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LIPA preparing tax challenges on substations

The move gives LIPA the green light to challenge an unspecified portion of the $289 million in total payments it makes on 185 so-called substations across the region. 

LIPA chief Tom Falcone, shown in Uniondale on

LIPA chief Tom Falcone, shown in Uniondale on Nov. 13, 2015, called the action "routine." Photo Credit: Howard Schnapp

LIPA trustees on Wednesday gave the utility’s chief executive the authority to challenge the taxes it pays on hundreds of potentially “over-assessed” properties across Long Island in a move that could return untold millions of dollars back to utility coffers from municipal budgets.

The move unanimously approved at the end of a Wednesday board meeting gave LIPA the green light to challenge an unspecified portion of the $289 million in total payments it makes on 185 so-called substations across the region, as well as equipment such as transformers and land around more than 15,000 miles of overhead and underground lines.

LIPA chief Tom Falcone called the action “routine,” noting that assessed values for the properties are often based on little evidence. Some assessors “don’t have records,” he said. “Often the assessor hasn’t looked at this stuff in a really long time.” He said LIPA hopes to negotiate lower assessments through discussions rather than in court, though six cases have already been filed on "over-assessed" substations.

LIPA’s move to begin reviewing the assessments of existing substations and other properties began last year and found examples of “significantly over-assessed utility equipment,” according to LIPA documents.  Falcone said one sample by the utility found six of 12 substations over-assessed, but stressed that ratio may not apply for all 185 substations, which are facilities that step down higher-voltage power to lower voltages used in homes and businesses.

For instance, one substation with a $63.8 million assessed value and an $1.5 million annual tax bill was found by LIPA to have a fair value of only $8 million, an 88 percent over-assessment. Another assessed at $19 million with a $325,000 annual tax bill was found by LIPA  to have a fair value of just $2 million. LIPA didn’t provide locations or actual tax bills for those properties.

LIPA for the past decade has challenged the taxes it pays for four National Grid-owned power stations, an amount that totaled some $176 million last year. It wants to cut the amount by 50 percent over the next eight years and has already reached an agreement to cut its taxes on the $32 million it pays annually for the Port Jefferson power station. Falcone said there were “good conversations” concerning taxes for Glenwood Landing and Island Park plants. A trial for Northport plant taxes is scheduled to begin next month.

LIPA is already benefiting from a 2 percent cap on taxes it pays on the properties as part of the LIPA Reform Act. LIPA’s acting chief financial officer Kenneth Kane said the utility has saved a cumulative $79 million in estimated lower taxes because of the cap by last year’s end. That number could jump to $285 million by the end of 2022, he said.

PSEG Long Island acknowledged at the board meeting it had signed a “contingency” agreement to buy 6.7 acres of hilltop property in Montauk to build a hotly contested substation that more than 2,000 residents have signed a petition opposing. PSEG president Dan Eichhorn said the utility believes it can “balance” and “mitigate” residents’ concerns. A public meeting is planned for next month.  

But Tom Bogdan, founder and president of citizen action group Montauk United, told LIPA trustees to expect a fight. “I can guarantee you that there will be a highly active group against this project and showing that anger and opposition in every way possible,” Bogdan said. Izabella de Jesus, an attorney who lives across the street from the proposed site, called PSEG’s previously undisclosed contingency agreement a “triggering” event that would lead the group to file suit to block it. PSEG said it chose the site at East Hampton Town’s request.


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