LIPA’s decadelong effort to lower the taxes it pays for power-plant and other utility properties will be expanded in 2021, as it prepares to go to trial over Nassau plants and could see a legal challenge to its previous settlement with Brookhaven Town.
In a presentation last month, LIPA staff said despite two settlements already reached to lower the taxes it pays on the Northport and Port Jefferson power plants, LIPA’s taxes and related fees still make up around 19% of customer bills — three times higher than the national average for electric utility customers.
Taxes for the four plant properties alone are $179 million, said Mark Smith, LIPA’s senior manager of rates, and one of those properties (Glenwood Landing) no longer has a large plant. LIPA pays another $51 million for all other plants on Long Island, and separately pays $302 million for transmission and distribution properties. (LIPA also pays $37 million for revenue-based taxes and $11 million for state assessments.) National Grid owns most of the plants.
LIPA assistant general counsel Joseph Wiener noted that many of the plants are over 50 years old, "use outdated technologies and aren’t used a lot."
Separately, Wiener said, LIPA expects to go to trial over the E.F. Barrett power plant’s taxes in Island Park, and the Glenwood Landing site's taxes, by the end of the year. Nassau County and LIPA had previously been close to a settlement, but LIPA’s offer was not accepted by the Nassau Legislature, and LIPA rescinded it in March.
LIPA and Nassau will exchange appraisals for the properties on Sept. 7, and Wiener said a trial date could be late 2021 or early 2022.
LIPA’s settlement with Huntington Town and the Northport-East Northport School District will lower the taxes LIPA pays from a past $86 million a year to around $46 million by 2027, in a gradual phasedown, saving customers some $364 million over eight years, Wiener said. He called the agreements over the Northport and Port Jefferson plants a "fair compromise" for the host communities and LIPA’s 1.1 million customers.
But Brookhaven Supervisor Ed Romaine isn’t quite convinced his settlement is as fair as it could be. Romaine had a clause built into his settlement saying that if a better settlement was reached subsequently by other municipalities, Brookhaven would get the same better deal. And while LIPA did move to lower the initially agreed upon tax reduction from 50% to 47%, Romaine said LIPA has not been as generous in offering his town the same $3 million payment LIPA offered Huntington Town.
"They gave a better deal to Huntington and a block of money just for signing the contract," Romaine said of the $3 million. "I said, ‘Where’s my block of money?’"
Romaine accused LIPA of "trying to worm around" paying the same $3 million by saying that the Northport plant is two to three times larger than Port Jefferson. The money, according to a statement from Huntington at the time, was given to help the town in facing COVID-19-related budget issues.
Romaine said LIPA has made a "partial offer" of a payment, but "that isn’t even on the table anymore. So I guess we’re going to have to litigate this."
LIPA’s Wiener during last month's meeting said, "We are continuing to work with the Town of Brookhaven to revise and improve that settlement," adding he expects to have "more to report in the future over that."
Meanwhile, LIPA is preparing to file new tax challenges for an unspecified number of secondary properties that house substations. "We will continue to prosecute those matters to obtain fair payments," Wiener said. LIPA didn’t specify the locations.
LIPA in April was dealt a blow in its case against those tax challenges after Suffolk County Comptroller John Kennedy issued tax liens against LIPA when LIPA began limiting its tax payments on those properties to a 2% cap permitted under the LIPA Reform Act. That resulted in around 1,700 delinquencies for unpaid tax bills to numerous Suffolk municipalities.
The shortfalls are forwarded to Suffolk County, which pays the towns and villages the difference, but issues a lien against the LIPA properties to force payment.
A judge in the case ruled said that LIPA owes some $70 million in back taxes, penalties and interest, but LIPA disagrees.
About that case, Wiener said, "We continue to respond to the judge’s recent decision and order."