TOWN OF SOUTHEAST 1360 Route 22 Brewster, New York 10509

TOWN OF SOUTHEAST
1360 Route 22
Brewster, New York 10509
Thursday, January 30, 2014
SPECIAL MEETING 7:00 P.M.
Notation of Exits
Pledge of Allegiance
Present: Supervisor Tony Hay
Councilwoman Elizabeth Hudak
Councilwoman Lynne Eckardt - Absent
Councilman Robert Cullen
Councilman Edwin Alvarez
Also: Town Clerk Michele Stancati
Town Attorney Willis H. Stephens Jr.
And: Karen Schmieder, Registered Diplomate Reporter
And: 35 persons
PUBLIC HEARING
Supervisor Hay made a motion to open the Public Hearing and Councilman Cullen seconded.
All in favor.
Independent Sewage Works
ISW and Home Depot hired Mr. Dax of The Dax Law Firm, P.C. in the matter of Independent Sewage
Works Inc. sewer rates. The Town Board is reviewing his recommendations and will make a
determination soon. There are a lot of discrepancies and the Supervisor hopes to be able to sit down with
both parties and work something out. Mr. Dax’s report will be added at the end of the minutes.
Mr. Albert Natoli, Attorney for Home Depot, spoke and stated that he formally objects to any new
information being presented. He stated that Home Depot employs about 185 employees and about 23 are
residents. Also, that Independent Sewer Works is not independent, it’s owned by the owners of the
shopping center. He asked the Town Board if they really believe that any government should allow or
direct private business to subside over another private business. He stated that if your answer is no, then
you have to implement cost base rates. Mr. Natoli’s written comments will also be added at the end of the
minutes.
Supervisor Hay wanted to make the public aware of the magnitude of the situation. He referred to a chart
of the affected businesses, their square footage, their usage, and their current and proposed rates, which
will be added to the end of the minutes. For example, the business with the highest water usage is The
Eveready Diner. They use 25.49% of the water and currently pay $9, 828.72, with a recommended
increase by Mr. Dax to $131,672.50. Home Depot only uses 9.15% of the water and pays $244,383.12
with a recommended decrease to $80,397.47. The water rates are presently based on square footage, not
water usage.
Mr. Richard O’Rourke, Attorney for ISW, stated that this is a unique situation, that Home Depot has
2,248 stores, no other quite like this one. It is a NY State Law and a requirement made by Home Depot,
that a sewage disposal be established. He stated that Home Depot was going to buy this property. In all
the agreements this was to be a condominium that they could buy within 5 years, but they never exercised
this option. He stated that the IWS was formed because state law required it, and that the shopping center
does not own the Sewer Plant. It is a separate corporate entity that may share some shareholders but it is
a different entity, with a different tax ID and tax returns pursuant to the laws of the State of NY. Mr.
O’Rourke submitted a handout by ISW in response to the second report by the Dax Law Firm, which Mr.
John Guastella went through. Also, along with the consultant’s qualifications and experience, a copy of
article 750-1.6 of the Transportation Corporations Law will be added to the end of the minutes.
Mr. Donald M. Rossi of Hogan & Rossi, representing the Highlands Center, which is the landlord of the
center, read a letter into the record which will be added to the end of the minutes.
Mr. Daniel C. Stafford of McCabe & Mack LLP, representing Eveready Diner, presented a letter into the
record which will be added to the end of the minutes. He stated that they chose their present site on the
demographics and the costs of sewage, and they employ 60 people. He feels the rates are fair and
reasonable and if they were raised to the proposed rates, the diner couldn’t afford to operate.
Mr. Tony Conte, district manager representing Michaels Store, attended the meeting to get more
information and stated that he pays approximately $38,000 in sewer fees based on 3 bathroom stalls and
about 25 associates, which seems to be more substantial than others. He asked the Supervisor if he had
the currant usage and proposed changes. Supervisor Hay stated that Michaels uses .22% of the water, has
about 21,000 sq ft, and currently pays $38,604.04. The proposed fee would be reduced to $3,246.94 with
a reduction of $35,353.10. Mr. Conte wants to make sure that the rate is fair and equitable. He pays
about $9000 for water and $38,000.00 for sewer. He also stated that they only have about 17 sq ft. not
21,000 sq ft.
Councilman Cullen stated that if these proposed rates were adopted, they would have a huge savings.
Councilman Alvarez stated that maybe the impervious surface was figured into the sq. footage.
