Nassau County will lose $2.56 million in revenue after “inconsistently negotiating” fees for connections to its sewage system by projects outside the district, including Oheka Castle’s Cold Spring Hills condominiums, according to a report by Nassau’s comptroller.
In a 44-page report released this week, Nassau Comptroller Jack Schnirman’s office found the county Department of Public Works used a “convoluted formula” to determine the fees for connections to the system, one that benefited at least three big projects, including the proposed condo project at Oheka Castle. The report recommended delaying the pending Oheka vote on the sewer hookup until the legislature “has an opportunity to review the difference” in the formula.
Newsday reported last September on the different formulas used for calculating the fees. It found Oheka’s proposed Cold Spring Hills condo project, which is primarily located in Suffolk County, paid a $425,000 connection fee, also called an “equalization” charge, while a smaller, nearby project, Kensington Estates, paid $969,318.
“What we see is that this process or lack thereof created a list of winners who were able to get a lower charge,” said Schnirman in an interview. “It was done behind closed doors in the proverbial backroom.”
In a response to the audit’s criticism of the department’s practice of negotiating with developers, the Department of Public Works said all agreements were authorized by the county executive, who was then Edward Mangano, whom developer and Oheka owner Gary Melius supported with at least $17,500 in campaign contributions.
He noted there was “no formal policy for negotiating these deals. Staff was free to wheel and deal as they saw fit.” Ironically, Schnirman noted, the legislature approved two different deals using two different formulas on the same day.
The report noted that the two pending projects are “literally across the street” from each other, yet the per-unit valuation used for Kensington was nearly 400 percent higher than Cold Spring Hills, which is expected to generate 72 percent more sewage annually.
The difference in the fees charged was the result of a formula that used the predevelopment value of the project, compared with the post-completion estimate of its value. The report noted developers who negotiated fees based on the predevelopment value could save “thousands and possibly millions of dollars at taxpayer expense.”
At least two other out-of-district projects also benefited from the lower connection fee, including Glen Head Commons and Glenwood Landing, which saw their fees lowered by $620,191 and $685,562 respectively, by using the predevelopment value.
Further, the report said, the Department of Public Works “did not always follow county ordinance” in providing for site inspections for the projects and other contract terms “were not consistent” for out-of-district projects.
Had the post-completion value been used for the Cold Spring Hills project, the connection fee would have been $1,678,292, compared with the $425,000 Oheka paid, the auditor’s report noted. In the Newsday story, Melius said he had “no idea” why Nassau used the lower fee for his project. “They didn’t do that for me,” he said. A call to an Oheka media representative on Monday wasn’t immediately returned.
Nassau County Executive Laura Curran, in a statement, called the results of the audit “a great help in determining the methods used by the prior administration with regard to out-of-district sewer charges. There should be uniformity throughout the county. I am looking forward to reviewing the audit in its entirety.”
Lester Petracca, managing member of Triangle Equities, which is developing Kensington Estates, was unavailable for comment.
The report recommends that the county legislature standardize the formula for calculating the charge, which is designed to recoup costs new developers pay for a system that has already been largely financed by existing users.
It also recommended the department cease individual negotiations for the connection charge, noting that in Suffolk County, it’s based on per-gallon fee. Schnirman said the report, as a matter of course, will be forwarded to the Nassau District Attorney’s office.