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LIPA tax challenge could cost schools, towns millions

A LIPA plant is seen in Northport. (Oct.

A LIPA plant is seen in Northport. (Oct. 28, 2010) Credit: Newsday / Thomas A. Ferrara

The Long Island Power Authority has begun the process of challenging the taxes it pays to local governments in areas where National Grid power plants are located, a move aimed at reducing costs for its 1.1 million ratepayers that could hamstring school districts and others highly dependent on the hundreds of millions in payments.

National Grid, which owns the plants, has already filed tax petitions with two towns, Brookhaven and Huntington, on LIPA's request, the utility confirmed. It is expected to file others in coming months in an effort to lower assessments that pump more than $100 million into local economies, lowering school taxes and helping fund local governments.

Depending on how successful LIPA is, the moves could cost villages, school districts and other special districts tens of millions of dollars.

LIPA pays a total of $488 million annually in state and local taxes and assessments. Of that, $181 million goes to pay taxes on properties owned by National Grid. The five largest plants owned by National Grid represent around $154.5 million in payments.

 

A 10 percent cut?

LIPA first broached the possibility of challenging taxes a year ago, when Kevin Law was chief executive. LIPA last year said successful challenges could cut its tax bill by up to 10 percent.

The first filings this month challenge the assessed value for two of the Island's largest plants, in Northport and Port Jefferson.

"We're extremely concerned and upset," said Port Jefferson Village Mayor Margot Garant. "We've gone to our elected officials and we're asking for their help. We're meeting with the stakeholders to find out how we can help; we want to be involved in all discussions."

LIPA declined to release its analysis of the value of the plants, but one local expert said they are "grossly, grossly over-assessed."

"There's no question that they are overvalued," said Lauren Harris, an attorney at Cronin, Cronin & Harris, which specializes in tax reductions. Harris is a board member at the Association for a Better Long Island, which has strongly advocated for LIPA to lower the assessments. "School districts have become overdependent on these excess assessments," she added, and will likely be impacted by the process, but "somebody's going to suffer."

Michael Hervey, chief operating officer at LIPA and interim chief executive officer, said filing the assessments was a matter of fairness to LIPA ratepayers.

"We think we owe it to our customers and to our willingness to be fair on both sides," he said, noting that those living around the plants get a tax benefit, but the bill is paid by ratepayers.

He said LIPA will file tax petitions challenging the value of other properties that house National Grid plants.

State Sen. Kenneth LaValle (R-Port Jefferson), said the decision to file the petitions broke what he understood to be a handshake agreement not to challenge the plants' value when LIPA was formed 12 years ago.

LIPA spokeswoman Vanessa Baird-Streeter said with the filing of the petitions, "the next step is in the towns' court." LIPA will request National Grid to file petitions for other plants as the deadlines approach.

LaValle said that the process to get the taxes adjusted could take more than a year, at a time when National Grid has expressed an interest in selling the plants. LaValle also noted the prospect of overhauling the plants, discussed by LIPA and National Grid, could greatly increase their value, and obviate the question of lowering the assessment.

 

School board action

The Port Jefferson school board is taking the move to reduce assessments so seriously that on Oct. 12, it voted to allot $50,000 to a fund to fight any reduction. The village also plans to contribute $50,000 to the fund.

"It could be devastating," said Max Riley, superintendent of Port Jefferson schools. "It could also be a minor event."

National Grid's power plant in Port Jefferson provides 40 percent of the district's property-tax revenue of $29.9 million. (Because the district is affluent, property taxes make up the bulk of its $37.7 million budget. Historically, the district has had the lowest property-tax rates in Brookhaven Town.)

Brookhaven Supervisor Mark Lesko, meanwhile, said the move was "not unexpected." He said the town attorney and tax assessor were reviewing the case, but "to date, no change in the assessed value has occurred."

A spokesman for Huntington Town declined to comment, but a local school official expressed surprise.

Lorie McCue, a member of the Northport-East Northport school board, said she didn't know if the district would put up a formal defense against LIPA's effort to lower assessments. But she did question the utility's contention that it was trying to lower rates for homeowners. Recently, she noted, LIPA announced that consumers may be hit with costs to rebuild its reserves to cover storm damage.

"How can they say they're trying to reduce bills, when they said on the news just today that they had to raise bills because of all the storms?"

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