Supervisor Hay didn’t think that would be part of the sq. footage and Mr. Larry Nadel confirmed it. The
lease was just recently signed and it stated 21,000 sq ft.
A representative of Kohl’s wanted to let the Town Board know that Kohls uses very little water and
sewage and he thinks it’s very unfair to have to subsidize the other tenants. He stated that he agreed with
Mr. Natoli and all his arguments.
Mr. Joseph Chianese of Gaetano’s Pizza stated that there are two issues to consider; the sewer system
makes it all possible for all the businesses to be there and everyone who signed a lease new the
parameters and still signed it. No one was forced to sign the leases.
Mr. Kevin Jennings representing Sleepy’s stated that they have very low usage and asked the Supervisor
what their numbers were. Supervisor Hay stated that they have 4,308 sq ft, currently pay $7,698.60, and
the proposed rate would be $2,181.74, a reduction of $5,516.86. Mr. Jennings said that they support the
lease and believe it is fair.
David Robles, representing Verizon Wireless, stated that they are a national retailer with about 450
stores nationwide. They would benefit from the proposed changes, if it went from sq. footage to usage
but with the proposed changes, the food establishments would absorb most of the cost and that would be
catastrophic. They would have to close and that would not be in the best interest of the rest of the
businesses. It would be lost revenue to the County, a loss of jobs, and the loss of the restaurants that drive
the business into the stores, and it would affect his business by about 50%. Any business he has opened
has always been determined by sq footage. He is strongly opposed to the changes, as it would affect the
financial health of all the businesses. Every business has the opportunity to review and negotiate their
leases prior to taking possession of any premise. He stated he hopes Home Depot and any other
businesses that are for a change would reconsider, based on the overall picture. It simply doesn’t make
sense.
Mr. P. Daniel Hollis III, representing T.L. Cannon, the owner and operators of Applebee’s, have 54
Applebee’s in NY and employ 70 people in the Town of Southeast. When he reviewed the report, he
found no evidence in the record to substantiate the change in policy. He stated it would set a dangerous
precedent that would result in a negative fiscal impact to the customers. He doesn’t want this shopping
center to become vacant. If revenues of the shopping center go down, one by one the tenants will leave
because their sewer charges were increased. They can’t afford a 1200% increase. In 2002, a sewer rate
was set, and in 2010 it was reset and decreased. It’s a serious issue that can interfere with contractual
leases between the tenants and the landlords and put the Town in a difficult legal situation. ISW is
satisfied with the current rate and there is nothing in Mr. Dax’s proposal that is fair, reasonable and
accurate according to the Transportation Corporation Law. The Town Board is sitting as a rate setter, and
administrator, not a legislative body. There have been prior determinations by the courts that have not
overturned the setting of the rates based on sq. footage. To deviate from that would put the Town in a
difficult legal position. My client Applebee’s would have a rate change of $93,000 a year. There is no
way the restaurant can absorb it. I don’t believe that government should intrude on the commercial
agreements between the landlords and tenants to the point where they would be subsidizing Home Depot.
Applebee’s signed their lease knowing the rates, and never would have signed it knowing that this
proposal might go through. No business could afford a 1200% increase, Home Depot will be the only
business left there.
Mr. Perry, the president of T.L. Cannon Mgmt Co, Applebee’s, is an operating partner who is involved in
the decision making and budgets. He stated that no one in there right mind would enter into a lease
without doing the math, understanding it and the impact of cost going forward. It’s not fair or reasonable.
The average Applebee’s pays from $12,000.00 to $20,000.00 a year for water and sewer. This location is
the 2nd most expensive. We entered into the leases with what was presented to us at that time and signed
the documents basted on that structure. He asked the Board to please use common sense and consider our
request to maintain a fair balance.
Mr. John DeCicco Jr. of DeCicco’s Market stated that they own 5 stores in Westchester and Putnam
County and they employee 108 people just in the Brewster store. He stated that he is in favor of the rates
now, that the proposed rates would double what he is currently paying, and many businesses would go
out of business. It would be a dramatic impact and he would have to lay off employees or find a way to
make up the difference. He believes that we’re discussing a rate structure, and how we should be going
forward, not on how much profit the ISW is making. He is in favor of leaving the rates the way they are.
We all signed leases knowing what we would be paying going forward and where we stand. Any changes
now will pose a problem to all the businesses. It’s all the small businesses that will get hurt most.
