It’s been nearly five years since LIPA and National Grid agreed to shutter a little-used power plant on Hempstead Harbor in Glenwood Landing, but the property tax bills keep on coming.
Although the main plant was demolished and only two small ancillary generators remain at the site, LIPA last year paid $16.6 million in municipal and school taxes for the Glenwood Landing property, which is owned by National Grid.
That’s a reduction from the $23.2 million paid in 2012, but it’s still nearly twice what LIPA pays in taxes for newer, more productive plants such as the 350-megawatt Caithness facility in Yaphank.
As LIPA and PSEG Long Island consider new power resources in capacity-constrained pockets like Glenwood and conduct a more comprehensive review of the region’s power sources, the legacy of high and rising taxes for plants continues to have an impact on those decisions.
LIPA has been waging war against what past and current officials have labeled excessive taxes on plants and other properties for nearly a decade.
The authority this year will pay $555 million in taxes and assessments, the second largest cost for the utility besides fuel and power, according to LIPA. Taxes cost LIPA, a public authority with tax-exempt status, more than even its $523 million in annual debt-service payments.
Taxes on the old National Grid-owned plants, which LIPA pays under a long-term contract, represent the bulk of those payments.
Last year, LIPA paid $76.6 million in taxes for the Northport power plant, $27.6 million for one in Port Jefferson and $35.6 million for another in Island Park. Since 2000, taxes for all the National Grid plants have nearly doubled, to $193 million in 2015, from $102 in 2000.
LIPA, backed by its trustees, began filing tax grievances in 2010.
“We thought the properties were very substantially overassessed and our ratepayers were subsidizing these communities,” said Howard Steinberg, former chairman of the LIPA trustees, who was among those who led the effort to grieve the taxes. “This was a long time coming to finally get off the ground and the mindset that something had to be done.”
Separately, LIPA is embroiled in lawsuits resulting from a 2 percent tax cap on its properties that Gov. Andrew M. Cuomo included in the LIPA Reform Act — a decision that has rippled through local town and school district budget debates this year.
Reducing taxes to levels requested in its various tax filings would have an substantial impact on rates, LIPA figures indicate. Average savings of $6.05 to $7.45 on monthly bills would offset a recently enacted rate hike.
LIPA, which as a public authority is otherwise exempt from taxes, pays more in property taxes and assessments than most other utilities. Nnon-income taxes amount to 15.5 percent of total revenue, compared with 12.2 percent for Con Edison and 4.7 percent for National Grid’s upstate operations.
Proponents of LIPA’s tax challenges say high taxes on aging plants that are used less each year are necessary to cut rates and stop subsidies for well-to-do school districts.
Desmond Ryan, executive director of the Association for a Better Long Island, a builders group that has long advocated for cutting the payments, says the half billion dollars in annual tax payments are among the few rate components that LIPA can control.
“The problem is that the school districts are hooked on these payments” said Ryan.
School districts and municipalities argue that the utility promised not to challenge tax payments under an agreement with former LIPA chief Richard Kessel when LIPA was formed.
Tax payments to school districts and municipalities near power plants in Northport, Port Jefferson, Island Park and Glenwood Landing are critical to district budgets, school officials say.
“Fifty percent of our tax levy is paid by LIPA,” said Port Jefferson School District Superintendent Kenneth R. Bossert. “If there is any reduction, the burden would fall solely on taxpayers” in the district, primarily Port Jefferson village.
The reductions LIPA is seeking “would have a major impact on the school district and the residents’ ability to pay their property taxes.”
While the cases continue to move slowly through the courts, Ryan says the only solution remains a settlement mandated by state legislation, though he doesn’t expect that to happen this year.
Bossert agreed legislation is a key option, but says he remains hopeful the Port Jefferson plant can be overhauled and kept as a vital part of the LIPA power fleet. That decision rests with the PSEG power analysis.
The LIPA The 2 percent tax cap itself has led to a series of objections from local towns — Brookhaven’s bill was cut by $1 million — and, more recently, a series of lawsuits among Nassau towns after LIPA paid $3.7 million less than was billed by the districts county for its first-half tax bill. That held up payments from Nassau County.
LIPA estimates that if its property and related taxes were in line with those of other utilities, the savings would amount to hundreds of millions of dollars.
According to LIPA figures, savings from lower taxes it is pursuing could amount to $158 million a year, or $528 million over three years. The LIPA rate increase called for around half that amount, or $287 million over three years.
But the rate increases LIPA ratepayers have already begun paying, a cumulative 7.2 percent in their delivery rate over three years, don’t compare to the bills local districts will have to foot if all the tax challenges are successful. For that reason, officials are hopeful of a resolution.
“At the end of the day we are trying to prepare as best we can,” said Bossert, the Port Jefferson superintendent. “We do not want to see the quality of the programs we offer our students negatively impacted by a grand reduction in the tax payments.”