Appellate court affirms dismissal of Riverhead’s $2 million lawsuit against Suffolk County for sales tax revenues to stabilize town sewer rates

Riverhead Town’s $2 million claim for a sewer tax stabilization payment from the county’s drinking water protection program fund was shot down this week by a state appellate court.

A four-judge panel of the Appellate Division, Second Department upheld the decision of a Suffolk trial court judge dismissing the town’s lawsuit seeking payment of $2,003,852 from a portion of the county’s quarter-percent sales tax revenue collected by the county for the drinking water protection protection program.

The county sets aside a portion of its drinking water protection program funding — which the county collects as sales tax — in an Assessment Stabilization Reserve Fund. A sewer district is eligible for funding from the Assessment Stabilization Reserve Fund if it will have to raise district taxes by 3% or more. 

Riverhead Town sought a share of the fund to stabilize the Riverhead Sewer District’s assessments and taxes for 2016 and 2017. When the county rejected its claim, the town filed suit. 

Supreme Court Justice John Leo ruled in May 2020 that the county is not mandated to use the fund to cap sewer assessment increases at a maximum of 3%. The judge dismissed claims asserted by the town under the Equal Protection Clause of the U.S. and N.Y. State Constitutions, noting that “Riverhead has received subsidy payments greater than a number of town/village districts and a greater subsidy than 15 of 20 county districts.”

Riverhead appealed. The Appellate Division on Wednesday upheld the lower court dismissing the town’s lawsuit.

The town could seek permission to appeal to the state’s highest court.

Neither the town supervisor nor the town attorney has responded to a request for comment on the outcome of the appeal.

Town and county discussing settlement of a separate sewer-related lawsuit

The town and the county are adversaries in a separate proceeding, a lawsuit filed by the county in 2021 to challenge the “out-of-district” rates established by the Riverhead Sewer District for wastewater generated by the county’s facilities in Riverside. 

A State Supreme Court judge in January ruled that Riverhead Town illegally overcharged Suffolk County for the treatment of wastewater generated by the county jail, court complex and county center from 2018 to 2021. The court  barred the town from charging the out-of-district rates, ruling that the Town Board resolutions establishing the rates were “arbitrary and capricious” and “had no rational basis in the record.”  The ruling prevents the town from collecting millions of dollars from the county for wastewater treatment fees from 2018 to the present. The town has filed a notice of appeal.

The trial court judge in that case did not rule on three other causes of action that were part of the county’s lawsuit, which were based on alleged violations of the U.S. and N.Y. State constitutions and seek damages; the judge said those were severed for determination at a later date. 

Last month, attorneys for both parties jointly asked the trial judge for an adjournment of proceedings on the remaining causes of action. 

“The parties are currently engaged in negotiations seeking to resolve these matters,” the county’s attorney wrote to the judge. “We believe that the requested extension of time will enable the parties to conclude these negotiations and determine whether additional [proceedings are] necessary.”

The judge granted an adjournment until July 2. 

Update on Riverhead’s lawsuit against Southampton over Riverside sewer district boundaries

There is a third pending action involving the treatment by the Riverhead Sewer District of wastewater generated at the county center. Riverhead Town sued Southampton Town last year, challenging the boundaries Southampton established for the Riverside Sewer District. Riverhead argues that the boundaries should properly include the county center in Riverside. 

This case, too, is adjourned to allow time for settlement discussions between the parties, according to March 27 correspondence filed with the court. Southampton made a motion to dismiss the complaint. According to the March  27 letter to the court from the town’s outside counsel, the parties agreed to an adjournment to April 28 of the deadline for Riverhead to file its opposition to Southampton’s motion to dismiss.