The Nassau County Department of Public Works undercharged certain out-of-district developers over a four-year period, costing the county $2.6 million in sewer hookup fees, according to an audit released Monday by the comptroller’s office.
“We found that there is a clear difference in how developers were treated when they requested to hook into the County’s sewer system,” Comptroller Jack Schnirman said when the report was released. “Without any formal policies in place, the Department of Public Works (DPW) was free to wheel and deal as they saw fit.”
Certain projects received a discount based on how the department calculated equalization charges, the fee for properties located outside the county’s sewer district to hook into Nassau’s system. The formula is designed to proportionally share the cost of the existing sewer system based on estimated assessed values. This can be determined based on the assessed value of similar, nearby properties or the value of the undeveloped land.
According to the audit, several projects used the value of the undeveloped land to determine the fee, which led to much lower fees.
One of these was OHEKA Castle, a proposed Cold Springs condominium project located mostly in Suffolk County. That project — which consisted of 191 units — paid a $425,000 fee to hook up to the sewer system. A nearby 82-unit development called Kensington paid a $969,318 fee, despite the fact that the OHEKA Castle project was 2.3 times the estimated fair market value of Kensington and was expected to generate 72 percent more sewage volume annually. The audit estimated that the undervaluation of the OHEKA Castle project cost the county about $1.25 million.
Schnirman said the audit contained no evidence of kickbacks or gifts between OHEKA Castle developers and county officials.
“If there was money changing hands, that is not necessarily something we would see,” he said, adding that audits are sent to the Nassau County district attorney’s office upon completion.
According to a Newsday report, the DPW said that all deals were authorized by then-County Executive Edward Mangano, who received at least $17,500 in campaign contributions from OHEKA owner Gary Melius.
Schnirman did not say what started the audit or what drew the office to the OHEKA Castle project. The audit was started in early October 2017 by the previous comptroller, George Maragos.
Some of the deals might have been approved out of misunderstanding. The report notes that in 2015, the Nassau Legislature approved two different sewer agreements with two different formulas on the same day.
In order to avoid confusion in the future, Schnirman said the DPW agreed to have a standard, legislatively approved process for calculating the charges and a consistent valuation policy. He supported the use of anticipated future assessed value — or using the average assessed value of similar nearby properties — rather than the “pre-developed” value to determine the fee.
“Nassau County needs to have a consistent formula when it comes to these charges,” Schnirman said. “That formula should be debated out in the open and ultimately approved by the County Legislature and County Executive.”
According to a news release, the comptroller’s office will follow up in six months to make sure the audit’s recommendations are being implemented.
Reach reporter Luke Torrance by email at [email protected], by phone at 516-307-1045, ext. 214, or follow him on Twitter @LukeATorrance.