Liz from Coco Day Spa stated that she has 25 employees, that this is really serious and she has a lease and
is happy with what she has. She asked the Town Board to please side with the landlord.
Peter Cirucus, representing The Eveready Diner, stated that if he was charged the proposed rates he would
have to relocate. He employs 65 people and would have to let at least 7 go. Home Depot has a prime
location that can be seen for 3 miles on Interstate 84 and they signed their lease. Shame on them for
trying to renege on their lease.
Supervisor Hay read some comments into the record from Mr. William DeBonis Jr. that stated America
Runs on Dunkin, 61 % of his business is generated through the drive thru, the 39% that come in don’t
flush, and if the fees were based on square footage it wouldn’t be fair.
Mr. Natoli asked Mr. O’Rourke when the statute he referred to was passed and stated he believes it was
after the date that ISW was incorporated. Also, the other transportation corporation in this Town doesn’t
charge for sewers. He said that Mr. Guastella is always eloquent, but not always accurate. The Public
Service Commission doesn’t apply to ISW. Neither Home Depot or Linens and Things were ever notified
in 2002 of the rate structure and in 2010 it was not approved by the Board. The application for the rate
change was made in 2005, it was pending and not only Home Depot’s rates would have gone down, but
everyone else’s too.
Mr. O’Rourke disagrees with Mr. Natoli about distinguishing the water rate from the sewer rate. He read
from documents previously presented to the Board. In summary Mr. O’Rourke stated that the size of the
square footage of the building has a direct relationship to how much impervious surface there is, and on
how much phosphorous runoff that occurs. This is a unique situation that had to be approved by the PSC
and DEP. There is standard industry practice that applies to this.
Councilman Alvarez asked why Home Depot was not notified of the 2002 rates and how much time they
have to grieve it.
Mr. Daniels, involved in the building of this project, stated that Home Depot was involved in the process
on a weekly basis. The contract called for PSC to set the water rates and the Town to set the sewer rates.
Home Depot was built during 2001 and opened their doors on 12/27/01. They wanted to open before the
rates were set and the builders didn’t feel right charging for anything until the rates were approved by the
PSC. To Mr. Daniels knowledge the billed the rates were sent and Home Depot didn’t complain for three
years. Mr. Natoli referred to another center not being charged for sewers, and Mr. Daniels stated that
Clocktower Commons shares a sewer with Lakeview Associates and their fees are treated like a Common
Area Maintenance charge on a square footage basis. Also, PSC determines the Fire Protection Systems on
a square footage basis.
Supervisor Hay asked where the water for the fire protection system comes from and Mr. Daniels
explained that it comes from the wells.
Mr. Natoli stated that the water was provided before the rates were approved but there was no notice of
the rate application. If Home Depot was asked to treat the sewer charges as a CAM charge, they would
sign up.
Mr. O’Rourke stated that the rate structure was approved and re-approved by the PSC and the rate of
return is between 8% and 14%, not 60%. If it was so, the PSC would have a problem with it.
Mr. Chianese reiterated that we all have contractual agreements, signed them, and wants Home Depot to
live up to theirs.
Councilman Cullen asked how the businesses were notified of the rate increases and Mr. O’Rourke
replied that notification is sent out by a billing company retained by the utility company pursuant to the
lease.
Mr. Guastella stated that the PSC wants any newly formed utility to wait till the rates are approved before
they serve customers. The Commission saw that the utility accommodated Home Depot and looked at the
rates and they were approved.
Mr. Natoli stated that he worked for the Public Service Commission as well as Mr. Guasella. He stated
that the company wasn’t penalized for the lack of notice. Anything with respect to what the commission
did or didn’t do is pure speculation and shouldn’t be considered as factual. Also the first complaint went
our after the first bill was received.
Mr. O’Rourke asked that the Board close the Public Hearing and stated that the parties will try to sit down
one more time. This has been going on for a decade and he would like to bring this to closure.
The Supervisor stated that we will close the Public Hearing because there has been great representation
from everyone.
Mr. John Perry stated that the legal issue has been dealt with in the last 10 years, and we want to grow
business here. We cannot sustain the proposed increases. Many of us have loans based on our
projections and we cannot go to the bank to ask for more. We ask you to deny Home Depots request.
Supervisor Hay made a motion to close the Public Hearing and Councilwoman Hudak seconded. All in
favor.
Respectfully Submitted,
Michele Stancati
Southeast Town Clerk

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