City collects millions from Allegria, Nassau County

The city recently recouped more than $1 million in unpaid real estate taxes and other fees owed by the Allegria Hotel, part of a deal reached in U.S. Bankruptcy Court in July.

Corporation Counsel Rob Agostisi said that the hotel — which was sold for $27.4 million at a bankruptcy auction in July after years of financial setbacks and two Chapter 11 filings — had failed to pay nearly $1 million in real estate taxes to the city for the 2015-16 fiscal year. Additionally, the hotel owed nearly $86,000 in water and sewer fees.

“We were working with the bankruptcy trustee extensively to make sure that the city’s arrears — in terms of taxes and water charges — were paid off the top,” Agostisi said, adding that the money was recouped without having to file a lawsuit against the hotel.

Stabilis Capital Management LP, a Manhattan investment firm and the Allegria’s mortgage lender, submitted the winning bid for the hotel. Stabilis is a successor to Brooklyn Federal Savings Bank, the original mortgage provider, which held a $38 million note on the property.

In February, Stabilis sued to foreclose on the hotel, saying that the mortgage note had come due in 2014, together with interest and other costs. Stabilis claimed it was owed $31.7 million plus interest and fees, according to court documents.

The sale of the hotel was finalized in August, attorney Ken Silverman, the former court-appointed bankruptcy trustee, told the Herald. Court documents filed prior to the sale show that the hotel had debts totaling $39.1 million, and last year marked the second time in four years that the Allegria had filed for bankruptcy, after the State Department of Taxation and Finance slapped seizure notices on a third of the hotel’s rooms because it owed $6 million in back taxes.

“As part of the sale, all of the city and county taxes were paid,” Silverman said. “It was a significant amount. Everybody that provided services to the hotel — at least under my watch — were paid, and I don’t recall that there were any outstanding bills due.”

Agostisi and other city officials said that the city has been aggressive in pursuing money it is owed. In addition to the funds recouped from the Allegria, City Manager Jack Schnirman said that Agostisi’s office put pressure on Nassau County to pay a total of $1.2 million the city was owed over a two-year period, and was able to avoid litigation.

Agostisi said that the county owed nearly $740,000 in arrears as part of a contract with the city for the treatment of sewage in the Lido Sewer District. Officials said that the county also owed the city $500,000 for the ShotSpotter Flex Gunfire Alert and Analysis System, a gunshot-recognition software system the city installed last year after a rash of shootings in the North Park area. The cost of the system is being covered by Nassau County Community Revitalization Development funds secured by County Legislator Denise Ford (R-Long Beach).

“I am extremely pleased with the aggressive action taken by the corporation counsel in recovering these funds,” said City Council Vice President Anthony Eramo, a Democrat who is running for the State Assembly. “While it is unfortunate that many of these entities, who were certainly capable of paying, took so long to do the right thing, I’m glad that corporation counsel was able to ensure that the city received what was owed.”

County spokesman Brian Nevin did not immediately respond to an email requesting comment. Schnirman said that the funds, which the city recouped from the hotel and the county in August and September, were part of the budget for the current fiscal year.

“Although it’s frustrating to wait this period of time, we’re hoping that a successful resolution of these matters will open up new channels of communication with the county,” Agostisi said.

City officials also said they had collected more than $200,000 in insurance reimbursements related to various legal actions.

The city was aggressively pursuing money it was owed, they added, as part of its ongoing fiscal recovery. Though the city has come a long way since it was on the brink of bankruptcy in 2012 — it has since received eight consecutive positive credit ratings — Long Beach still faces a number of financial and legal challenges.

In May, the City Council voted 3-2 to approve a $90.1 million budget that included a 6 percent tax increase, a large portion of which is covering the remainder of a $20 million judgment the city must pay to two former owners of the Superblock property to resolve a decades-old lawsuit.

And the city is currently appealing a default judgment a State Supreme Court judge issued last year in favor of developer Sinclair Haberman, which is seeking to recoup $50 million in damages and profits it claims it lost after the city’s Zoning Board of Appeals revoked its permits to build three condominium buildings on Shore Road in 2003. The project dates back to the 1980s, and officials say that litigation is expected to continue for years.

“One of the key components of a successful fiscal recovery is ensuring and collecting unpaid debts and preventing a large accumulation of unpaid debt that can be a drain on our cash flow,” Schnirman said. “We continue to move forward consistently along the path that we have laid out as we implement our long-term fiscal recovery plan. We are approximately halfway through our fiscal recovery, and we still have many difficult choices ahead of us.”