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Face-Off: Board v. Developer, Building 2 - Spring Meadows

Face-Off: Board v. Developer, Building 2 - Spring Meadows, Hauppauge, Long Island

A developer, a sewage treatment plant, and $4 million in expenses all spelled disaster for one Suffolk county co-op.

I moved into Spring Meadows in spring of 2001. It is a charming Hauppauge, Long Island, community consisting of 167 units with hard-working, middle-income residents who are mostly teachers, nurses, and working class people. We have our share of senior citizens, single moms, and newlyweds, as well. No one could tell from the people or the place that our co-op had just finished a bruising, seven-year battle over sewage, money, and our rights as owners.

But it did. I am the current board president, and how our co-op survived – and learned – from our experience is my tale.

It all started in 2000, when the sewer treatment plant (STP) we housed on site was nearing the end of its lifespan. The board had contracted engineers to draw up plans to build a new plant. At the same time, there was a major real estate developer planning on building a hotel a short distance away. In order to accommodate the “sanitary” needs of the hotel, the developer was going to be expanding an existing municipal STP that was conveniently located between the developer’s land and our community. So with some exploration, “cajoling” from the county, and $500,000 in escrow, Spring Meadows agreed to become partners with the developer and join his expansion. Once we connected to the municipal STP, it would enable us to demolish our plant and get out of the sewer business. A “win-win” for all parties involved. The total cost for this project was estimated to be $1 million.

This was one of those ideas that worked really well in theory. But almost as soon as the ink had dried on the contracts the trouble began. I won’t bore you with the details. Suffice it to say, by 2007, there was still no construction but a whole lot of reasons and excuses for delays. And even more worrisome: the scope of the project had changed significantly. When we joined this project, it was a 350,000-gallon expansion. After another big developer had initiated a lawsuit in order to join this expansion, it turned into a 750,000-gallon plant that was being built from scratch. And unfortunately, that left Spring Meadows stuck in the middle.

 

New President, Old Problem

While we were stuck in limbo, we saved every extra penny because we had no idea what this project would now cost with inflation. We had stripped all of the fat from our budget and were only doing capital improvements that were necessary to maintain the integrity of our structures.

I had been on the board for much of this time. I had first run for office when three of the five board members moved from the community for various personal reasons. At the time, I thought to myself, “I have always maintained an interest in my community, and have an investment here and while I might not be the smartest person I know, I am also not the dumbest.” And – before I had time to turn back – I was on the board of directors at Spring Meadows. Three years after that, another three of our five board members stepped down; I reluctantly accepted the position of president. They say hindsight is 20/20... if I only knew then what I know now.

I took over on Friday of Memorial Day Weekend. On the same day, I received a certified letter from the developer informing me that the project was finally put out to bid and our “proportionate” share of the cost was a whopping $4 million. I sat at our pool wearing my sunglasses to hide tears I couldn’t hold back. We had painstakingly saved just over $1 million (no easy task since our sole source of income is the monthly maintenance).

Over the weekend, I considered our options. Either we could try to rebuild our plant, connect directly to the existing STP as is without the expansion, or try to renegotiate with the developer since the entire project was now different.

After a thorough investigation, our engineer advised us the cost of rebuilding/expanding our plant would probably be $4 million, if not more. So, that left us with either the direct connection or negotiation. Seems simple right? Here’s the problem: the developer – very big, powerful, heavily connected politically, and fiercely adversarial – was holding $500,000 of our money. And there was the other small matter: the county had told us on several occasions that there was actually no space in the existing plant to connect directly.

It was then that I did what anybody would do who has a full-time job, part-time business, and somewhat of a personal life, and who has taken on what is now an additional full-time, thankless, and unpaid job. I ignored the insistence from our attorney and engineers that we give up and decided to fight.

Never having been an advocate for anything, I had no idea where to start. I began by trying to recruit help from our local legislator. When we met, I explained the gravity of our situation and immediately he was up for the fight. One minor problem, he also believed that connecting directly might be difficult as there was supposed to be no additional capacity. We devised what I would call the “shotgun” strategy. We would contact all the agencies involved – the health department, public works, and the environmental protection agency – to solicit any and all ideas for a solution to this nightmare. We were energized and ready to go.

 

The C-SPAN Panel

Have you ever dealt with a municipality? (Insert theme from Jeopardy here). They do not move as fast as one would hope. Unfortunately, our quest for resolutions did not come to pass. Still, undeterred, I proceeded to try to create opportunities for us to gain some traction.

