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TOWN OF BROOKHAVEN
INDUSTRIAL DEVELOPMENT AGENCY
MEETING MINUTES
NOVEMBER 21, 2011
MEMBERS PRESENT: Frederick C. Braun, III, Chairman
Gasper C. Celauro
Peter G. Moloney
John Rose
Ann-Marie Scheidt
EXCUSED MEMBERS: Joseph R. Kessel, Jr.
Ronald J. LaVita
ALSO PRESENT: Lisa M. G. Mulligan, Chief Executive Officer
James Ryan, Chief Financial Officer
Annette Eaderesto, IDA Counsel
Howard Gross, Weinberg, Gross & Pergament
William Weir, Nixon Peabody (via conference call)
Jocelyn Brinka, IDA Assistant
INVITED GUESTS: Lou Avignone, CEO, Uncle Wally’s
Michael Petrucelli, CFO, Uncle Wally’s
Gordon Van Vechten, Co-Chairman, Framerica Corporation
Gene Eichner, Co-Chairman, Framerica Corporation
Chairman Braun called the meeting to order at 7:58 A.M. on Monday, November 21, 2011, in
the Work Session Room on the Third Floor at Brookhaven Town Hall, One Independence Hill,
Farmingville, New York.
MEETING MINUTES OF OCTOBER 17, 2011
The Minutes of October 17, 2011 had previously been sent to the Members for review. The
motion to approve these Minutes as presented was made by Mr. Rose, seconded by Ms. Scheidt
and unanimously approved.
CFO’S REPORT
Mr. Ryan presented the Operating Statement for October 31, 2011 noting deposits for
application, termination and closing fees. He also noted that the rent to the Town of Brookhaven
was reduced again as the IMPLAN hard drive was stolen from his office a second time. Mr.
Braun questioned if the roughly $100,000 in the LPL account was waiting to be reinvested; Mr.
Ryan replied that yes, it would be.
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The motion to accept the Operating Statement was made by Ms. Scheidt and seconded by Mr.
Rose. All were in favor.
SAYVILLE BROWNING – REQUEST FOR PILOT EXTENSION
Ms. Mulligan and Mr. Braun recently met with Lee Browning of Sayville Browning Properties,
Inc. Mr. Browning is again requesting an extension of his property tax abatement on his
Courtyard Marriott hotel in Ronkonkoma, which expires this year. He is also exploring
constructing an additional hotel on the same property, rental housing units on a second piece of
property to the west, or both. Mr. Browning says that without an extension of the abatement on
his existing hotel, plus the usual package on the second hotel or rental units, he would be unable
to complete either project. According to a letter Mr. Browning sent in February, he projects
hiring 17 additional employees for the current hotel as a result of the second hotel coming online.
He has financing in place and has met with Tullio Bertoli, the Planning Commissioner who feels
that he will not be able to get the density necessary for rental housing. Mr. Braun noted that the
long-range plan for the Ronkonkoma Hub project includes a hotel. One of Mr. Browning’s
arguments for the extension on his current abatement is that if he constructs the new hotel there
will be an initial drop at his current location. Mr. Browning has recently built a new hotel in
Riverhead and has cleared land in Riverhead for another. Ms. Scheidt recalled that the
Courtyard Marriott hotel may have originally been approved because it was in the Ronkonkoma
Hub area. Mr. Braun stated that it is just outside of the current boundary. Mr. Weir added that
when this deal was originally done, there was a study that showed a lack of hotels in Eastern
Suffolk County. At the time there was a retail prohibition in place so the IDA had to show that
this project provided a service that was not otherwise readily accessible to the residents of the
Town. There have been a number of hotels built since then, but this was one of the first projects.
Mr. Rose inquired if Mr. Browning had informed the Board of any financial hardship he would
experience if the Board did not approve this. The members discussed the investments that Mr.
Browning has made and the potential issues that could arise by not granting an extension. The
sewer system that is in place there already has capacity for a second hotel but not for both the
hotel and rental housing units. However, it was designed to be easily expanded. There has been
discussion of Hub projects tapping into Mr. Browning’s sewage treatment plant. Discussion
followed about the Pinnacle Hotel project at exit 68 that never came to fruition.
