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Appeals court to Suffolk County: Return $29.4 million to sewer fund

A state appellate court for a second time has ruled a $29.4 million diversion from the Suffolk’s Drinking Water Protection Program was illegal, and this time emphatically ordered the county to return the money to its sewer fund.

In a 4-0 ruling, the Appellate Division in Brooklyn threw out the formal judgment issued by state Supreme Court Justice Joseph Farneti after the appellate court's initial 2016 ruling. Farneti's order ignored a major part of the original appeals decision that required money diverted from 2011 to 2013 to be returned the county’s assessment stabilization reserve fund.

The fund was created to stabilize taxes in the Southwest Sewer District and about two dozen other smaller county sewer districts.

“A trial court … lacks the power to deviate from the mandate of the higher court,” Presiding Justice Alan Scheinkman wrote in a two-page decision. “Here the Supreme court … failed to adhere to the terms of this court … when this court clearly granted … the entirety of the plaintiff’s motion.”

The appeals court in its original 2012 decision ruled the diversion of money was “illegal, null and void and of no force and effect” because the county failed to get voter approval in a public referendum as required by the county charter.

The ruling also called on Suffolk to “take all actions and make all budgetary adjustments … necessary to transfer the $29.4 million” back to the reserve fund.

“A first grader could have figured out what Farneti did was wrong. We’re delighted to have a crystal clear decision," said Jennifer Juengst, an attorney for the Long Island Pine Barrens Society, which first sued in 2011 over the diversion.

Derek Poppe, a spokesman for Suffolk County Executive Steve Bellone, said the appellate decision, “which was based on actions taken in 2011 during a prior administration, has already been satisfied by a 2014 referendum that authorized the spending of the $29.4 million for an enhanced water quality protection program.”

Paul Sabatino, another attorney for the Pine Barrens Society, said county lawyers made the same argument before the appellate panel and were “resoundingly rejected. I guess they are waiting to be held in contempt of court.”

Farneti omitted the repayment part of the ruling after the county attorney argued that the issue had been resolved as part of a settlement between Bellone and the Pine Barrens Society over Bellone's use of $32.8 million from the sewer fund in 2014 to plug holes in the county budget.

However, the society earlier had sued the county over former County Executive Steve Levy’s raid of $29.4 million from the same fund. The society said that suit was not part of the settlement with Bellone. The settlement did not cover the money Levy diverted.

“Levy took money first. Then Bellone said, ‘maybe we shouldn’t do that, but we don’t have to give money back,’” said Richard Amper, Pine Barrens Society executive director. 

Amper noted voters approved $2 billion for water and land protection by as much as an 84 percent margin in referendums. But he asked, “how much longer do you think voters will support it if the county executive can say ‘April Fools — We can change the rules.'?”

Sabatino called the appeals court decision significant, saying it was another step in undoing the series of fiscal diversions that he labeled "the biggest Ponzi scheme in the county history.”

Bellone’s 2014 settlement with the society permitted the county to keep borrowing money from the sewer fund through 2017, but required the money to be returned in payments from 2018 to 2029.

In all, Suffolk has borrowed $171.3 million from the fund. The county made its first payment of $8.56 million last year and has budgeted payment of the same amount this year.

Also pending is a lawsuit filed by Southwest Sewer District residents against the county, seeking recovery of at least another $104.6 million, which the lawsuit claims the county diverted from a separate district sewer fund to reduce the county deficit. Bellone aides say the money is being used for the purpose for which it was intended —capital projects like the $207 million replacement of a bay outfall pipe. 

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