Amid new plans for Seaside, would-be developer still seeks damages

Feb. 17—Last July, seven years after asking, Mark Steiner got permission to sue the State of Connecticut for terminating his contract to purchase the former Seaside Sanatorium property in Waterford.

Less than two months later, he filed his lawsuit.

A few weeks ago, the Connecticut Department of Energy and Environmental Protection announced the state's commitment of $7.1 million in federal funding to demolish the historic but dilapidated buildings on the site and create a "passive park."

But both Steiner and a spokesperson for the Connecticut Office of the Attorney General said DEEP's announcement doesn't have an impact on the lawsuit.

Steiner is seeking damages from the state and filed a complaint, as Seaside in Waterford LLC, in September in Connecticut Superior Court. As of October 2019, Steiner said he had spent $360,000 in legal fees trying to get his day in court; he declined this week to give an updated figure but said "it's a very, very substantial amount."

According to a two-page order from the Connecticut Office of the Claims Commissioner, dated July 22, 2022, Seaside in Waterford filed a claim with the office seeking "monetary damages in the amount of $20,000,000 and permission to sue the State of Connecticut for breach of contract."

Temporary Deputy Claims Commissioner Robert R. Sheldon wrote that after reviewing documents from both parties and state law, "I find that this claim presents a contested issue of law or fact for which the state, were it a private person, could be liable. Accordingly, I hereby authorize suit by the claimant, Seaside in Waterford, against the respondent, State of Connecticut."

Sheldon, a partner at the Bridgeport-based personal injury firm Tremont Sheldon, states in his bio that Gov. Ned Lamont nominated him to serve as temporary deputy commissioner on the State Claims Commission to help "reduce the substantial backlog of personal injury cases that have been filed against the State and its various agencies."

Eight years after contract termination

Steiner in 2010 signed a contract with the state to purchase Seaside for $8 million, with plans to build housing, and the contract recognized that any redevelopment would be subject to Town of Waterford zoning regulations.

Seaside in Waterford was denied a zone change application from the Waterford Planning and Zoning Commission on Sept. 14, 2014 and appealed the denial Sept. 26. Four days later, then-Gov. Dan Malloy announced the state was terminating the contract and would turn Seaside into a state park.

The state maintained that Steiner, who had been pursuing development of the property for 15 years at that point, was in default of the contract, which Steiner denied. In August 2015, Steiner filed a claim with the state Office of the Claims Commissioner seeking permission to sue the state.

Claims Commissioner Christy Scott said in April 2021 the Seaside case didn't land on her desk until March 2019, due to various motions made by the parties. Her statutory time to rule had expired so she sent the matter to the legislature, but the pandemic stalled these kinds of referrals to the Judiciary Committee.

The Office of the Claims Commissioner didn't respond to an email Friday inquiring about why the authorization took seven years.

The court complaint Seaside in Waterford filed Sept. 7 states that former Department of Administrative Services Commissioner Donald DeFronzo advised Seaside in Waterford on Sept. 30, 2014 that it was in default under the agreement based on its failure "to receive and/or diligently pursue necessary Land Use Approvals." But Seaside had appealed the denial of the zoning application.

In an answer to the complaint, filed in December, the state denied that DAS' termination of the contract was wrongful and denied that Seaside in Waterford has suffered damages as a result. In a Jan. 5 filing, Seaside in Waterford denied the state's allegations. The next scheduled court date is a remote status conference on March 28.

Demolition of buildings

Seaside was placed on the National Register of Historic Places in 1995 because buildings were designed by renowned architect Cass Gilbert, who also designed the U.S. Supreme Court building and Woolworth Building, and because it was the country's "first institution devoted exclusively to the heliotropic treatment of tubercular children."

Prior to the contract termination in 2014, Steiner had engineers go through Seaside, and he still maintained this week "those buildings can and should be saved." He said he is "mystified as to how you can tear the buildings down" but hasn't decided whether he would pursue an injunction against demolition.

So, what is the law around tearing down historic buildings?

State Historic Preservation Officer Jonathan Kinney said while the National Register of Historic Places "is primarily an honorific designation" and doesn't place restrictions on private property owners, it "does provide a level of consideration in state undertakings," through the Connecticut Environmental Policy Act.

Pursuant to CEPA, the Department of Energy and Environmental Protection in June 2017 released an Environmental Impact Evaluation examining different alternatives for Seaside. This was prepared with input from the public and stakeholders, including the State Historic Preservation Office.

Based on the EIE process, DEEP said in a January 2018 report its preferred alternative "involves restoration and reuse of the existing historic buildings onsite for lodging and enhancement of the waterfront for ecological and recreational purposes."

But in 2019, DEEP concluded its request for proposals process with no award. Now, DEEP instead plans to use $7.1 million in federal American Rescue Plan Act funds to implement a passive park concept.

Kinney said because federal funds are involved, SHPO recommended that DEEP evaluate whether the National Environmental Policy Act ― the federal equivalent of CEPA ― applies.

"SHPO is currently working with DEEP to assist them in evaluating the current status of their regulatory compliance, specifically as it pertains to the historic buildings on the Seaside property," said Kinney, who "would love to see these buildings saved and rehabilitated."

Asked whether some sort of public posting or notice period is required, Kinney said that will depend on how discussions about the process turn out.

DEEP spokesperson Will Healey said Friday in an email that the department will convene a working group in the coming months to begin planning for the passive park design. This will be informed by other state agencies, and the work "will contribute to the historic interpretation to be incorporated into the ultimate design of the park."

Healey said as with all projects, DEEP will secure all necessary permits and follow relevant regulations.

"These are incredibly important buildings to the state of Connecticut and the nation," Kinney said. He added, "We are certainly concerned about the proposal for demolition, and we look forward to continuing to work with DEEP to explore potential alternatives."