TATE’S BAKE SHOP – APPLICATION
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Ms. Mulligan presented an application for Tate’s Bake Shop, the Town’s only regionally
significant Empire Zone project. Tate’s has a facility in East Moriches where they manufacture
cookies and other baked goods, and they are looking to expand by 14,000 square feet. Ms.
Mulligan noted that Tate’s has a second building on their property that they lease to IGHL. This
is a $750,000 project, and they project that employment would increase from 67 to 87 jobs as a
result of this expansion. Ms. Mulligan reminded the members of how the Empire Zone allowed
for regionally significant projects. Basically, the Empire Zone had geographic barriers. If a
project was not located in an existing zone, yet merited certification in the program, their
property would become its own Empire Zone. Mr. Braun inquired of Mr. Weir if the lease to
IGHL would be problematic; he responded that it was not. This project is expected to break
ground in the spring of 2012. This is not an existing IDA project, and Mr. Ryan informed the
Board that he recently settled a tax certiorari with the company.
The motion to accept the Tate’s Bake Shop application was made by Mr. Moloney, seconded by
Ms. Scheidt and unanimously approved.
AMNEAL PHARMACEUTICALS – APPLICATION
Amneal Pharmaceuticals is located at the intersection of County Road 101 and Horseblock Road
in Yaphank at the former Arrow Electronics site and is an Empire Zone certified company.
When Arrow Electronics left, Interpharm Pharmaceuticals moved in and they were then acquired
by Amneal. Amneal is looking to double the size of their existing facility with a 260,000 square
foot addition to the current structure. They are also looking to build a 35,000 square foot stand
alone facility on their 38 acre property, as well as a sewage treatment plant. They develop,
manufacture, warehouse and distribute generic drugs. This is a $60 million project that would
potentially increase their employment from 190 to 390 employees. Amneal indicated in their
application that the sites they are renting in Commack and Hauppauge would close with this
expansion; however, they would take their employees with them. While they will be
consolidating their operations, the majority of the jobs will be new positions. Mr. Braun
informed the Board that he has reviewed Amneal’s financials and provided details of their
financing structure. Amneal is also applying to New York State for additional funds*. Amneal
is the seventh largest pharmaceutical distributor in the country. Ms. Scheidt noted that Amneal
recently won the Hauppauge Industrial Association’s Large Business Achievement Award.
There was further discussion of who owns the company and the property; it appears that this is a
family-owned company. Ms. Scheidt added that this is exactly the type of large pharmaceutical
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company that Long Island needs to help develop the bio-tech industry. It was mentioned that
this company had previously considered moving operations to India or New Jersey.
The motion to accept the application for Amneal Pharmaceuticals was made by Ms. Scheidt and
seconded by Mr. Moloney. All were in favor.
* Subsequent to the meeting, Amneal was the recipient of a $3,000,000.00 grant from the
Governor’s Economic Development Competition.
UNCLE WALLY’S PRESENTATION
At 8:30 A.M., Lou Avignone, CEO and Michael Petrucelli, CFO of Uncle Wally’s joined the
meeting. Mr. Braun reminded the members of the IDA’s involvement with this project and
invited the representatives from Uncle Wally’s to make their presentation to the Board.
Mr. Petrucelli thanked the Board for their past assistance and explained their request for an
extension of their benefits to keep their company on Long Island. They have recently applied for
assistance through the Empire State Development Corporation (ESDC) and hope to have an
answer back from them in the next sixty days. Uncle Wally’s is privately owned by its
employees. They have created 130 jobs over the past ten years and currently have 166
employees. They expect to add 50 more jobs in the next five years and have invested over $100
million dollars in the community over the last ten years. Uncle Wally’s has two locations on
Long Island: one in Ronkonkoma and their headquarters in Shirley. They have exceeded all
New York State commitments and plan to invest another $22 million dollars over the next five
years. Mr. Petrucelli informed the Board that the end of their economic incentives could not
have come at a worse time for them with the uncertain economy, rising energy costs, and the raw
material costs for their business and freight costs going up. He added that they have limited
ability to pass these costs on to their customers such as Walmart, Costco and Sam’s Club as they
don’t want to raise their prices to consumers. They have accepted lower margins and have
reduced management salaries as well. Mr. Petrucelli forecasts that when the incentives end in
January 2012 they will have to sell another 50 million muffins or increase their sales by $10
million to cover the expiring incentives. The higher cost of doing business on Long Island with
electric, freight, insurance and workers compensation is costing them a million dollars a year.
