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Northport school district, LIPA reach deal over power plant taxes

The Northport Power Station is Long Island's largest.

The Northport Power Station is Long Island's largest. Credit: Newsday/John Paraskevas

The Northport-East Northport school board has reached an agreement in principle to settle a decadelong tax case with LIPA over taxes for the Northport Power Station in a deal that would give the district $14.5 million in direct annual payments to offset the impact of LIPA's tax contributions, officials said.

The proposed deal, which district officials said was authorized by the school board and which the Long Island Power Authority has accepted, still must be approved by the Huntington town and school boards. The agreement would lower the annual taxes LIPA pays for the plant from a current $86 million to $46 million in gradual steps by 2027.

There would also be a five-year extension holding the final year’s $46 million tax payment, but only if LIPA extends the power supply agreement for the plant beyond 2027.

New to the proposed settlement over previous offers by LIPA is a total of $14.5 million in direct upfront payments to the school district to help offset the impact of LIPA's lower tax payments, which would have to be made up by district taxpayers. Payments to the district would be $2.5 million in the first year of the settlement, then $2 million each year for the remaining six. No extra payments would be made during the extension years. 

Only a "significant" drop in the capacity of the Northport plant, or substantial improvements, would allow for changes in the payment schedule. LIPA has been mulling reducing the capacity of the plant — Long Island's largest — by one of the four units that powers it.

“LIPA has relented,” said David Badanes, the school board president, in announcing the proposed settlement during a virtual meeting Thursday night.

LIPA spokesman Sid Nathan said the authority was “pleased to have reached this fair settlement with our host community which preserves the Northport School District’s low taxes even as LIPA continues the transition from fossil fuel plants to a cleaner electric grid.”

Under terms of the proposed settlement, the school district would drop a lawsuit it filed several years ago charging that LIPA previously agreed never to challenge taxes it paid for power plants. The case, which the district initially lost in state court, is on appeal.

The proposed offer also would forgive what could amount to $800 million in tax refunds LIPA would be due if it wins the case in state Supreme Court. The officials close to the school board said such a judgment, which could result in substantially higher tax bills in the district, also could hike Huntington town taxpayers' bills with one-time payments of $10,000 to $25,000.

The school district is planning a town hall meeting next week to present its case for settling the tax challenge, which could see a verdict in state Supreme Court in Riverhead in coming weeks. The school board, which authorized the settlement offer to LIPA, is expected to vote on the settlement on July 20.

Under the terms, Huntington’s Town Board has to act on it by Aug. 11. “If it doesn’t, the deal does not go forward,” said the official close to the school board.

John Gross, a lawyer for the school district, said the settlement represents “the best chance” for the district to  “preserve and maintain the high-quality educational program for its students and to avoid taxpayers having to pay devastating retroactive tax payments in excess of $10,000 per household together with having to pay dramatically increased property taxes for the foreseeable future.”

There are signs some may balk at the deal. Michael Marcantonio, who has led a fiery campaign for the state Assembly largely by opposing LIPA’s settlement offers in Northport, Island Park and Glenwood Landing, called LIPA’s actions to force a settlement amid COVID-19-related budget cuts and school planning “disgraceful.” The town, school board and Suffolk County Executive Steve Bellone had asked LIPA to request a delay in the case until at least next year. LIPA declined.

The district official said the $14.5 million in direct payments “help ameliorate the impact substantially” of LIPA's reduced tax payments, although that becomes substantially less apparent after four years when LIPA’s tax payments are reduced even more. By then, the school district could turn to measures such as cost cutting amid declining enrollment to help lessen the impact, the official said.

The Northport plant is owned by National Grid, which has been a party to the tax challenge. Taxes on the plants are paid by LIPA ratepayers.

LIPA has already settled a similar suit with Brookhaven Town over taxes for the Port Jefferson plant, though a settlement over other plant properties in Island Park and Glenwood Landing are stalled in the Nassau County Legislature. 

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