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Agreement in principle expected in Brookhaven-LIPA tax dispute

The deal would gradually reduce the amount of taxes Brookhaven charges the utility for the Port Jefferson power plant.

On Tuesday, Brookhaven Supervisor Edward Romaine is expected

On Tuesday, Brookhaven Supervisor Edward Romaine is expected to announce an agreement with LIPA regarding taxes for the Port Jefferson power plant. Photo Credit: Composite: Randee Daddona; John Paraskevas

Brookhaven Town was expected to announce Tuesday that it has reached an agreement in principle with LIPA to gradually reduce the $32.6 million in annual taxes it charges the utility for the Port Jefferson power plant.

It would be the first settlement of four tax challenges filed by LIPA over the $176 million it pays in taxes for National Grid-owned plants. LIPA has argued that for aging plants that are used less and less each year, they are 90 percent overassessed.

Brookhaven Supervisor Ed Romaine was expected to announce the tentative agreement Tuesday in his state-of-the-town address. It was expected to include an eight-year ramp-down of the $32.6 million a year LIPA pays in lieu of taxes for the plant, which operated just 11 percent of the time in 2016. The ramp-down period is expected to begin in the 2018-2019 tax year, with incremental reductions in tax payments over the eight years.

Romaine declined to detail how the taxes will be reduced for the plant over that time, but called the amount “substantial.” Previous proposals had put the reduction at around 50 percent over that period.

“I’ve wanted to settle this from the day I came into office,” Romaine said, adding that he has long felt taxes on the plant were “out of whack.”

LIPA said in a statement it “continues to engage in productive settlement discussions with the town and we hope to reach a final agreement.”

He said the agreement includes an assurance that the reduced taxes will “will go directly to the LIPA ratepayers in the form of lower electric bills.”

Most of National Grid’s large Long Island plants have been used substantially less in recent years. LIPA has turned to undersea power cables and the newer Caithness power plant in Yaphank for a larger percentage of energy, as well as green-energy sources. LIPA pays just under $10 million in annual taxes for the Caithness plant, which is also in Brookhaven.

By avoiding a trial, the tentative deal means Brookhaven won’t face the prospect of a hefty back-tax repayment on the plant were LIPA to win its challenge, which was brought in 2010. LIPA has contended the past overpayments amount to more than $200 million for Port Jefferson alone.

The deal “puts an end to the uncertainty over the course of nine years, and gives finality to this,” Romaine said.

Other municipalities that host National Grid plants, including Northport, Island Park and Glenwood Landing, are reported to be continuing to negotiate the matter. The case involving the Northport plant and Huntington Town, for which National Grid pays $80 million in annual taxes, is scheduled to go to trial in June.

The biggest impact of the Brookhaven reduction will be felt by the Port Jefferson School District, which gets around 40 percent of its budget from the tax payments. Only around 8 percent of the $32.6 million annual payment for the plant goes to the town, and Romaine said the town is making plans to make up for the shortfall.

“We have tax reserve funds that will be used to offset this,” he said. “I don’t believe it will have a big impact on the town per se. It may on other taxing jurisdictions.”

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