shea said, and is currently paying about $136,000 a year in property taxes.
While the IDA allowed Farahzad to keep the bulk of the property tax break, IDA chairman Frederick C. Braun III said, “I also get the feeling that you go ahead like a bull at a China shop and do what you think is right and then ask for forgiveness later.
“I would say, speaking for myself here, that for a future violation that the board would not be so kind,” Braun said.
Lisa Mulligan, chief executive of the IDA, said after the meeting that it is unusual for the IDA to amend an agreement.
Last month, the IDA notified Farahzad that he had 30 days to rectify the violation of the lease agreement, after the CrossFit studio was brought to Mulligan’s attention.
The CrossFit was not listed as a tenant on an application submitted by the developer in March for solar panels at the site. The board also discovered that CrossFit 631 moved into the building without insurance.
“It was an oversight” not to include CrossFit 631 on the application, Shea said. “I would assure the board that I would do everything in my power to make sure that Mr. Farahzad does not cross hairs with the IDA board again.”
The solar panel application was rejected by the IDA because of the CrossFit issue.
“Everything needs to be squeaky clean going forward,” Mulligan said.