'Smiley Face Motel' Frowns, Sues East Hampton Town Over Septic Grant Denials

The owners of Hero Beach Club, the Montauk hotel best known for the yellow cartoon smiley face painted on its side, have sued East Hampton Town for refusing to award the property grant money from the Community Preservation Fund’s water quality improvement funding program to cover some of the cost of upgrading the septic systems at the property.

The lawsuit claims that the town has labored for years to block the motel’s efforts to rightfully improve its facilities within the limits of town code, and that the denial of the grant funding is meant to derail an agreement with the Town Planning Board that would have allowed for the construction of a kitchen on the property to serve guests at the hotel.

The hotel has twice applied for a $200,000 grant to cover a portion of the more than $560,000 it planned to spend to upgrade all three of the property’s septic systems to so-called innovative/alternative, or I/A, systems that greatly reduce the amount of nitrogen released into the ground in wastewater. The town has issued millions in such grants in recent years but twice denied the Hero Beach Club’s application on the basis that the replacement of the septic systems were not voluntary.

“Since it purchased the Hero Beach Club in 2016, [the owner] has sought to upgrade the property in what should have been a pro forma application to build a kitchen and provide the sort of light meals, snacks and room service customary at a resort motel,” the hotel’s attorney, Gayle Pollack, wrote in her September 15 complaint to the Suffolk County Supreme Court on behalf of owner Jon Krasner. “As part of its comprehensive efforts to clamp down on commercial activity in Montauk, however, the Town Board, assisted by its municipal arms, has stymied [those] efforts in a number of ways.”

Town officials declined to comment on the lawsuit or the claims that the town has unfairly targeted the hotel — a point that the hotel’s ownership sued over, unsuccessfully, in 2017.

The lawsuit catalogs the various steps the town has taken to block the hotel from introducing food service, including four code amendments that seemed to be tailor-made to throw up roadblocks to Hero Beach Club.

Between 2017 and 2019, the Town Board adopted code amendments that barred retail food sales at hotels, redefined how spaces in a resort could be used, imposed new calculations of parking requirements, and introduced a new requirement that I/A systems be used for any septic upgrades.

Pollack claims in her complaint that the town even “attacked” the Hero Beach Club business, by throwing up roadblocks to special events and charging one of its employees with state liquor license violations — which the lawsuit says were ultimately dismissed — and posting “No Trespassing” signs on a roadside that had long been used for parking by the hotel’s guests.

Nonetheless, after six years of back-and-forth, the hotel’s representatives finally reached an agreement with the Planning Board in 2022 to be allowed to build a 1,000-square-foot kitchen that would service only hotel guests, without a proper dining area with seating.

The exclusion of those who were not guests at the hotel from being able to take advantage of the kitchen’s fare proved to be the winning concession to the Planning Board members, who had long made clear their concerns that the addition of a restaurant could mushroom into the sort of social gathering draw that has caused problems at other hotel properties in the hamlet.

But the board required an upgrade of septics — which now appears to be a new sticking point.

“We’ve been in front of the Planning Board for six years arguing over a 16-seat restaurant that the code allows in a motel in a resort zone, all while they changed the code on us four times and denied permits that were granted to anyone else,” said Tiffany Scarlato, the attorney who has shepherded the application to the Planning Board throughout. “They said one of the septic systems had to be replaced, and we volunteered to upgrade two others in a good-faith effort to improve water quality and get the site plan approved. And they are saying no and saying it’s not voluntary, even though none of the legislation says it has to be voluntary.”

The town follows a regimented process for recommending water quality improvement grants. Applications filed with the Natural Resources Department are reviewed by an advisory committee that scores each application on a variety of factors intended to ensure that grant dollars get the most bang for their buck in terms of reducing nitrogen loading in local groundwater and surface waters. The committee then makes recommendations to the Town Board each quarter on how to apportion the amount of grant funding available.

After both applications by Hero Beach Club, the committee recommended against awarding the hotel the grants because the replacements of the septic systems are not “voluntary.”

The motel’s representatives argue that there is no requirement in the water quality funding bylaws that requires a project to be voluntary to receive funding, and that, even so, only one of the three systems being replaced was required to be upgraded in order to conform to the agreed terms of the kitchen being permitted.

Britton Bistrian, the planning consultant for the hotel, who filed the applications, said the total estimated cost of replacing all three septic systems would be $561,000, $316,000 of which would be for the upgrading of the two systems that were not mandated by the Planning Board contingencies. The hotel had applied for the $200,000 grant to help cover some of those costs.

But the advisory committee deemed the replacements of all three systems to be required under the Planning Board’s conditional approval of the kitchen, a town analyst told Bistrian in an email shared in the lawsuit filing by the hotel’s attorneys.

“The way it is written in the site plan approval, all three systems were required to be upgraded to low-nitrogen systems, and that is how it was interpreted by the Town Board,” the analyst, Melissa Winslow, wrote to Bistrian on June 6. “If that was not the intent of the Planning Board then I think it might need to be addressed by that board if possible.”

The water quality improvement bylaws say that grants should be directed at improving existing facilities and not be directed at projects that would facilitate the expansion of existing uses.

Scarlato said that the Hero Beach has been run as a family hotel and has never caused the sort of quality-of-life problems as other hotels in Montauk and does not deserve to be “targeted” by the town.

“There has never been a parking issue, there has never been a noise issue. This property causes no problems,” Scarlato said. “We just don’t understand why the town has this property in their craw.”