This article was written by Newsday's James Madore
A developer’s plan to build a $98 million warehouse across from the Long Island Hilton in Melville — with tax breaks from Suffolk County — is imperiled because out-of-state contractors are putting up another warehouse nearby for the same developer.
Hartz Mountain Industries Inc., a large real-estate development company that traces its roots to the sale of singing canaries and pet products, wants to construct a 411,000-square-foot warehouse on Spagnoli Road. The property has been used by National Grid to train employees in digging trenches for natural gas lines.
Between 200 and 300 people would work at the warehouse, earning $45,000 per year, on average, according to Hartz’s application for tax breaks from the county’s Industrial Development Agency.
The tax aid package, valued at $8.5 million, would include $5.1 million off property-tax payments for 15 years, or a 30% savings, records show.
But the IDA board, in a 5-1 vote last month, postponed deciding whether to approve the tax breaks after three county legislators, a state assemblyman and some construction unions denounced Hartz for a nearby project.
Critics said the New Jersey-based developer is using some out-of-state contractors to build 1 million square feet of warehouses at 235 Pinelawn Rd., also in Melville and the site of the former Newsday headquarters. That project was awarded $16.8 million in tax breaks over 20 years in a 4-2 vote by the IDA in November.
Legis. Tom Donnelly (D-Deer Park), who represents the area, said the IDA board should "deny any additional tax breaks for Hartz Mountain until they stand by their commitments" made in November to follow the IDA's Long Island First Policy.
IDA's 'Long Island First' policy
The buy-local policy states "to the greatest extent possible [IDA] project applicants should consider purchasing goods and services from Long Island-based providers, businesses and vendors and that to the greatest extent possible all employment opportunities should be provided to Long Island residents first."
Hartz and its general contractor for the Pinelawn Road project, Aurora Contractors Inc. in Ronkonkoma, confirmed to Newsday that steel and precast concrete work was awarded to contractors from Alabama, South Carolina and Pennsylvania. No local company can produce the precast concrete needed for the project, according to Hartz and Aurora Contractors.
James P. Rhatican, Hartz’s land use and development vice president, said it has fully complied with the Long Island First policy, adding that 96% of the company's spending has gone to local companies, principally Aurora Contractors.
"We’ve done everything in our power to ensure [Aurora Contractors] goes through the effort to communicate with the local trades," he told the IDA meeting, referring to construction unions. "We do not interfere with the hiring of subcontractors. That only leads to trouble."
75% of workers are local, says contractor
Frank Vero Jr., president of Aurora Contractors, didn’t participate in the IDA meeting but he told Newsday last week "more than 75% of the work was awarded to Long Island contractors" of which 50% use union workers.
"As a local company with more than four decades in this community, we understand the importance of [the] Long Island First [policy] and will always comply with the requirements set forth," Vero said.
At the IDA meeting, board chairwoman Natalie Wright said "it appears [Hartz] is moving forward in good faith to comply with the Long Island First" policy in terms of the Pinelawn Road project.
Among the state’s 109 active IDAs only Suffolk has a written buy-local policy as part of the application for tax breaks, said Wright, who is County Executive Steve Bellone’s economic development commissioner. Others, such as the Nassau IDA, verbally stress the importance of employing Long Islanders.
The last major dispute over compliance with the Suffolk policy took place in 2012. It involved the purchase of a stormwater drainage system by the then-expanding Walt Whitman Shops in South Huntington over a rival system from a Bellport company.
Federal power and claw backs
The Long Island First policy doesn’t mandate the use of local contractors and workers on projects that receive IDA assistance because to do so would violate the federal government's constitutional power to regulate interstate commerce, said IDA attorney William Wexler, adding the agency can claw back tax breaks for noncompliance.
That’s what critics of Hartz are calling for, including the union umbrella group Long Island Federation of Labor.
The IDA should "claw back the benefits" that Hartz was "awarded applicable to 235 Pinelawn Rd. in Melville and deny consideration of their second application for benefits related to the National Grid site on Spagnoli Road in Melville," said Ryan Stanton, the federation’s political director.
The federation and others have been lobbying for changes to the Long Island First policy, but the revisions were tabled by the IDA board to allow for additional negotiations.
Last week. Rep. Thomas Suozzi (D-Glen Cove) said the hiring of out-of-state contractors for the Pinelawn Road project "calls into question whether Hartz should ultimately get to keep its tax breaks or whether they should be clawed back." In a letter to Hartz president Gus Milano, Suozzi offered to "facilitate a meeting" with local union leaders.