Injunction In IDA Suit Dropped As Board Ratifies Decision
By Stephanie Mariel Petrellese

The Village of Garden City and the Garden City School District have decided not to pursue a permanent injunction against the sale of the Garden City Hotel, announced Village Counsel Gerard Fishberg at the July 17th Board of Trustees meeting. However, the portion of the suit which challenges the Town of Hempstead Industrial Development Agency's granting of tax assistance to the proposed hotel buyer will continue.

"Both the school district and we, in our office, have concluded that the seeking of that injunction was not paramount in pursuing this claim," Fishberg said.

On July 8th, a temporary restraining order halting the sale of the Garden City Hotel was issued by a state Supreme Court judge in Mineola after counsel from the Garden City School District and Village of Garden City joined forces to initiate legal action against the IDA.

In return, an attorney for Alrose GCH LLC, the reported buyer of the hotel, filed a $20-million notice of claim against the village and school district, contending that his client will lose a $6-million deposit if the deal with the current hotel owners does not close on time. The closing is expected within a month.

On July 16th, attorneys for the school district and Village sought to modify their petition and asked a judge to drop the temporary restraining order and the motion for a permanent injunction, allowing the actual sale to go forward. They will continue in their legal pursuit to prevent the IDA from granting tax assistance to Alrose.

The developer has said the deal is dependent on receiving the benefits. A source told the Garden City News that is not a concern for the Village and school district. To protect their interests, counsel for Alrose may have made sure a clause was included in the contract which decreases the selling price in the event IDA benefits are not received.

In June, the IDA approved a deal with Alrose which freezes the property's current $1.7 million total for school, county and village taxes for three years. The corporation will make payments in lieu of taxes, known as PILOTs, which will increase modestly over the next seven years. The hotel would be required to pay its full share of real estate taxes beginning in the eleventh year. The agreement also includes sales tax exemptions for the hotel renovation and exemption from a one percent mortgage recording fee.

Albert Chase, Garden City School District's assistant superintendent for business and finance, has estimated that the district will experience a loss of $2.8 million in tax revenue over the 10-year period. The school district contends that the IDA violated its procedures and mission, which is to "attract, retain and expand businesses within their jurisdictions through the provision of financial incentives to private entities," according to a May 2006 report from New York State Comptroller Alan Hevesi.

The Village has taken the legal position that the tax abatement should be applied to the hotel improvements, not the current assessment, according to the Notice of Public Hearing and IDA's Uniform Tax Exemption Policy and Guidelines. According to Village Counsel Gerard Fishberg, the IDA believes that the two cited sources are broad enough to cover the approved abatement.

"We're challenging the actions of the IDA and pointing out that their actions did not comport with their tax policy and with their notice of hearing," Fishberg said.

As many expected would take place at the July meeting, the Garden City Board of Trustees ratified Mayor Peter A. Bee's decision to join the Garden City School District in the litigation against the IDA. Trustee John Watras was absent, and Trustee Robert Rothschild recused himself.

At the last Board of Trustees meeting on June 19th, a resolution authorizing counsel for the Village of Garden City to begin litigation against the IDA failed to pass after five of the eight trustees decided to wait to see how the school district chose to handle the matter.

When the Village learned that the school district was going to begin legal proceedings before the next Board of Trustees meeting was scheduled, the mayor took an informal telephone poll of trustees on July 7th before directing Village Counsel Gerard Fishberg to join the litigation on July 8th.

"It is my perception that a number of Board members who voted against that motion, and it's certainly true of myself, wanted further time to study the matter and think about the matter before they made a determination to go forth with litigation," explained Mayor Bee. "The school board then did go forth with the litigation...I took an informal poll of a number of trustees and felt comfortable that there was, by that point in time, a majority in favor of joining the litigation."

Mayor Bee said he could not reach Second Deputy Mayor Thomas Lamberti, but was confident he would support joining the litigation since he introduced the resolution at the June 19th meeting. The mayor also said he did not poll Trustee Rothschild because he decided to recuse himself from the matter.

As senior vice president of commercial real estate lending for Signature Bank, Rothschild was called upon to approve a loan on July 3rd for an entity of Alrose. He admitted that he was surprised when he saw the name. Rothschild approved the loan, but emphasized it had nothing to do with the Garden City Hotel.

Rothschild alluded to concerns of residents and Lamberti that on previous matters some trustees had possible conflicts of interest due to their jobs and business relationships. "To be honest, I'm not sure whether I had to recuse myself, but given what has gone on in the past regarding some of these issues, I felt it was better to do so," he said.