Developer seeks to reduce job commitment it made to obtain IDA tax breaks

The developer of a large warehouse on the site of the former Newsday headquarters in Melville is asking for a 50% reduction in the number of jobs that have to be created in return for millions of dollars in tax breaks, officials said.

Representatives of Hartz Mountain Industries Inc. said on Thursday that prospective tenants are balking at the requirement that a minimum of 500 people work in the 669,186-square-foot building. They offered a commitment of 250 jobs in return for a smaller tax break.

But members of the Suffolk County Industrial Development Agency expressed skepticism and frustration about the proposal, saying Amazon rented the developer's adjacent warehouse and rescinded the tax incentives that had been awarded in 2020.

The IDA board voted unanimously to put off a decision on the Hartz Mountain request until at least next month.

James P. Rhatican, vice president of land use and development for New Jersey-based Hartz Mountain, said it has been unable to find a single tenant that wants to use the entire warehouse. So, the completed building will be subdivided to accommodate between four and six tenants. So far, a pharmaceutical company has signed a lease for 95,000 square feet and pledged to create 40 jobs, he said.

“Each [prospective] tenant is concerned that with three, four or five other tenants in the building they might not create the aggregate number of [500] jobs that is required” to receive the property-tax savings, Rhatican said at Thursday's IDA meeting. “We think lowering the job requirement would make the building more attractive by reducing the risk to the tenants that other tenants’ actions would result in the job requirement not being met.”

He said in return for reducing the job commitment to 250, the company is proposing that its property-tax savings be reduced by $536,954 to a total of $2.5 million over 15 years, or 14%. The duration of the savings also would be cut from 20 years to 15 years.

Hartz Mountain isn’t proposing changes to the other tax incentives awarded in 2020 for the warehouse at 235 Pinelawn Rd.: a sales-tax exemption of up to $4.6 million on the purchase of construction materials and equipment, and up to $663,400 off the mortgage-recording tax, according to IDA records.

Phil Heilpern, a broker at the commercial real estate firm CBRE who is trying to lease the warehouse, said the number of lease transactions on Long Island “has slowed tremendously.” The market in Suffolk County is “very, very competitive, with landlords fighting to sign tenants,” he said.

Still, several IDA board members pointed to Amazon’s decision last year to give up nearly $5 million in tax aid for a 276,500-square-foot warehouse on Ruland Road in Melville, which also was built by Hartz Mountain.

At the time, the online retailer said it wasn’t sure it could meet the commitment of creating 175 jobs. In rescinding that deal, the IDA increased the job commitment for the larger warehouse from 425 to 500, to which Hartz Mountain agreed.  

“I just feel that these jobs, whether it’s 250 or 500, are going to happen whether we provide [property tax] benefits or not,” said board member Joshua Slaughter, a union official. Hartz Mountain “has already shown us that they’re capable of creating jobs” because Amazon is doing so at the adjacent warehouse without receiving tax breaks, he said. 

Board member Brian Beedenbender, a business executive and former county legislator, agreed, saying, “I’m not entirely convinced that [tax] benefits are required for this project.”

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.