A state Supreme Court judge Tuesday ordered the Long Island Power Authority to pay Nassau school districts the full amount of tax payments billed by the county for the 2015-2016 school year.
Supreme Court Justice Anthony Marano in Mineola issued a temporary restraining order from the bench directing LIPA to immediately turn over the $3.72 million that it had withheld from the first-half payment of its total $50 million school tax bill, while the case continues in court.
More than 40 Nassau school districts had sued LIPA and the county in January, seeking full payment of the bills issued to LIPA by the county as payments in lieu of property taxes for more than 600 properties owned by the authority.
LIPA contended that the LIPA Reform Act of 2013 limited increases in such payments to 2 percent a year. School districts wanted Nassau to make up the difference, but the county argued that the power authority underestimated what it owed by calculating its bill based on the calendar year rather than the school year.
A lawyer for the Ingerman Smith law firm hailed Marano’s order in a memo to its school district clients. Partner Carrie-Anne Tondo wrote that the judge said the districts’ revenue losses would in “some way, shape or form equal less teachers, less programs, less books” and result “in irreparable harm to children.”
County Executive Edward Mangano said in a statement, “This is good news for local schools as the court prevented LIPA from its attempt to shift taxes onto the backs of residents.”
However, LIPA indicated the judge’s ruling will lead to a hike in electric customer bills. All LIPA costs ultimately are paid by ratepayers.
“We are disappointed the court ordered LIPA to make an additional $3.7 million payment in lieu of taxes in the interim while the case continues,” said spokesman Sid Nathan. “This payment will increase the bills paid by LIPA’s 1.1 million customers, a result at odds with the Legislature’s intent in the 2013 LIPA Reform Act.”
Nathan said LIPA was “reviewing all options available to best protect the interests of its customers.”
John Gross, partner at Ingerman Smith, rebuffed LIPA’s notion that taxpayers should shoulder a higher tax burden. “When you look at the impact on ratepayers,” he said, “it’s pennies.”
“When you create a system that school districts rely upon in planning their revenue receipt year after year and then suddenly pull the rug out from under them, it injures scores of school districts and thousands of kids,” Gross said.
LIPA has a mechanism to review its rates annually, and reconcile actual costs, which it can recoup or return to customers. The so-called delivery service adjustment can be triggered by an increase in taxes such as that resulting from Tuesday’s court ruling, among other factors.
The 2 percent tax cap was part of a multipronged strategy by LIPA and the state to reduce the utility’s exposure to taxes, which account for about 15 percent of every ratepayer’s bill. LIPA is grieving the payments in lieu of taxes that it pays on several National Grid Long Island power plants, and its contractor, PSEG Long Island, in 2014 ceased making sales tax payments on LIPA’s behalf to Nassau and Suffolk.
Although Marano denied the school district requests to address next year’s school tax bills, Tondo said Tuesday’s order “will make school districts substantially whole” for this year.