Our break came when the legislative panel that handles public works held a meeting to approve the developer’s plans for expansion and construction. I enlisted the help of our shareholders to join me in attending this meeting to speak out in an effort to bring a face to our cause. My community responded well. In the middle of the business day, about 20 to 30 residents took time off from work or from their day to show their support and anger.

In what I can only describe as the “C-SPAN” panel, I found myself – little old me – alongside the high-powered attorneys for the county and the developer. Now, I am not one for public speaking, but I summoned up the courage and shakily told the panel of our plight and begged for their help. All the while, my residents were loudly cheering me on. It worked! The legislative panel adjourned the decision to investigate the situation more expeditiously. Score one for the little guys!

Trying to use that momentum, I contacted our county executive’s office. After vigorously asserting myself, I got in touch with the deputy county executive who agreed to meet with me. By now I had been in this battle a year and a half and I knew in my heart, if I could not win the support of this office our struggle was going to end in defeat. So, I did what any strong leader would do. I played the game. I put together a booklet with a timeline of events, a brief synopsis of our predicament, and a description of our options. And in an effort to summon the most empathy possible, the front cover was shamelessly filled with pictures of our senior citizens and single moms.

Several weeks after our meeting, I received a call from the deputy executive advising me that he had been in contact with the commissioner of the Department of Public Works and they were working on coming up with a solution to our problem. Slowly, I began to notice a shift in power. The real estate developer who was once so adversarial had fired his attorney and replaced him with a much more “we want to find a solution” public relations type of lawyer. Now after much hard work, we were finally gaining the momentum.

Over the next few months, there were hurdles in which Spring Meadows prevailed. And these were hurdles that we had never been able to get over in the past. These months were spent negotiating and exploring. It was our position that the contract we had entered into with the developer nearly ten years before had been breached. We needed to know if the developer would refund all of the funds he was holding in escrow should we decide we wanted out of the project. You can imagine how well this notion was received.

The culmination of this battle came at a county sewer district meeting. On the agenda was, in fact, Spring Meadows’ application to connect directly to the existing sewer treatment plant without the expansion. This was a very tense meeting, attended by all involved parties. We were the next to last item on the agenda, and finally when it was our turn, the commissioner spoke and, just like that, Spring Meadows was granted its request to connect directly!

Not only were we approved, but the county was not going to charge us $30/gallon, the current connection fee. They were going to honor the $15/gallon that was in the original contract ten years prior. That part alone saved our community $500,000! I sat with my attorney and engineer (the ones who told me this was an impossible feat) completely astonished. And for once, I was actually speechless.

 

And the Winner Is...

It has been nearly nine months since that meeting. After a very long and arduous negotiation with the real estate developer, I am proud to report we have received 100 percent of our escrow back, plus interest. Hopefully, by the time this story is printed, we will have signed the connection agreement with the county. And if it were not for some big faux pas on the part of our engineer (which is actually another tale), we would be ready to build. Instead, we are now working on getting some permits that were somehow “overlooked.”

At the end of all this, our savings “God willing” (as my Jewish mother would say) will hopefully be somewhere around $2.5 million. This crusade has without a doubt been the biggest battle I have ever endured. It has also been one of my proudest accomplishments.

I could not wait to announce to my shareholders that the $30,000 assessment per unit or $125 to $150 per month maintenance increase we anticipated for the next 30 years (not taking into account normal increases) was not going to be necessary. And not only did we save enough money to pay for this project in cash, but most likely we would have a sizable surplus to do the much-needed capital improvements we had not been able to tend to for the past few years.

As every board member knows, ours is a thankless job. But this situation was unprecedented. Everyone said that it was impossible to win. The shareholders all knew how big this was. This was going to be my Julia Roberts moment, when she accepted her Oscar for playing Erin Brockovich. For this was like finding the ever elusive Unicorn. I would finally be able to please 100 percent of the people.

I sent out a letter to our shareholders, urging everyone to attend our “community meeting.” There was going to be a VERY BIG announcement that would affect everyone significantly. Finally, the day came. I proudly stood in front of 40 shareholders (out of about 200) and made my BIG announcement. After which I received about 30 seconds of applause that was immediately followed by: “Well, are we going to get new windows?” “What about the roofs?” “I need new siding.” Remind me again, why we do this?

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