Tag Archives: wikileaks long beach

Long Beach’s “Surprise” Lack of Cash

(Some cash seized in the LBPD Raid, perhaps it can help with payroll)

The comments section is already a buzz about the fact that Long Beach is broke and has to now borrow money just to make payroll.  It strains credulity to think that some members of the City administration did not know about this and could be at all surprised by this interruption.  I’ll get into it more later, but this topic has created a lot more questions than answers, specifically about what money the City has and what money the City owes.

Thankfully, the memo includes a fairly detailed breakdown of just that.  You can analyze it yourself here.

Of course, this breakdown doesn’t include the real whopper (readers may note I suck at spelling that word, sorry), which is the $1.4 million sick/vacation payout required to three members of the LBPD (including the acting commissioner).

I pointed out – as did many others – that the idea you can accrue $500,000 worth of vacation and sick time is insane.  I’m happy to get just 10 vacation days (and a few sick days) a year, and if I don’t use them, I lose them.  As my employee handbook states, the whole point of vacation/sick days is to de-stress you (vacation day) and help you get better (sick day).  “Saving” these days, doesn’t help you or your employer, hence why in the private sector, they often don’t “carry over” to the next year, and if they do, they certainly aren’t allowed to add-up to these astronomical levels.

Scrooge Comes to Long Beach (and we need a bailout)

The Long Beach Herald has a whopper of a story before the holiday season.  It seems Scrooge has come to Long Beach, and without emergency action, Long Beach can’t make payroll on December 23rd.  Meaning that, Long Beach’s workers won’t get paid two days before Christmas.

Of course, in the leaked menu obtained by the Herald, City Manager Theofan and the comptroller are frantically working to borrow money – over $1 to cover the shortfall.  An emergency City Council meeting will be held on November 30th to approve the Long Beach “bailout.”

It’s interesting that for month’s we’ve heard about the fiscal health of Long Beach, yet when push comes to shove, we can’t pay our bills and seemingly have known we wouldn’t be able to for as many months.

City Manger Theofan explained that it was all Irene’s fault because of the overtime the City racked up, and FEMA hasn’t paid up yet.  How is this a surprise and why weren’t residents aware of this earlier.

The other whopper to come out of this memo is that while resigning acting police commissioner Sofield Senior will not be getting a golden parachute.  But his accumulated sick and vacation time add up to 500k.  And he wants it within 60 days.  And here I am getting excited about my 10 vacation days a year that are use or lose…

The plan the City Manager has floated is to borrow $1.5 million to cover the payroll shortfall of $1.4 million (are we already assuming the estimated shortfall is larger than $1.3 million?).  If my math is right, the City only has $100,000 to pay the $1.3 million bill.  Much later after all the obfuscation about Irene, the crux of the matter comes up, and that’s these unbudgeted payouts.  The memo says these payments total to a monstrous $1.4 million for the three employees, making any Irene-incurred overtime seem like just a drop in the bucket.


Read the article for the rest of the info.  It’s great. 

On Thin Ice (Another Slippery Lawsuit for LB)

It seems when I came across a lawsuit related to the mis-development of the SUPERBLOCK, I was just seeing the tip of the litigation iceberg. I argued in that post that it seems Long Beach is drowning in litigation, little did I know just how true that was. Today, I’ll highlight yet another case featuring such hits as breach of contract, wrongful eviction, and defamation against the City.

For a little background (and something you can do at home), while looking for more lawsuits that were linked to the SUPERBLOCK, I started searching this website. This handy-dandy website lets you search for all sorts of litigation, and gives you easy to download copies of all applicable court documents, for free. When one of the results against LB came up with the plaintiff called “Arena of Long Beach,” I was interested. A few clicks and some reading and WOW, yet another nasty lawsuit that the City government is facing, that I haven’t heard a peep about – even though there was a filing in June and the next appearance is set for December.

In brief, this lawsuit pits the former renter of the Long Beach ice rink, Bernard Shereck, against the City Manger, Charles Theofan, and the City itself. In 2009 evictions went out, and now the former renter has taken the City to court, and has had decisions go in his favor in the case’s first two motions.

I’ll let Newsday summarize:

The lawsuit contends that the city’s eviction attempt breaks an existing lease. A 10-year lease set to expire last August included a tenant option to extend it for five years. Klein said Shereck was not entitled to an extension because he had not fulfilled the lease’s terms – namely, he had not paid the annual $175,000 rent stipulated in the original.

After Shereck paid his first installment in January 2007, then-City Manager Edwin Eaton and the City Council granted him a rent reprieve through July 2008 in light of the expenses incurred in fixing up the arena, the complaint states.

Then, last year, the city hired an auditor to review the tenant’s finances, including the rent obligation. In a March 2008 letter to the auditor, City Manager Charles Theofan said: “We believe the rent obligation imposed mighthave to be adjusted downward.

