Hotel developer proceeds with lawsuit against Village “on principle,” hints at larger issues within local government

On July 1, developer Kevin O’Neill received word that a Suffolk County Supreme Court judge denied a request from Village board members to dismiss a lawsuit he filed against them over the cost of a building permit fee.

This week, the Journal learned that Northport Village attorney Stuart Besen has filed a notice of appeal of that determination, and intends to ask the appellate court to review and reverse the judge’s decision.

It’s the latest move in a drawn-out saga over what O’Neill claims is an excessive overcharge, and Besen says is a standard building permit fee for a project this size in a Long Island village.

O’Neill is CEO of the John Engeman Theater and one of two partners behind the Northport Hotel, a 24-room boutique hotel and upscale restaurant currently being built on the corner of Main Street and Woodside Avenue. When he was told the building permit fee would be $87,000, he assumed it was a clerical error. In an effort to keep the project moving, O’Neill paid the permit fee in protest (an indicator that a lawsuit is coming) in February of 2020, but immediately tried to work with the board to get things rectified.

“They refused,” O’Neill said.

When the pandemic hit the following month, O’Neill said he took a step back so that Village officials could deal with the unexpected challenges of Covid in the community. In July, he wrote a letter to Village Mayor Damon McMullen, and copied all the Village trustees, requesting they revisit the permit fee situation and see if they could come up with a solution.

“And there were crickets. There was no response whatsoever,” said O’Neill. “So then we had to proceed with a lawsuit.” O’Neill is suing the Village over that permit fee, which he claims is approximately $58,000 more than what he should have been charged.

O’Neill argues that if the fee schedule, as outlined in the official Village of Northport building construction code, would have been followed strictly and correctly, the building permit cost for the hotel should have been $28,697. The code calls for a building permit to be based on the estimated cost of a project, and O’Neill feels the Village used an “unauthorized formula” to calculate the cost of the fee, according to court papers.

“We just caught them overcharging. And whether it was intentional or not, we caught it, it’s an error. They were supposed to fix it, they just haven’t fixed it,” he said. “It’s a disgrace what’s happening. It shouldn’t happen to any taxpayer, regardless of the size of the project. We all get lectured on how we’re supposed to follow the code, and they’re not following their own code. It’s extortive.”

O’Neill feels this is an issue that may be happening with other taxpayers and wonders if the error is plain ineptitude, or in his particular case, malice. The $58,000 price differential, he said, is indicative of a larger problem within the Village and specifically with some Village officials. He’s continuing with the lawsuit “on principle,” he said, and hopes to uncover through it a problematic system that delayed the construction of the hotel for more than a year.

Village Attorney Stuart Besen, however, says the permit fee is “completely in line with all other villages on Long Island, and what our Village code states.” He said that O’Neill’s comparing the Northport fee to other municipalities, such as Smithtown and Huntington, is comparing apples to oranges. Villages tend to have higher permit fees for many reasons, including the need to hire outside engineers to oversee and review projects, he said (towns generally have engineers already on staff).

“You can’t look at towns, you have to compare to what other villages would charge,” Besen said, comparing the Northport Hotel fee to that of a new building construction in Port Washington North, where he is also village attorney. “This is a standard building permit fee for villages throughout Long Island. It’s not anything different.”

Besen believes it’s typical for a building permit fee in a village to be around 1% of the total cost of the project. When O’Neill’s architect submitted the cost of the project – approximately $8.7 million – to the building department, the $87,000 building permit fee followed.

“They’re relying on what the architect or construction manager think was the actual per dollar cost of building the project,” said Christopher Modelewski, O’Neill’s attorney. “But when they do that they disregard whole volumes of their own law and you’re not allowed to do that when you’re in the business of government. You have to follow your own law.”

And that law, as written in the Village code, said O’Neill, is based on a project’s square footage and estimated costs, with a detailed and comprehensive fee schedule that covers how to calculate them. “They’re just taking my finished cost from bidders,” he said. “That’s not how you are supposed to get a building permit. They’re not using their own code to do it, they’re just asking what we’re paying for it, and that has nothing to do with it.”

Besen stated that working from the actual cost though, is correct, as it was available. ”So there didn’t need to be an estimate of [the project], because they submitted the actual cost of it to the Village. And you only go to an estimate if you can’t determine immediately at that point what the actual cost is going to be,” he said.

The Village attorney also points to a 2019 agreement stating that O’Neill would pay for outside engineers hired to oversee and review the project and that the Village agreed the cost of these outsourced engineers would come off the building permit fee. O’Neill claims to have offered to pay the fees, in addition to the lower building permit fee as calculated by his attorney, prior to filing the lawsuit, but was denied.

So what does a building permit fee cover?

According to Modelewski, a permit fee is supposed to represent the legitimate cost of the municipality in issuing the permit and inspecting the work; fees have to be reasonably related to the municipal service that is rendered, he said. He thinks the $87,000 fee is so excessive it could constitute an unlawful tax and questions why the Village would deviate from its own code and suggest a fee based on what a developer chooses to spend on a project. “It’s still the same inspection; that doesn’t change just because the cost of the material or the cost of the installer or tradesman rises substantially,” he said.

Modelewski also questions why the Village could have followed code so closely when charging a separate plumbing permit fee O’Neill and partner Rich Dolce were obliged to pay, but then not follow it with respect to the building permit fee.

“How is it that Northport Village knows and understands how to charge a plumbing permit fee but not a building permit fee?” he said. “Why the departure on the building permit fee? That’s the question that we’d like to have answered and that’s where, for us, bad faith comes in, imputed to the Village officials.”

O’Neill hopes an answer to that question will be found in the discovery stage of his lawsuit, once people involved in the case have to go on record to discuss extensive delays in construction, on top of the building permit fee.

“We want to go into discovery and find out what went on,” said O’Neill. “I have a major problem with what took place. It’s an embarrassment that they’ve done this to me, or anybody else. I’m trying to get it so they treat everybody the way the code states, and they’re not, and they know it.”

While the lawsuit seeks to get the money back from the fee he paid in protest, O’Neill said it’s open right now as to what else can be pursued, based on damages. He brings up past history with the Village, including the corrupt behavior of former Northport Village administrator Tim Brojer, who pleaded guilty in January 2020 to stealing Village property and using Village funds to buy personal items.

“I said ‘No’ to the Village of Northport twice. One was Tim Brojer. They thought I had a personality conflict with [him]. I thought he was a crook. And he got taken away in cuffs,” O’Neill said. “Two, is to this building permit fee, and Stu Besen, and the mayor. They should have rectified this right away.”

Besen said that even though the first request to dismiss the lawsuit, which was submitted “pre-answer,” was denied, the lawsuit could still be dismissed in the future. Requests for comment from the mayor, who is directly named in the lawsuit, were not returned.

A major Main Street presence and contributor to the downtown economy, O’Neill understands that taking on Village officials in this case could have consequences. “I understand there’s implications and I’ll deal with them,” he said. “I’m not just going to let them abuse me in triplicate. It’s a complete disgrace what they’re doing and it needs to stop.”