He noted that many states are offering manufacturers free land, low electric rates and tax
incentives for up to twenty-five years. They have been contacted by North Carolina whose
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approach was that one manufacturing job equals four other jobs; but, they would like to remain
here. Uncle Wally’s has been very active in the business community and have recently been
invited to join the Business Retention Taskforce. They are seeking additional benefits from the
Long Island Power Authority (LIPA) and New York Power Authority (NYPA). They are asking
the IDA for either a ten-year phase down schedule on their PILOT or seven years of full
abatement if possible. Mr. Braun inquired if the additional jobs that Uncle Wally’s will be
adding involve further capital investments or an expansion of their facility, and what specific
program did they apply to ESDC for. Mr. Petrucelli replied that they applied for $9 million for
new building and equipment costs on a new site, $4 million to make their current factory more
efficient, and $2.5 million for research and development. ESDC has been very supportive and
has said they are hoping to come back with between $1 to 1.5 million over a ten-year period in
refundable tax credits. NYPA may also provide assistance but only for half to three-quarters of
their needs. Mr. Braun asked about the location for the potential new building. Mr. Petrucelli
answered that they have not made any decisions yet but they have a 40,000 square foot site in
Ronkonkoma. It could also be outside of New York, perhaps in North Carolina or the Midwest
as their main site in Shirley is built-out. Mr. Celauro inquired if they have any adjacent land in
the industrial park. Mr. Avignone responded that there is land in the park and with the sewage
treatment plant there is the possibility of purchasing there. Mr. Avignone explained that they
compete with manufacturers all over the country who do not have the same operating costs. If
they only competed regionally, they would not have the same challenges. In response to Mr.
Celauro’s questions, they ship 90% of their goods off of Long Island and use thermal oil at their
plant to run their ovens. Ms. Scheidt inquired if the new rail facility could help offset their
freight costs. Mr. Avignone replied that it could, but they would need to have bulk silos first.
Mr. Braun noted that the rail facility may construct silos on site at some point if demand calls for
it. Discussion turned to how a potential PILOT extension could be structured. One phase of
their PILOT ends now, with the other ending in 2017. Mr. Braun has reviewed the financial
statements of Uncle Wally’s and can attest to their lower profit margins as a result of inventory
items costs going up such as sugar.
Mr. Avignone and Mr. Petrucelli were thanked for their presentation and excused from the
meeting at 8:44 AM.
The members discussed Uncle Wally’s fiscal situation and what assistance could be offered.
Also discussed was the upcoming presentation from Framerica who has the potential to expand if
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they receive a new large contract (Home Depot). A concern that was voiced was what
assurances would the Board receive if they assist these companies that they won’t leave in a few
years? It was determined that these requests would need to be considered on a case by case basis
but that clawback language provides some protection. Mr. Braun has also been appointed to the
Business Retention Taskforce and has been reaching out to some of the large employers in the
Town to see if they are having any problems. Ms. Scheidt questioned some of the costs that
Uncle Wally’s detailed noting that it seems that property taxes are less than 10% of their
problem. Mr. Ryan believes that when they go to full taxation their taxes would be around
$130,000 with sewer fees charged separately and calculated each year. While the property taxes
may not be a large part of the problem, it may make a big difference for them. Mr. Celauro
stated we need to be proactive in these times in order to keep these jobs here. Mr. Braun asked
the members for any ideas on how to respond to this request. Mr. Moloney stated that we should
help them if we can since the money flows back to the community in different ways. Different
scenarios about structuring these extensions were discussed including a 100% abatement for a
couple of years and then cutting it back, or a 10-year abatement that is increased by 10% every
year so they are phased in to full assessment. This would also mean revenue sooner. Mr. Ryan
suggested that there be a couple of choices that all save roughly the same amount of money but
the project can select the option that suits them best. Mr. Braun will report back to the Board
after discussions with these companies. Mr. Gross noted that there needs to be clawback
provisions put in place and the needs of these companies have to be documented. Ms. Mulligan
shared with the Board that the Suffolk County IDA recently took a pre-existing building, reduced
the taxes to 40% of what they were, and then ramped them back up over a period of time. She is
now receiving inquiries if this is something the Brookhaven IDA has discussed doing as well.
