Planned development for small firms wins tax breaks from Suffolk IDA

A proposed office complex in Nesconset for small businesses has won $1 million in tax breaks from Suffolk County over 15 years, officials said.

The $8.7 million project consists of three buildings at 104 Lake Ave. S. The 59,000 square feet is to be divided into rental units of between 1,961 square feet and 2,738.

Each unit will have a storefront office and garage door opening onto production and warehouse space.

The complex will accommodate 27 small industrial and service companies that together would employ 135 people, according to developer O’Shea Properties.

The IDA tax breaks "enable us to pass along the [property-tax] savings to offer more competitive lease rates," said Kate O. Rivas, director of leasing and development at family-owned O’Shea in Ronkonkoma. "This is particularly important for startup companies and smaller businesses as they look to clear the financial hurdles of opening or expanding their business."

With the IDA aid, O’Shea will save $682,690 in property taxes over 15 years, or 29%. It will pay $1.6 million over the same period — far more than if the site remains vacant, said Kevin Gremse, a consultant with the National Development Council in Manhattan.

The IDA hired Gremse to examine the O’Shea project after two of the agency’s board members in July questioned whether the tax breaks were needed. The developer already owns 1 million square feet of space in Suffolk.

"This isn’t a feasible project" without the IDA’s help, Gremse told the board last month. "This allows [O’Shea] to get a very marginal return but certainly [the tax breaks] aren’t creating undue enrichment for the developer."

Besides the property-tax savings, the developer was awarded a sales-tax exemption of up to $368,100 on the purchase of construction supplies and equipment, and up to $42,300 off the mortgage recording tax.

Board members Brian Beedenbender and Joshua Slaughter accepted Gremse’s analysis and the tax aid package was approved unanimously.

"This is one way that we are able to assist small businesses by providing these sorts of spaces where they can grow," said IDA chairwoman Natalie Wright, adding expansion projects by entrepreneurs often don’t meet the size threshold to seek tax breaks.

IDA executive director Anthony J. Catapano agreed, saying the vacancy rate for industrial space on Long Island is at a record low.

"Industrial space is in such high demand in our region," he said. "Our economy thrives when smaller, resident-owned businesses have the appropriate spaces to operate in."

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.