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LIPA, Huntington to face off in court over power plant taxes

The LIPA electric power plant in Northport on

The LIPA electric power plant in Northport on Oct. 28, 2010. Credit: Newsday /John Paraskevas

LIPA and the Town of Huntington are scheduled to go to trial Monday in a high-stakes lawsuit over taxes paid for the Northport power plant. 

The case, which stems from a LIPA tax-grievance filing from nearly a decade ago, seeks to drastically lower the amount of annual taxes LIPA pays for the plant, which stood at $82.1 million in 2018. By 2030, LIPA projects, taxes for the plant are on scheduled to increase to more than $100 million.

LIPA argues the plant is used considerably less than even a decade ago, and "fair taxes" by 2030 would be closer to $3.7 million, though LIPA has offered a settlement that would forgive hundreds of millions in past-due taxes since 2010, and gradually reduce the annual tax over nine years to just over $40 million. 

"What we've offered is far better than what they're likely to get at trial," said a senior LIPA official on Friday. 

Huntington Town Attorney Nicholas Ciappetta, in an email, said the town was prepared to “vigorously defend” the assessed value of the Northport plant, saying LIPA’s proposed reduction fails to consider “the uniqueness of the plant and its location,” among other things. He called the plant “a vital component of the Long Island power grid,” and said the utility’s “drastic and irresponsible demands would devastate” the Northport-East Northport school district and the entire Town of Huntington” while ratepayers would “get back pennies.”  

In court papers the town has argued that LIPA's appraisals and valuations are flawed.

"The evidence at the trial of this matter will demonstrate that LIPA has failed to submit a competent appraisal" for the plant, the town's papers state. "LIPA's appraisal also fails to include the necessary facts, figures and calculations upon which it is based."

The 50-year-old electricity generation plant, Long Island's largest, is owned by National Grid and operated under contract to LIPA.

John Gross, an attorney for the Northport-East Northport school district, which is not a party to the case, said a ruling against the town would be "devastating" to the district, which has drawn upward of $54 million from the $82 million LIPA tax payment. 

"We don't believe the tax [challenge] process should have ever proceeded," he said. "We believe they [LIPA] made a promise never to seek a reduction" of the plant's taxes. The district argued as much in a lawsuit that found in LIPA's favor. It remains on appeal. 

LIPA in a pretrial motion called the town's assessment of the plant's valuation of $3.4 billion "simply unsupportable," given its decreased use, limited remaining life span and the presence of newer, more efficient natural gas plants such as Caithness in Yaphank. Northport in 2017 was used only 13 percent of the year, compared with 53 percent in 1999, LIPA said, in arguing that the plant's assessed value is $198 million "at best." 

The senior LIPA official said that even using plant value and plant replacement costs supplied by town engineers, the value of the plant would be reduced by more than $1 billion, to a figure closer to $500 million. The official predicted a $200 million to $500 million final valuation for the plant as the "likely trial outcome." 

LIPA and lawyers for Huntington attempted to work out a settlement, including through six months of court-ordered mediation, but were unsuccessful. The senior LIPA official didn't rule out the prospect of a settlement, but noted time is running. 

"We're on the courthouse steps, the clock is striking noon and the cowboys are in the middle of the alleyway," he said. 

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