“We are very pleased with the programs that have been introduced at the arena, and with physical improvements that have been undertaken,” Theofan wrote. A lawyer for Shereck, Richard Cahn, said Theofan agreed last November to extend the lease for five years at an annual rent of $60,000, which Shereck has been paying. “The city has no right to evict Bernie,” Cahn said. “He’s got a lease.”

So did you get all that? Basically summarizing the court docs and Newsday, Mr. Shereck came in and took over the decaying ice rink. Because he was going to put up a bucket of his own money to improve it ($250,000), the City Manger at the time Edwin Eaton (gasp a Democrat!) waived his rent for the facility in light of the capitol he put up for the renovations.

Then when Mr. Theofan came back in 2008, and after an auditor looked over the ice rink, Mr. Theofan basically says, alright everything looks good, and here’s your five year lease extension. So, Mr. Shereck continues for about another year paying his new rent amount ($60,000 per year) and continuing to run the rink. Then on 3/31/2009, the rink gets an eviction notice, with one of the main issues being that Mr. Shereck wasn’t paying his rent. If that sounds confusing, it is.

In the amended complaint, Mr. Shereck tagged on a claim of defamation because in the media coverage that came out, Mr. Theofan is quoted as saying Mr. Shereck was being evicted because he “did not pay his rent for a year and a half amounting to about $200,000 in lost revenue for the City.” Even though Mr. Shereck seems to be able to prove he wasn’t a deadbeat and was indeed paying his rent and all was well. There were technically two evictions, the first one received all the news attention – in which Mr. Theofan was quoted saying that the issue was he didn’t pay his rent. Then days later after they dropped the first eviction they submitted a second eviction notice, but it is unclear what the reason underlining the second eviction was and how it differs from the first (still for non-payment of rent or was it something else?)

And the next twist – selective amnesia. As these court proceedings take forever, it wasn’t until January of 2011 when Mr. Theofan and the City’s Corporate Counsel Corey Klein were deposed. During that, both City officials “could not recall discussing the moratorium” with the reporters of Newsday and the Herald, even though they are quoted in both of those papers.

The City’s Parks Commissioner who took over the rink and runs the separate and private hockey league to this day, Joseph Brand, was also scheduled to be deposed, but the City attempted to block it. The City claimed, “city representatives already had sufficient knowledge of the Arena’s eviction” so he shouldn’t have to talk to the courts. What they’re saying is the guy that has been running the rink in the meantime and the head of the recreations department at the time of the eviction shouldn’t have to talk about what he knows because, hey trust us, other people already told you what he knows. Yea, that doesn’t make too much sense to me either.

In the latest motion I could find, dated June 7, 2011, the Honorable Stepehen Bucaria called shenanigans on that, and said the plaintiff (Mr. Shereck) had every right to request Mr. Brand to be deposed (with a few caveats protecting “official” communications). Currently, the next court appearance is scheduled for 12/15/2011.

So what does all this mean? With the ice rink that was neglected since built in 1974, a former hockey player came in, invested a massive amount of money, and reportedly began to turn a profit. At some point it appears the City Manger, Charles Theofan decided Mr. Shereck had violated something, and required his eviction.

What’s extra interesting is that in March of 2011, the City approved (3-2) a new lease agreement for Building Fitness Performance, a father/son Lido Beach based-company. Based on the play by play in this article, the City Council meeting turned into a brawl between at least two members of the City Council (the article cites Mr. Sofield and Mr. Fagen).

In 2009 when the eviction was going through, Corporate Counsel Klein said that one of the reasons was because, “The city itself can provide better services.” That’s a reasonable position for the City to take, but why was that only true in 2009, but now in 2011, the City thinks they should again lease out the rink? I thought the City can “provide better services”? Anyway isn’t the “free market” supposed to decide the success and failure of business and not government?

The new company, Building Fitness Performance was to be offered a lease of $22,000 per year! The previous contract, that was originally approved for a five-year extension by Mr. Theofan was worth a minimum of $60,000 per year for rent alone. In 2006 when Mr. Shereck first got the lease he was to pay $175,000 per year in rent (which was waived after he made all the improvements). Why after two years did the rent drop by two thirds? Why after six years was the rent dropped by 87%! I have no idea and none of those numbers seem pegged to reality for rent of one of the only ice rinks on the south shore of Long Island. Note: I cannot confirm if Building Fitness Performance ever actually took over the rink

I don’t particularly care about the ice rink. But, from reading through this stuff I know there are an awful lot of kids and parents that do care about the ice rink. How many of them know all of this is going on? Why during news coverage of the March 2011 decision to start a new lease with a different company is there no mention of pending litigation that could void the new lease? How much money is at stake in a lawsuit like this? How many other lawsuits are floating out there? The same way I want the beaches open so surfers can thrive, I want the ice rink to be run well without a cloud of litigation over it so little dudes can become pro hockey players.

