5/09/2005

A steamroller at Flowerfields: Newsday (Long Island NY), 5/8/05

By Charles V. Zehren

It's fitting that the state [of New York] wants to build a virtual reality center on private property it seized from a company that once manufactured pilotless drones.

For there's an absurd quality to the situation the business community finds itself in after a unanimous decision by four justices of a New York appellate court on April 25 that paves the way for Stony Book University to annex through eminent domain 246 acres of a 314-acre parcel belonging to Gyrodyne Co. of America of St. James.

Critics say if you need more evidence of the abridgment of private property rights, here it is. Developers, landlords and small businesses think they "own" their real estate and the "market" sets the price. But that's an economic illusion in a community where dozens of local governments, state lawmakers, university trustees and the courts exert ultimate control over the value of property through restrictive zoning, confiscatory taxation, open space acquisitions and outright seizure.

Originally acquired back in the 1950s as a flight-test facility, the tract stands as the sole asset of Gyrodyne, a thinly traded corporation held by investors speculating that the ultimate sale of the property will yield a tidy windfall on their shares. South of Route 25A and adjacent the Stony Brook campus, the scenic "Flowerfields" has been described by its owners as among the most valuable real estate east of Manhattan.

Not all Gyrodyne shareholders have been happy, filing complaints with the Securities and Exchange Commission, accusing company executives with dragging their feet on potential land sales while pulling down large salaries for managing what amounts to a passive investment. The executives deny such claims, saying over the years they've been stymied trying to develop a $220 million golf course community, which would require a change in zoning.

The stock bumped up last year when the university expressed interest, but talks fell apart, the university accused Gyrodyne of bad faith, invoked its condemnation power, went to court, and won the right to seize the property at "fair market value," ostensibly to build Republican Gov. George Pataki's Center for Excellence in Wireless and Information Technology.

The university says it wants to use 73 acres to build nine buildings totaling 830,000 square feet housing high-tech research and some private businesses by 2017. It also intends to provide payments in lieu of property taxes for those portions of the buildings occupied by private businesses.

But the university could still be in the business of taking land off the tax rolls for de facto environmental preservation as plans now call for setting aside 172.5 acres for perimeter buffers, land preservation and and a "field study area." Let's hope SUNY doesn't hire the same post-modern-Stalinist architects this time around.

"The balance of power has tilted so far in favor of the condemning authorities that property owners have extremely limited rights," said Peter Pitsiokos, Gyrodnyne's chief operating officer. "It's been 40 years since the state university system has condemned this volume of property."

Even though it's called "fair market value," the courts and the board of trustees - not market forces - are now effectively charged with setting the price of the very property the university covets. That's all the more startling given that the state has moved to take the property even though there is no rock-solid guarantee that it has the money to pay for it, even if Pataki holds a groundbreaking ceremony. The university has set aside $18 million to buy Flowerfields - $86 million less than the $100 million Gyrodyne wants.

"At the appropriate time, when the value is set, the university will be there with a check," promises state Sen. Ken LaValle (R-Port Jefferson), who is playing a central role in shepherding the deal. Gyrodyne says university president Shirley Strum Kenny may tap the Stony Brook Foundation, a tax-deductible nonprofit dedicated to financing "mission-essential initiatives." A university spokesman declined to comment on that possibility.

A large part of the university's success is attributable to the lawyer it hired to argue its case against Gyrodyne, M. Allan Hyman of Sands Point, partner in Certilman Balin's Real Estate Tax Certiorari and Condemnation practice group. The law contains myriad mechanisms to protect individual property rights and gives holders the courts as a forum to defend their interests, he told me. After Gyrodyne rebuffed the university's "fair and reasonable" offers, the school was well within its federal and state constitutional rights to seize the property through eminent domain, Hyman explained, adding that the $100 million price tag is "unrealistically optimistic."

The decision will be hung up in court for quite a while. The judge now seated in the Court of Claims, where the price will be set, is none other than James Lack, the former Republican state senator from East Northport. Sen. Chuck Schumer evidently senses there's PR hay to be made. An internal fax between the Democrat's aides sent apparently by accident to our office last week noted that the Gyrodyne flap "is a great issue, we should think of some federal involvement."

A compromise could involve striking a public-private partnership between the university and Gyrodyne that would allow the company to retain some of the property, build and then lease space to tenants as part of a corporate center. Such a plan would serve the university, Gyrodyne and local residents by generating additional property tax revenue instead of taking it away.

But no matter how much land the state seizes to create "centers of excellence," little will happen to bolster local business until companies are able to attract high-quality employees who can afford to own a home and pay taxes on Long Island. As long as that's not the case, businesses - even those coming out of virtual reality incubators - will elect to forge their futures elsewhere.

Players in the Gyrodyne case
  • The lawyers
    • Peter Pitsiokis, Gyrodyne chief operating officer and a Republican who worked as a Suffolk County prosecutor and ran unsuccessfully for state Assembly in 1992
    • M. Allan Hyman, Republican and partner with Certilman Balin, an East Meadow firm with strong ties to the Nassau GOP.

  • Appeals Court judges ruling in favor of SUNY
    • Republicans: Robert Lifson, former Huntington GOP chairman
    • Robert Schmidt, former Nassau County and Town of Oyster Bay attorney
    • Robert A. Spolzino, former counsel to state Sen. Nicholas Spano (R-Westchester)
    • Democrat: Fred T. Santucci, who was appointed by then-Gov. Mario Cuomo

  • Judge likely to set the price
    • Judge of the Court of Claims James Lack, former Republican state senator from East Northport



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