Malloy Inc.: Deal-making with a tax scofflaw

One of the buildings on the Seaside campus in Waterford, as photographed this week. The Malloy administration said it would go along with developer Mark Steiner's plans to demolish the buildings.
One of the buildings on the Seaside campus in Waterford, as photographed this week. The Malloy administration said it would go along with developer Mark Steiner's plans to demolish the buildings. David Collins/The Day Buy Photo

When I wrote back in the summer of 2011 about the state's proposed developer for the historic Seaside sanitorium in Waterford, Mark Steiner, I suggested he might have trouble coming up with the $8 million purchase price, given his financial problems, including a foreclosure on his home in Avon.

Steiner admitted back then he did not have financing for either the purchase of the Seaside property or its development.

Who would have guessed then that the state would have continued to wait for three years for Steiner to close on the deal, and that there would be no apparent end in sight to the stalling.

But here we are, in the spring of 2014, and Steiner's house in Avon is still in foreclosure.

The difference is that the bank, which says it has received no payment for years on the nearly $650,000 in loans on Steiner's house, has included in its lawsuit not only another creditor that has a $175,000 judgment against the developer but also the U.S. and Connecticut tax agencies, which the bank says have both filed tax liens against the Steiner house.

Steiner's lawyer in the foreclosure, who filed a motion saying he hasn't been paid, was recently given permission by the court to withdraw from the case.

Meanwhile, in another collection effort in Superior Court against him, Steiner was ordered to make $35 a week in payments to satisfy a judgment by American Express.

That seems a long way from the kind of credit needed to buy an $8 million property and develop it.

Steiner did not return phone messages asking about the foreclosure and the tax liens I left for him Tuesday at his home and on his cellphone.

In one of the motions in the foreclosure against Steiner's house, a lawyer for the bank sounded especially exasperated by what he called Steiner's delaying tactics, which the lawyer said were usually without legal merit but time-consuming to address.

"Time and time again the defendants, (Mark Steiner and his then-wife and co-borrower, Linda Steiner) have made numerous promises, none of which have been kept," the lawyer wrote in May 2011.

"In the eighteen months since the defendants made their last payments on the two mortgage loans, the defendants have repeatedly represented that the "Seaside" project was just around the corner. Once the project was funded, they argued, the arrearage on the loans would be paid in full."

The lawyer went on to complain about "months of empty promises" and "no concrete plan of action" and "not a penny" toward the overdue mortgage.

The Malloy administration, on the other hand, seems just fine with Steiner delays.

A spokesman for the state Department of Public Works, which is administering the sale, told me Monday that Steiner made an initial $250,000 deposit on the purchase contract in September 2011, and there is no deadline for the deal to proceed to closing, with the purchase contract saying only that Steiner has time to obtain local permits.

And yet I subsequently found a provision in the 2011 purchase contract that says the intent is that the closing should occur before June 30, 2011 and that each party must diligently perform its obligations to close before Sept. 30, 2011. The contract specifically notes that these dates were a factor in choosing Steiner as the buyer.

Sounds to me like time's up.

But when I asked about that contract deadline, Jeffrey Beckham, the department spokesman, said there is a "drafting error" in the contract and that Steiner can take as long as he needs, provided the state believes he is being "diligent."

Indeed they do, Beckham added.

A 48-hour deadline in the contract for a second $250,000 in deposit money also was a "drafting" error, and that money won't be due until town permissions are obtained, Beckham said.

Steiner is sure lucky to have such easygoing folks on the other side of the table.

One principal element of the sales agreement, indeed of the original request by the state for proposals from developers for the project, would be that historic structures of the sanitarium would be restored and preserved.

Some of the buildings on the magnificent 32-acre shoreline parcel, with its wide open lawns and sandy beach, were designed by famed architect Cass Gilbert and are on the National Register of Historic Places.

The state appears to have done little to maintain or protect the buildings in all the years the sales deal with Steiner has stalled. Most recently, the Malloy administration said it would go along with Steiner's plans to demolish the buildings.

I took a walk around the property this week and, while the state's neglect is showing, the buildings look structurally sound, roofs intact, most window frames in place, though some panes are broken. The buildings are made of brick and stone. Some look like you could clean them up and move in.

It will be interesting to hear more about what engineering reports the Malloy administration relied on, to go along with a developer's request to tear down buildings that are part of state history.

I blame the Malloy administration for dithering while a dead-end purchase agreement ages and for allowing the historic seaside buildings to further deteriorate.

But I also wonder what local officials have been doing all this time.

State Rep. Betsy Ritter of Waterford recently tossed her hat in the ring for a state Senate seat.

It makes you wonder why people in surrounding towns should sign up for her to represent them in Hartford when she has allowed the state to sidestep its responsibilities for this significant and historic property, 32 acres and 300 feet of Long Island Sound waterfront, all right in her hometown.

This is the opinion of David Collins

d.collins@theday.com

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