NIAGARA FALLS — A State Supreme Court justice found a group of Niagara Falls officials and their attorney in contempt of court on Thursday and ordered the city to pay $10,000 for expenses incurred by the legal team representing the manager of the One Niagara building downtown.

In the latest hearing in an ongoing dispute between the city and One Niagara operator Frank Parlato Jr., State Supreme Court Justice Richard Kloch issued a terse ruling from the bench, saying the city must abide by the terms of an injunction he granted months ago and allow the ninth floor observation deck at the former Occidental Chemical Corp. headquarters building to remain open to the public.

In rendering his decision, a visibly upset Kloch questioned the city’s motive in the case, suggesting officials in Niagara Falls could find better things to do with their time and resources than to hassle a businessman who is trying to make a go of it in an economically depressed community. He told attorney Dan Oliverio, an associate from the firm Hodgson Russ who represented the city inside the Niagara County Courthouse in Lockport, that Niagara Falls isn’t sick or on life support, but “dead” because of the unfriendly approach to business exhibited by the municipality’s leaders.

“You’re trying to close this building down over my injunction by filing a notice of appeal?” Kloch said.

“So, you close the building down, what are you going to do with it?” he added.

Oliverio suggested the city was not interested in the building itself, but rather in making sure Parlato kept it up to city codes and standards.

Kloch responded by saying he decided to hold the city’s planners, inspectors and Oliverio in contempt of his court order. He asked Parlato’s attorney, James Roscetti, for an estimate on his client’s legal expenses to date. When Roscetti and his associate, fellow attorney Paul Grenga, suggested $10,000, Kloch accepted the figure as a suitable amount to be levied against the city in the form of a fine for contempt.

Oliverio told the judge he strongly disagreed with his position and said the city would appeal to a higher court.

Kloch told him to do so if he felt it was necessary.

Parlato and city officials have been sparring over One Niagara for years. A formal site plan is required for the building to maintain its certificate of occupancy. The original site plan proposal submitted by Parlato and his associates was rejected by the city’s planning department. In the wake of that move, Parlato took the city to court, alleging that it was acting in an “arbitrary and capricious” manner in denying him the right to develop his own property.

On July 2, 2009, Kloch issued an injunction, ordering the building’s ninth floor to be opened while the two parties attempted to come to terms on a site plan agreement. Parlato has consistently maintained that City Planner Tom DeSantis, Mayor Paul Dyster and other members of his administration are wrongfully targeting his operation, making it difficult for him to generate revenue at the building.

Last week, after several weeks of negotiating with city officials, Roscetti and One Niagara President Tony Farina pulled from the planning board’s consideration the company’s latest site plan application, opting instead to pursue variances from the Zoning Board of Appeals on several items requested by the city. Parlato’s attorneys said they went that route on the advise of DeSantis himself. The application for the variances has been submitted to the zoning board, Grenga said.

“If they don’t want to take it, we’ll stay open,” Roscetti told Kloch. “We’ve tried to work with them all year.”

Outside the courtroom following the hearing, Oliverio said the city’s position has nothing to do with trying to hamper business in Niagara Falls or harass Parlato in any way. Instead, he said, the city is simply trying to enforce existing building codes and standards at One Niagara.

Oliverio said he still believes, despite Kloch’s ruling, that under the law the city should have been granted an automatic stay on the injunction pending a decision on the appeal. The next step in the case will be an appeal by the city to the Appellate Division, Fourth Department in Rochester.

“I have no idea what the basis was for the justice’s decision under the law and we’ll take it to the Appellate Division immediately,” Oliverio said.

Farina hailed Kloch’s decision as an indication that Parlato’s long-standing complaints that the property’s development has been hampered by undue interference from city officials and an unfair tax assessment from the city which the building’s manager continues to challenge.

“I think this is a very strong message from the court about what’s been happening at One Niagara,” Farina said. “This should send a strong signal that the city is barking up the wrong tree when it attempts to shut down an important development like One Niagara without a fair process and we don’t think it’s been a fair process.”

Farina added that Parlato and all representatives from One Niagara remain committed to working with the city to resolve all outstanding issues so the building can continue to serve as an asset for the city and an attraction for visitors to the downtown area.

“We are going to continue to work hard to promote One Niagara as a tourist center and we think we are going to be successful,” Farina said.

Reached by telephone Thursday afternoon, Grenga said he was also pleased by Kloch’s decision. He also said Parlato looks forward to continuing to do business at One Niagara and remains hopeful that all of the parties involved will be able to an agreement on an acceptable site plan soon.

“Regardless of the decision, we’d prefer reaching a middle ground with the city that is cooperative,” Grenga said. “No one wants to spend more money on litigation.”