Oyster Bay withholds $44 million in taxes from Nassau

Oyster Bay is withholding $44 million in general property taxes it owes Nassau County in an attempt to get reimbursement for tax refunds the town paid utility companies in a decades-old legal dispute over erroneous county property tax assessments, officials said.

Although a state judge ordered Oyster Bay to transmit the taxes, the town has appealed, which stays the order.

Oyster Bay Tax Receiver James Stefanich said last week that he is holding the $44 million in an escrow account as he awaits direction from the town’s legal team.

“I can’t give it to the town, I can’t give it to the county,” Stefanich said. “I’m in limbo sitting on the money.”

The dispute stems from a 1994 lawsuit filed by the old New York Telephone company and continued by its successor Verizon against Nassau’s three towns. The phone company, joined subsequently by other utilities, argued successfully that it was assessed improperly for telephone poles, wires and other equipment in town garbage districts.

The towns eventually borrowed millions of dollars to refund the disputed property taxes paid by the utilities, and requested reimbursement from Nassau.

Since 2010, the state’s highest court, the Court of Appeals, has twice upheld the “county guaranty,” a state law requiring Nassau to indemnify the towns, schools and special districts for its erroneous assessments.

But the county has filed multiple arguments in court against repayment. The unpaid refunds are accruing 9 percent interest, and the total cost now is estimated at more than $185 million.

Frank Scalera, Oyster Bay’s chief deputy town attorney, said the town had obtained judgments against the county to pay the refunds, but had not been able to negotiate reimbursement.

“The money by law is duly owed to us,” Scalera said. “We just want our money back.”

The town obtained a court order requiring Stefanich to hold back $22 million from the county’s tax receipts, which are usually remitted from the end of February through March. Under the order, Stefanich can retain twice the amount owed.

Nassau’s other two towns are not saying what steps they will take to get reimbursed.

“This is a matter of ongoing litigation and potentially pending litigation and as such we have no comment,” said Michael Deery, spokesman for Hempstead Town, which has paid $30 million in utility tax refunds.

North Hempstead spokeswoman Carole Trottere said Nassau owes the town “a full refund for the garbage tax refund payments the town has made. Our taxpayers have been waiting a long time. It is time for the county to draw this litigation to an end and pay what it owes.” She estimated the bill at about $10 million.

County officials said last week they expect the stalemate with Oyster Bay to be resolved quickly. County Comptroller George Maragos predicted the overdue taxes would be remitted this week and discounted any adverse effects of the delay.

But Scalera said, “The law is the law. . . . At this point in time, we’re going to continue to hold it.”