So with a little Google-fu and checking court records and newspaper clippings, yet another case slides in front of me. What is it about Long Beach? It seems no matter where you look or who you talk to, there’s another lawsuit around the corner.

You can read the latest motion filed in June here. It actually gives a fairly good plain English account of the story.

And here’s the original complaint filed in April 2010.

SUPERBLOCK Mismanagement Could Cost You and LB $26m

(The SUPERBLOCK as it stood in July)

UPDATE 10/20:  Read City Manager Theofan’s response to this post here

I talked a few days ago about the precarious financial situation the City is in – that our possible few million dollar surplus could actually not exist, or that it could easily disappear if unforeseen expenses popped up?  Well, doomsday for Long Beach, and you the tax payer,  may be approaching, and it all has to do with the SUPERBLOCK.

The SUPERBLOCK, once upon a time, was the Long Beach Hotel – the birthplace of all of Long Beach and the City by the Sea.  That burned down, and yada yada yada, the lot remained abandoned and unused after a number of other projects came, burned down, and left.  We talked about the WWII defenses that were built there here, and documented some of the other building that burned to a crisp.

Well, in the ’90s, the then near-autocratic City Council started getting serious with finally developing what had long been an unbuilt lot.  If you think LB politics are bad now – you just wouldn’t believe the way the administration back then was talked about.

The story of the SUPERBLOCK is comically complicated so I’ll borrow from Marc Ferris at the Real Deal

Through the 1990s, the empty Superblock symbolized the inability of a public and private partnership to turn a parcel of land fronting a pristine beach into a profitable property.

In the late ’90s, when the long-time Democratic regime was being challenged by new “Republicans,” there were all sorts of gripes.

But despite some obvious improvements in government-no-tax-increase budget, closing the incinerator plant, increased parking and the county’s first skateboard park-critics find much to harp on. This includes hefty increases in garbage and water fees, … support of a controversial expansion of a two-screen movie theater to seven screens with no added parking (I’ve got to laugh at this one as this clearly was a non-issue over the last 10 years), and failure to do anything with the city’s proposed waterfront “superblock” of hotels, restaurants and theaters.

And now, back to the Real Deal’s summary

In 2001, the New York Times reported that the city had selected the Parkoff Organization of Great Neck as the preferred developer. The company proposed a 218-room hotel, spa, restaurant, retail and conference center, but failed to raise the $50 million it needed in the year-long time allotted and forfeited its $150,000 deposit.

In order to facilitate development, the city initiated eminent domain on all 13 lots that comprised the property the next year.

In 2001, the city chose Shore Development, a subsidiary of Philips International Realty, to build on the parcel.

Per its agreement with the city, Shore will pay $26 million to the former owners. Negotiations, including payment for capital improvements and the existing right of way on Shore Road, are done, Eaton said.

That original eminent domain move condemned about half the property that made up the SUPERBLOCK, which was owned by Sinclair Haberman – who promptly sued the City.  His suit – as is standard in condemnation cases – goes “you didn’t give me enough money for my land that you took.”  City: “No, we gave you the right amount based on our appraisals.”  Him: “No, my appraisals are higher.”

In 2005 the City sealed the deal with Philip Pilevsky of Philips International.

This quote struck me as particularly ironic.  The newish City Manger at the time, Charles Theofan, said referring to the SUPERBLOCK development: “‘Not to sound any bravado here, but nothing can stop us now.”

Then in 2007, as development looked like a sure thing (and we hadn’t even thought about the folly of mortgage-backed securities, Fannie and Freddie weren’t household names, and TARP was something that you used when it rained) the City used eminent domain again.

According to Newsday: “The City of Long Beach used eminent domain to condemn six acres of vacant privately-owned land in 2007. The City paid $39 million for the land using the developer’s money. Within weeks of taking title, Long Beach transferred ownership to the developer. ”

Then, Shore Development filed for bankruptcy and effectively vanished, walking away from the whole project, and may have set off a chain of events that will get you in your wallet.

That $26 million that was discussed in 2001, is now the liability The City faces a $26 million liability in two civil suits against the City which is confirmed by a third suit filed in February against the developers, just recently disclosed by Long Beach’s corporate counsel.

UPDATE 10/20: City Manager Theofan corrected me here.  I mistakenly thought the 2001 $26 million figure was the same as the $26 million discussed in these suits.  The two numbers are not connected, and the fact that they are both $26 million is only coincidental.