The Board had decided in March of this year that they did not want to grant tax exemptions on
existing buildings. Mr. Braun added that the Town of Islip has a program especially for Central
Islip where the tax rates are above the rest of the Town. Islip also decides these matters on a
case by case basis including taking an existing building off the tax rolls. Mr. Celauro noted that
if we don’t do anything and these companies leave, we’re not helping the taxing jurisdictions at
all. Mr. Braun will speak with these companies and this matter will be discussed further at the
January meeting.
On a separate issue, Mr. Braun informed the Board that the Suffolk County Legislature recently
proposed moving Economic Development and Workforce Housing along with Energy and
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Environmental under the auspices of the Planning Department. This will result in the
elimination of two Commissioners, one being former IDA CEO Yves Michel.
CEO’S REPORT
Authority Budget Office
The IDA was recently criticized by the Authority Budget Office (ABO) for sponsorships
awarded to the Miller Business Resource Center (MBRC) and the DARE Entrepreneurship
Program. The ABO declared that these donations were made outside of the IDA’s purview. Mr.
Braun responded to this admonishment with a letter explaining what these two organizations do
to aid economic development. Mr. Braun and Ms. Mulligan have met with representatives from
MBRC and a contract will be prepared for future consideration. The DARE Program requests
will be evaluated in a similar fashion. The MBRC provides invaluable economic information not
only to the IDA, but to residents and local businesses as well. They also provide numerous small
business assistance programs that the IDA is proud to support. The New York State Economic
Development Council has been very supportive in responding to these criticisms as well. To
avoid future confusion about the reasoning for these endeavors, the minutes will go into more
detail when these expenditures are approved.
Anorad
Ms. Mulligan and Mr. Braun recently met with representatives from Anorad Corporation.
Anorad is owned by Rockwell International and Precision Estates owns the building that Anorad
occupies. Right now Anorad has roughly 85,000 square feet of the space and they have rented
out the rest to Uncle Wally’s (who has since left) and Riverhead Building Supply without
permission. Anorad had initially projected they would have 329 employees in the building, they
currently have 90 workers and Riverhead Building Supply has 30. Their PILOT is set to
terminate in 2013/2014 and the full assessment is expected to be roughly $300,000. Anorad
would like to continue to rent the space out but they never received permission to sublease the
facility. Mr. Braun noted that the building is now owned by an investor not the company and it
was purchased at a very high price. The Board has every right to default the project now and
move them to full taxation, or, could choose to take no action and leave it as is for the rest of
their two remaining years in the program. The Board elected to take no action on this matter.
When Precision Estates took ownership of the building it was structured so that the benefits
would be passed along to the tenant, Anorad, for jobs promised. It was determined that the
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owner would be contacted and informed that while the Board is not going to default, if a tenant
with a significant number of employees is not found by the time the abatement expires, no
extensions would be entertained. They have requested further assistance (extension of the
abatement) from the IDA but as Ms. Mulligan explained, they don’t have the job numbers
promised and they illegally subleased part of the facility.
Global Tissue
Ms. Mulligan informed the Board that Global Tissue is planning on expanding on their 23.5 acre
parcel. They currently have 160,000 square feet and this expansion would double the size of
their facility. They have 75 employees and have roughly $60 million in sales. They are also
renting 230,000 square feet from the former Whitman plant next door. The additional 160,000
square feet would be used for warehousing and roughly 25 more employees would be hired to
bring them to a total of 100 employees. This is an $8-10 million dollar project. Global Tissue
has been struggling with regard to the expansion as they need $1.2 million in Pine Barrens
credits. They are working with John O’Hara to find the best possible way to obtain these credits.
Barry Greenspan from Empire State Development Corporation is also looking to assist them as
they are also an Empire Zone certified project. Ms. Mulligan expects that Global Tissue will
submit an application to the IDA soon. Mr. Braun noted that they could also benefit from the rail
facility. The Board recently extended their sales tax exemption for road signage. However the
exemption has since expired with no signage in place.
