Long Beach residents claim iStar agreement is unlawful

Motion seeks to dismiss developer’s Superblock lawsuit against city


The ongoing legal drama surrounding the development of the long-vacant Superblock property took another twist late last month, when a group of residents filed a motion to dismiss a $100 million lawsuit filed by the developer against the city, claiming that iStar Financial’s agreement with the city is now “illegal.”

On May 30, eight residents who live near the property filed a motion in Nassau County State Supreme Court to dismiss part of the Manhattan-based developer’s suit, which claimed that the city failed to show support for iStar’s request for tax breaks.

The developer is seeking the tax reductions from the Nassau County Industrial Development Agency to build two 15-story luxury apartment towers and retail space along the boardwalk on the six-acre oceanfront property. The IDA has twice rejected granting iStar tax breaks of up to $129 million.

IStar filed suit just days before the city’s Zoning Board of Appeals voted to revoke a building permit it issued the developer in May of 2015, after a group of residents claimed the permit was invalid because a variance that had been granted to iStar had expired.

IStar argued that the city breached an agreement the parties reached in 2014, which called for the city to show its support for tax incentives as well as any challenges to the zoning variance. The city has until July 10 to respond to the complaint.

Last year, city officials told residents at a heated meeting at City Hall that iStar would take legal action against the city if it did not submit a letter to the IDA supporting the developer’s request for a 20-year, $82 million payment in lieu of taxes, or PILOT, program.

The latest motion — filed by residents Michael Markowitz, Tamar Sklover, former Republican City Councilwoman Mona Goodman, Dan Shaffer, Beverly Jones, James Kirklin, Kevin Reilly and Stuart Austin — seeks to dismiss iStar’s attempt to force the city to support tax incentives and to stop the project from moving forward.

“We are not intervening to dismiss plaintiff’s cause of action for money damages,” the motion states. “We request intervention to stop a developer from making policy decisions on our behalf.”

“It’s ludicrous to think that the city should be on the hook for $100 million,” Goodman told the Herald. “I think the project is way too large for the area, and really will be detrimental to the city. But issue No. 2 is, to saddle the residents with a $100 million lawsuit is unconscionable, and our [motion], in my opinion, tries to help the city.”

City officials declined to comment. Representatives of iStar did not return a call requesting comment.

In 2014, the City Council voted to settle a lawsuit brought by the city against iStar for $5.25 million, and the terms of the settlement included the city’s support for a PILOT, albeit for an unspecified term. The zoning board subsequently gave the developer approval to move forward with the project. The council voted to approve a “community host” agreement in 2015, which reaffirmed its support for the tax abatement. As part of that deal, iStar agreed to pay the city $4.1 million to mitigate the project’s impact.

According to the motion filed by the residents, iStar’s agreement with the city is illegal and violates the state’s term limits rule. “When [the city] entered into the settlement agreement and [community host agreement], Scott J. Mandel, Anthony Eramo, Eileen Goggin, Len Torres and Fran Adelson were on the City Council,” the motion states. “They were the individuals who authorized former Corporation Counsel Corey Klein and former City Manager Jack Schnirman to enter into the settlement agreement and [community host agreement]. Today, the majority of the city’s elected officials are different.”

Adelson and Goggin were absent from the 2015 meeting in which the council voted to approve the host agreement. The motion argues that under the term limits rule, a municipal body may not contractually bind its successors beyond the term for which council members were elected, unless specifically authorized “by statute or charter provisions.”

“The thinking here is that now we have a majority of representatives who are different than those who entered in this agreement,” said Markowitz, the attorney representing the group. “We’re calling for the lawsuit against the city to be dismissed, but only concerning the declaratory judgment and specific performances requiring the city provide a letter in support and … regarding zoning and permits.”

Goodman and others, including former U.S. Sen. Alfonse D’Amato, have claimed that the city entered into a “secret” agreement with iStar. According to the motion, that agreement included a confidentiality clause that prohibited the city from revealing its terms. The residents claim that the clause was illegal, and conflicts with the Freedom of Information Law.

“We do not believe the city will adequately represent our interest,” the motion states.

City officials, however, have long disputed that contention, calling it a “baseless political attack.” Officials have said that the council voted to settle its lawsuit against iStar and enter into the host agreement at public meetings, and that relevant documents were provided to the public through FOIL requests.

City officials faced harsh criticism, however, when residents learned about the developer’s initial request for a 25-year tax break. Officials and council members had declined to speak for or against the tax abatement proposals, citing potential litigation.

In response to iStar’s claim that the city violated its agreement when it failed to support tax breaks, the motion argues that the local government has the power to tax, and that the city charter “does not allow the council to bind its successors in areas relating to its right to issue and collect taxes.” The motion also claims that a contract to influence zoning and building permits is illegal.

“The present City Council does not want to support the plaintiff’s IDA application — resulting in a reduction of taxes,” the motion states. “If this court orders the city to support the plaintiff’s IDA application, it would be interfering with the city’s governmental functions. As a result, enforcement of the PILOT clauses in the settlement agreement and [community host agreement] is illegal under the term limits rule.”

Residents have long criticized iStar representatives for telling the zoning board in 2014 that it could begin construction shortly after the variance was approved — and that the project would generate $4.8 million per year in property tax revenue — and then claiming that iStar needed more than $100 million in tax breaks to move forward.

“We’re not against the city,” Markowitz said. “I don’t want a builder to turn around and take the place of the people who elected their representatives of the city, and that’s the purpose of the motion.”