When the electricity went out briefly late last week at Suffolk’s H. Lee Dennison Building, one county comptroller aide joked it was the Long Island Power Authority “trying to get back at us.”
While it was just a technical glitch, the increasing tensions are real. They are the result of an escalating dispute between Suffolk Comptroller John Kennedy and Long Island’s public utility, and the potential cost to the county this year has grown to as much as $10 million.
At the heart of Suffolk’s conundrum is a conflicting interpretations of two state laws.
One is nearly a century old. The Suffolk County Tax Act lays out the system in which the county’s 10 towns assess and collect property taxes, but the county government has to advance the funds to the towns for property owners who fail to pay.
The county also has the nuclear option — the power to seize the properties of businesses and homeowners who are delinquent.
The other law is the 2013 LIPA Reform Act. That statute limits increases in payments in lieu of taxes, known as PILOTs, the utility pays for properties that went off the tax rolls after LIPA became a public entity to 2 percent a year. That’s the same as required under the state’s property tax cap law.
LIPA officials, claiming the payments were rising by as much as 7 percent a year, sought the cap to “minimize the extent to which one municipality could shift . . . their cost of providing local government services . . . through LIPA’s electric bills,” said Jon Mostel, LIPA general counsel.
Mostel also noted that the Public Authorities Law says the reform act is “controlling” if there’s a conflict with other state laws. He said a similar lawsuit in Nassau was unsuccessful.
Kennedy said Suffolk’s situation is different.
He said he received complaints from Suffolk towns that were hit when LIPA decided to cut payments on 730 utility properties, a year before county and town officials say it was allowed.
Kennedy also said LIPA “cherry picked” on a parcel-by-parcel basis, reducing their payments on any with more than a 2 percent increase, while paying only the lesser amount on those where less than 2 percent was owed.
In Brookhaven, Suffolk’s largest town, officials say PILOT increases townwide are below the 2 percent cap and the utility should make its payments in an aggregate manner.
Since the LIPA Reform Act is silent on the issue, town officials say LIPA should follow two other state laws dealing with PILOTs in which payments are calculated on all utility properties.
The problem is towns cannot sue LIPA because they have not been damaged by the shortfall, since the Suffolk County Tax Act keeps them financially whole.
For Suffolk, the LIPA tax issue has only added to the county’s structural deficit — the difference between recurring revenues and expenses — which is estimated at $135.3 million to $179.7 million.
Seeking guidance, Kennedy got the county legislature last week to direct the county attorney to decide within 90 days if the county should sue LIPA.
Legis. Rob Calarco (D-Patchogue) voted for the measure, but expressed concern taxpayers could face higher rates or taxes no matter who wins.
“We’re robbing Peter to pay Paul,” said Calarco, who conceded lawmakers had to act to deal with latest budget hole. He said the review also should determine if the county even has the obligation under the tax act to make towns whole on PILOT payments as well as property taxes. If the county does not have to pay, it could free Suffolk from the dispute.
“My sense here is my obligation and duty is to take some action,” said Kennedy. “The unacceptable posture is just to let the practice continue.”
The comptroller did not rule out seizure of LIPA properties. “That is a remedy under the Suffolk County Tax Act,” he said.