Hempstead Town Hall Plaza courtyard in the fall, Nov. 28,...

Hempstead Town Hall Plaza courtyard in the fall, Nov. 28, 2011. Credit: JC Cherubini

Hempstead Town has agreed to accept 30 percent less than it wanted from Nassau County to settle a long-standing dispute over millions of dollars in utility tax refunds, according to town and county officials.

The tentative settlement calls for the county to pay Hempstead $17.94 million by the end of the year in return for the town dropping its claim for $25.63 million in reimbursement for refunds that Hempstead paid Verizon as a result of erroneous county property tax assessments, officials said.

The deal mirrors an agreement Nassau made with Oyster Bay Town earlier this year, which called for the town to accept $26.779 million in return for Oyster Bay dropping more than $38 million in claims against Nassau.

Oyster Bay’s deal also called for the town to give up interest accrued on its claim. However, both Hempstead and Nassau officials would not give details about their settlement, which has been signed by the town and county attorneys but still must be approved by the county legislature, the Hempstead Town Board and the county’s financial control board.

Hempstead, facing a financial squeeze similar to other Long Island towns, earlier this month withheld $30 million of $48.6 million in general taxes owed Nassau in an attempt to force reimbursment of the refunds it had paid. The town on Tuesday remitted all money owed Nassau.

The utility tax dispute goes back to 1994 when the old New York Telephone Company sued Nassau’s three towns, arguing that it was owed refunds for property taxes paid on equipment in town garbage districts that had been improperly included on the county’s assessment rolls. Successor Verizon, joined by other utilities, eventually won. After paying millions in tax refunds, the towns demanded reimbursement from Nassau under the “county guaranty,” a state law requiring Nassau to pay the cost of tax refunds stemming from erroneous assessments.

Although the state’s highest court has twice upheld the county guaranty, Nassau continued to fight reimbursement. County Comptroller George Maragos in August estimated the county’s overall liability for the utility tax refunds at $345 million.

Hempstead paid Verizon after the company attached town bank accounts in late 2014. Other utility companies are also still owed refunds.

“It’s in the best interest of the county to settle and bring to an end decades of old litigation,” said Deputy County Executive Ed Ward. He declined to say how the county, which is facing its own budget problems, will find the money to pay Hempstead.

Hempstead spokesman Michael Deery said, “We settled this case in the best interests of Hempstead town’s taxpayers.”

Unlike Hempstead, Oyster Bay did not turn over any of the $44 million in taxes it had withheld from the county until its settlement was final. Although a state court judge had ordered Oyster Bay to pay, the town appealed, which stayed the order.

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