Islip approves $7.5M in tax breaks for warehouse at former landfill

The Town of Islip approved roughly $7.5 million in tax breaks for a plan to build a warehouse on the site of a former landfill in Bay Shore.

The site covers 22 acres at 1612 Fifth Ave. The western part of the land was the site of a municipal landfill from 1963 to 1986, according to an environmental review filed with the state Department of Environmental Conservation. Hubbard Sand & Gravel has been operating there since 1947 or earlier, according to the review.

Tuesday's vote by the town board was 4-1, with councilman James O'Connor casting the lone dissenting vote.

The developer, Fifth XNY LLC, wants to invest $97 million in the property to build the warehouse. The company plans to fill at least 115 permanent jobs. The warehouse would be a speculative industrial project, meaning the developer hasn't lined up a tenant to anchor the property before approvals are granted.

If successful, the proposal could turn “a piece of vacant land that has a troubled environmental past” into “a facility that can attract a business where you have permanent jobs,” said John Walser, executive director of Islip’s Industrial Development Agency.

According to DEC documents, the landfill "reportedly accepted chemical waste, metal waste, and large quantities of [construction and demolition] debris."

Islip’s IDA approved the tax breaks with a new condition aimed at minimizing the town's liability. Under the proposal, a PILOT or payment in lieu of taxes schedule would begin only after a tenant is secured. If the warehouse remains unleased, the PILOT would not go into effect and the developer must pay taxes on the property's full value.

Walser said the arrangement was borne out of concern on the IDA board about incentivizing warehouse projects where there is not yet a tenant. The Town of Brookhaven implemented a moratorium on such projects last year, citing waning demand for warehouse space.

Though O’Connor voted no, he said recently the caveat was "a very good and creative solution." O'Connor, who has expressed skepticism about speculative industrial projects, said it could prevent the warehouse from becoming a “giant behemoth of a building sitting there with no tenant that is receiving IDA benefits."

Brooks King, eastern region vice president for Xebec, which owns Fifth XNY LLC, said in a statement: "This project represents an exciting opportunity to contribute to the long-term growth and vitality of the community."

The statement continued, "with great market fundamentals and a strong demand for best-in-class industrial space, Long Island has been part of Xebec’s vision for a long time, and we are excited to work with the Town of Islip to bring a development that benefits all.”

Islip’s IDA property tax breaks usually kick-in during the tax year one year after a project has secured a certificate of occupancy.

Typically at that point, developers pay discounted bills for the length of the PILOT, regardless of permanent job creation. Walser said that arrangement gives “the ownership a longer runway to stabilize the property” and find a tenant without being buried in tax bills.

The measure under consideration is “higher risk” for developers, said Walser. “You’d have a completed building, and then they’d be paying full assessed value immediately. And then it’d be empty. That’s a scenario that I don’t think would be attractive.”

Tax breaks spur economic activity — especially on properties that are vacant or inactive — even if permanent job creation isn’t immediate, Walser said.

“Without the incentive ... you don’t have any of these short term jobs, any of this activity or any increase in assessed value, or the permanent jobs — nothing happens without it,” he said. "That’s the bargain."

By Sam Kmack

sam.kmack@newsday.com

Sam Kmack covers the Town of Islip for Newsday. He is a graduate of the University of Southern California and previously worked as a city watchdog reporter in the Phoenix metro area, as well as an investigative journalist at the Arizona Center for Investigative Reporting.