Town Board urges IDA to deny tax breaks for The Enclaves

In a letter directed to Kelly Murphy, the Suffolk County Industrial Development Agency’s acting executive director, all six members of the Southold Town Board decried the IDA’s tentatively approved $2.7 million tax relief package for the $43.9 million luxury hotel proposal known as The Enclaves.

“The Town Board of the Town of Southold hereby expresses absolute opposition to the tax abatement application submitted on behalf ‘The Enclaves,’ ” the letter begins. “This proposed luxury hotel project in our rural town will not support the local community; instead, it will result in the detrimental impacts as outlined herein. The resultant benefit to developers is disproportionate to any perceived benefit of the County and the Town. Ultimately, our analysis demonstrates that the abatement would unjustly enrich the developers to the detriment of the Town of Southold and its residents.”

The letter proceeds to outline eight major points the board says the IDA should consider to deny the developers the $2.7 million tax abatement package they seek. The board’s  major concerns are listed as follows: job creation and low wages; unjust enrichment and burden on the town; community opposition; disingenuous claim of infeasibility; seasonal business and limited local utilization; negative impact on local economy; inadequate business community impact; and Suffolk County IDA’s process and financial interest in approving the application.

Many of these talking points were addressed  during last month’s public hearing, during which the overwhelming majority of speakers, including town Planning Board vice chairman James Rich, derided the project. Unlike that meeting, the Town Board is specifically opposing the IDA tax relief package for The Enclaves and is making no comment on other approvals for the hotel complex, such as the site plan, or other IDA initiatives  within Southold Town.

Local resident Joyce Barry at a protest of the Enclaves in 2019. (Credit: Steve Wick)

“We did have a discussion about what sort of precedent this was going to set,” Councilman Greg Doroski said in a telephone interview after the letter was submitted Tuesday. “We did also say that we were not taking a position on all of these sorts of tax abatements, we were just taking a position on this individual project, because there are cases where PILOTs [payments in lieu of taxes] may be necessary and useful, and may be more in line with the goals of Southold Town. The challenge here is we had a developer from the beginning who said, ‘There’s this great need, we need to build this, it’s good for everyone, it’s good for the community, it’s good for our shareholders, we need it.’ We did see a lot of community opposition to it. Ultimately, they were allowed to move forward, but it does feel like a little bit of a bait and switch for them to kind of change their tune in the application that,  ‘Now we can’t do this unless you give us his big tax break.’ ”

Plans for The Enclaves call for 72,979 square feet of new construction, including a two-story, 40-room  hotel, four detached cottages and a pair of restaurants on 6.75 acres at the former Hedges bed and breakfast on Main Road. The public has consistently opposed the hotel since it was proposed in 2017, and the tax incentive package the IDA tentatively greenlit in September stirred further controversy. Proposed benefits to the developer, Enclave Southold LLC, include $1.8 million in reductions on sales tax for building materials and equipment, $246,000 in reduced mortgage tax payments and $700,000 in savings courtesy of a 15-year PILOT program.

The Town Board discussed those  proposed abatements at their  work session Tuesday morning, a few hours before submitting the letter. Members outlined  why  they want the developers to pay the full amount of property taxes they would be assigned following development and gave an updated assessment. As Mr. Doroski put it, the board’s opposition to the tax relief is about “fairness.”

“They’re getting a $2 million tax break, and those taxes are the taxes that fund our schools, our parks, our fire departments,” he said.

Architect Andrew Giambertone, one of the principals behind the Enclaves propopsal, displaying a scale model of the $43.9 million hotel at a December 2023 meeting. The IDA is expected to decide on its pending tax incentive offer in the coming months. (Nicholas Grasso photo)

Along with comments from a public meeting the IDA hosted at Town Hall last month and other written comments submitted by 3 p.m. Tuesday, the Town Board’s letter will be entered into the public record regarding the proposal. The IDA’s seven-member voting board will have access to all of the public comments ahead of their final vote on the tax package, which is expected in the coming weeks..

Some officials think the hullabaloo surrounding The Enclaves and the developers’ application for tax abatements could become a recurring theme in Southold’s future.

“I think this is almost a harbinger of things to come, in that the big money is here,” Mr. Doroski said. “I think the big developers are here, and they want to do these big projects. These are the sort of people and entities that have the expertise and the bandwidth and the know-how to apply for these sorts of things. Mom-and-pop businesses that open up in [the] downtowns of our hamlets are not the sort of folks that are applying for these IDA abatements.”