Basically, the way I read the lawsuit as filed by the City, there are three main things the City is arguing.  First, the defendant (who actually includes a number of different entities, but basically all track back to  Philips International and owner Philip Pilevsk) and through its subsidiaries did not develop the SUPERBLOCK as promised.  Second, Philips – and through their subsidiaries – did not fork over some of the money they were supposed to to cover the condemnation settlements.  And finally, because Philips created a whole bunch of shell corporations, effectively moving any real legal liability farther and farther from anyone that actually has any assets, they’ve left the City and the tax payer (that’s you) completely exposed.

I think this quote from the 2005 Times article might really sum up the irony better than Alanis Morrissette ever could by another new member of the City Council:

”The Long Beach taxpayer would have been on the hook,” said Mona Goodman, a Republican City Council member elected two years ago on a platform of limiting development. ”Now we are finally going to be able to realize this project, but in a very scaled-down way that is beneficial to the public.”

Section 120 of the recently disclosed February 2011 suit confirms the risk the City faces:

“As a result of the failure of any of the defendants to defend, settle, or prosecute any of the claims in two outstanding valuation proceedings still pending against the Plaintiff [that’s Long Beach], the Plaintiff City is currently exposed to significant liability in the amount of $26 million dollars.

Now this lawsuit was filed in February, and confirms that there are at least two pending cases against the City that I can’t find disclosed anywhere else (whether by the City or in the local media).

Further, section 60 highlights the fact that there has been some sort of litigation going on for nearly 10 years with the Haberman family related to the condemnation costs.

And the Times comes through again with more prophetic words:

Sinclair Haberman, the owner of about half of the property since 1993, sued the city in 2003 in an unsuccessful attempt to block condemnation. Mr. Haberman had contended that condemnation was unwarranted because he was prepared to develop the property.

Jacob Haberman, Sinclair Haberman’s father and a lawyer in the case, said a separate case remained in the state courts. In it, his son is seeking damages from the city for taking his property for a 10-year period, during which, he contends, the city improperly thwarted his efforts to develop.

Jacob Haberman said the family supported the revised project as long as the developer picked up all costs, including those that could result from the pending case.

Again, in 2005, the City knew the possible liabilities they were facing.  In the Times they said:

“City officials said under an amended contract of sale the developer would pay the full value of the property set by the courts in a condemnation proceeding. They said that amount might be in excess of $20 million

What does that mean?  The City Manager Charles Theofan,  in 2005, had already realized that if the deal went bust, any additional costs incurred by the lawsuits that were already filed would be at the taxpayers’ expense.

And in yet another quote that I’m sure the current City Manger would love to  have told himself not to say, he confirmed to the Times that: the developer was ”not assuming liability for that case.” He said the city would be liable for any award if the Habermans won. 

And now let’s get to the nitty gritty, what does this mean?  The City is on the hook for $26 million if they can’t get it out of the developer that has since flown the coop.  What is $26 million?  Well in a budget of around $85 million, $26 million works out to be about a 1/3 of the total revenue the City makes in an entire year.

The City surplus was around $5 million in 2007, down to $3.7 million last year, and another million dollars was just hacked off it to cover revenue shortfalls.  One is lead to believe then based on that downward revenue trajectory, the surplus could be gone when audits come back this year.

If these lawsuits are not settled on the side of the City, that 25% tax hike that’s always being babbled about will look like the good old days.

This February lawsuit is looking a bit like a knee-jerk response to the series of lawsuits that are ongoing against the City in light of the realization that there will be no progress on the SUPERBLOCK and the civil suits are winding down.  The City is suing Philip Pilevsky and his shell-corp of Shore Development (which was created in standard fashion to insulate Philips international (the big fish) from any legal liability if things went sour) in an effort to raise funds to differ the mounting condemnation costs.  Shore Development, of course, went bust and has no funds.

I’m an unabashed proponent of development.  And I know a lot of people that read this blog agree with me – obviously within reason and based on transparency.  I want the SUPERBLOCK built on.  I want new shops and new restaurants, and another hotel to keep the Allegria honest.

When some members of the City Council involved in these deals were elected, they had a platform against “overdevelopment.”  Instead of protecting the City from “overdevelopment” (whatever that is), they seemingly entered a boneheaded deal, and got conned by real estate tricksters, all the while, the City and the taxpayers were left “on the hook.”

Worst case scenario?  The City has to pay, for years likely, $26 million to a guy they may or may not have screwed out of his property and cash.  More realistic?  This drags on for years more, with continued mounting legal costs for the City, eventually ending in out of court settlement that costs the City, while totally blocking any SUPERBLOCK development for years more.

Again, the issue boils down to a total lack of transparency – did anyone have any idea these sorts of suits were pending against the City, am I just that out of the loop?  Further, another issue could be politicians running under one platform (avoiding overdevelopment) and then making seemingly nonsensical development decisions when they are the ones in charge.  If I get any updates as to the status of this case, or any of the other cases that are confirmed in the lawsuit, I will be sure to post them.

Are you having trouble sleeping?  You can read the entire February lawsuit here.