Drive Train PILOT
Ms. Mulligan informed the members that Drive Train has still not paid their second-half PILOT
for 2010-2011 and that she has been in contact with the company. In December new penalties
and interest will need to be calculated. Mr. Gross noted that if we re-convey the property back to
Drive Train, we lose the ability to collect the taxes owed. Ms. Mulligan will keep the Board
posted on this matter. The 2011/2012 tax rates should be published by December 7 th and PILOT
invoices will be going out in the coming weeks.
Long Island Business Development Council (LIBDC) Membership
The annual membership with the Long Island Business Development Council (LIBDC) is due.
Renewal at the current gold level which includes attendance at all dinner meetings with a
reduced fee for guests and the Montauk Conference registration will cost $600.00. Membership
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in this organization helps the IDA remain informed on economic activity throughout Long
Island.
The motion to renew the LIBDC membership for 2012 at a cost of $600.00 was made by Mr.
Celauro, seconded by Ms. Scheidt and unanimously approved.
Brookhaven Industrial Group (BIG) Membership
The annual membership with the Brookhaven Industrial Group (BIG) is also up for renewal. The
Brookhaven Industrial Group is a coalition of local business owners in the industrial park bearing
the same name and home to many IDA projects. The cost is $100 for the year. Ms. Mulligan
and Mr. Ryan attended their meeting last week and found it to be very informative. Ms.
Mulligan is able to stay up-to-date with the needs of our projects through this group and finds
herself taking care of a couple of issues each time she attends that she may otherwise not be
aware of.
A motion to renew the BIG membership for 2012 at a cost of $100.00 was by Ms. Scheidt and
was seconded by Mr. Celauro. All were in favor.
Ms. Scheidt mentioned that what the members have discussed about Uncle Wally’s fulfills seven
of the ten smart practices for implementing job retention incentives as outlined by the
International Economic Development Council (IEDC). Ms. Eaderesto noted that some of that
language can be contained in a future resolution for extensions.
Suffolk County National Bank (SCNB)
Mr. Braun informed the Board that Suffolk County National Bank (SCNB) once again missed
the deadline for filing their amended first and second quarter financial results. They may be delisted
from trading but can still trade their stock, but not easily. They did issue a third quarter
earnings report. Mr. Braun is comfortable that Agency funds are safe, but potential new banks
were discussed including TD Bank and Bridgehampton National Bank. More is expected to be
known about SCNB in the next few weeks. In the interim, Mr. Braun will explore TD Bank and
Bridgehampton as potential alternatives. Mr. Celauro advised that we keep our banking as local
as possible since it goes to the heart of what we are trying to do.
New York State Economic Development Council – Cost Benefit Analysis Program (CBA)
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A check for $2,200 was recently sent to the New York State Economic Development Council
(NYSEDC) to reserve a spot in their cost benefit analysis project. There will be training held at
the January conference in Albany on how to use this new program that Mr. Braun and Mr. Ryan
will be attending. This program will be customized to the Agency’s specific needs and a fee of
$1,000 is due annually for updating purposes. Mr. Braun added that the annual $1,000
administrative fee we are charging new IDA projects will more than cover this expense.
Mr. Braun noted that the LDC website is not yet up and running but will be shortly. This
website is required by the Public Authorities Accountability Act.
FRAMERICA PRESENTATION
At 9:29 AM, Gordon Van Vechten and Gene Eichner, Co-Chairmen of the Framerica
Corporation, joined the meeting. Mr. Braun invited them to speak about their company. Mr.
Eichner stated that Framerica moved to Yaphank roughly 10 years ago. Mr. Van Vechten and
Mr. Eichner opened County Frame in 1969 and invented FrameMica molding which can be
easily shipped unlike other types. County Frame became Framerica and they now employ
roughly 240 people. When they moved in to Yaphank in 2001 their business suffered as a result
of the downturn in the economy. Since their products were not considered a necessity, sales
declined. Their sons now work in the company and have helped broaden the industries that they
do business with. They were very fortunate that even with the economy failing their sales have
not gone down over the last five years and they have not had any major layoffs, though for short
periods of time they have had to reduce their shifts to a 35-hour work schedule. They are now
considering relocating their company off of Long Island as many of their competitors have lower
operating costs since they are not located here. Framerica has been approached by other states
about relocating their operations. Many of their suppliers are in the Southeast and Framerica
pays a great deal in shipping costs as a result. They also pay a significant amount of landfill fees
for dumping sawdust. They considered relocation before moving their business to Brookhaven
but the incentive package the IDA provided helped them stay. Mr. Van Vechten and Mr.
Eichner attended the recent Large Business Outreach Event where Supervisor Lesko announced
his new Business Retention Taskforce. They reiterated that they would like to remain on Long
Island but need help to stay. Mr. Braun explained to the gentlemen that the Board is cognizant of
the situation with companies leaving the Island. He inquired about the status of a potentially
large new contract that Framerica is seeking that would greatly increase their business here in the
Town, as well as what their plans are 3-5 years down the road. Mr. Braun also questioned what
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type of assurance Framerica would provide that they won’t leave in a few years if additional
incentives were granted. Mr. Eichner replied that it would help if their property tax abatement
was extended or if the Agency could match funds for building improvements as they do in the
South. The Yaphank building has been up for sale since November but the potential buyers are
looking at using it for warehouse space which would result in a drastic reduction in employment.
Mr. Braun said that while the IDA does not have the ability to make investments, the Agency can
provide abatements for property, sales and mortgage recording taxes and that grants and tax
credits could be available from the Empire State Development Corporation (ESDC), Long Island
Power Authority (LIPA) and New York Power Authority (NYPA) as well. Mr. Eichner
informed the Board that they invented a new product: “Crown Molding Blocks for Dummies”.
Home Depot is very interested in this new product and it is currently being tested. Lowe’s is
also performing a product review on transition floor molding they have developed. If these
products are picked up, they could potentially hire more people and expand to a second shift.
They can expand by 30,000 square feet at their Yaphank facility and they have submitted an
application to LIPA. Mr. Eichner added that they have received an offer on a 50,000 square foot
building they own on Waverly Avenue. If they receive some help, they feel that they could
transfer those operations to their Yaphank facility. Mr. Van Vechten stated that an extension of
their PILOT benefit and a LIPA discount would help them to be able to remain here. Mr. Ryan
inquired what the cost difference is if they receive all of the assistance they have requested from
multiple agencies compared to what they are being offered by a competing state. Mr. Van
Vechten detailed what is being offered by other states: a county jobs grant of $400,000 for 200
jobs, a local tax grant of $15,000, a rural center grant of up to $480,000 in matching funds for
any renovations they do, and a new job state tax credit of $1,000 per job for 200 to 250 jobs.
These incentives are being offered by North and South Carolina. Mr. Van Vechten added that
real estate tax rates are very low there and many vacant buildings are available for purchase at a
comparatively lower cost. They reiterated that they do not want to move off of the Island. Mr.
Celauro asked if receiving most of what they are seeking from the Town and State would be
enough for them to take their building off the market. They responded that yes, if the package
was attractive enough, they would. Mr. Celauro also inquired if they were seeking a PILOT on
their Waverly Avenue facility to which they said they would be interested in anything that could
be offered. The Board thanked the gentlemen for their presentation and reminded them that the
IDA is only able to consider granting a portion of the assistance they are looking for. At 10:20
AM, Mr. Eichner and Mr. Van Vechten left the meeting.
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Mr. Braun will speak with Uncle Wally’s and update the Board at the January meeting. The
Board discussed the possibility of Framerica leaving Long Island. Mr. Celauro noted that North
Carolina is renting conference centers here to pitch their state to local companies. The need for a
policy to address these requests was discussed, as well as a deviation from the Agency’s Uniform
Tax Exemption Policy to address retention. Sayville Browning’s PILOT expires now. The
general feeling was that if the second hotel is shovel-ready, with financial commitments in place,
an abatement extension may be entertained. Mr. Celauro mentioned a potential PILOT on
Framerica’s Waverly Avenue building; Mr. Braun will find out what the taxes are for that site,
and will also reach out to Mr. Browning for more information about the status of the second
hotel.
The motion to adjourn the meeting at 10:33 AM was made by Mr. Rose, seconded by Ms.
Scheidt, and unanimously approved.
The next IDA meeting is scheduled for December 5, 2011 at Pace’s Restaurant in Port Jefferson.
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