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Judge dismisses suits seeking to halt LIPA tax challenges for plants

The judge rejected the contention by two school districts that past assurances not to fight the taxes were contractually binding.

A Huntington town attorney said at least three

A Huntington town attorney said at least three separate counteroffers have been made to settle a decadelong tax challenge with LIPA over its Northport power station, seen above on  Aug. 26, 2015. Photo Credit: Newsday/John Paraskevas

A state Supreme Court judge has dismissed lawsuits by the Northport and Port Jefferson school districts that sought to quash LIPA’s property-tax challenges for National Grid power plants, ruling that assurances by a former LIPA chief not to fight the taxes amounted to “gratuitous promises” that didn’t “contractually bind” the authority.

State Supreme Court Justice Elizabeth Hazlitt Emerson, in a 24-page decision granting LIPA’s request for summary judgment, ruled that “nothing” in LIPA’s power supply agreement with National Grid and its predecessors “prevented LIPA from initiating tax challenges,” despite claims by the districts and municipalities to the contrary. LIPA, which pays all the plants’ taxes through ratepayer charges under contract to plant-owner National Grid, “may challenge the real-property tax assessments on the power plants,” Emerson concluded.

She also ruled that the school districts were not “intended third-party beneficiaries” to the LIPA contract for the plants. One of the plaintiffs’ lawyers had argued that the beneficiary clause meant that there were “legally binding” commitments made to the districts not to challenge the taxes.

The decision and Emerson’s purported statement from the bench could ripple to LIPA tax challenges across Long Island. A summary of the judge’s decision distributed by LIPA and confirmed by a lawyer for Huntington Town quoted Emerson as saying she will apply her decision to not only the Northport-East Northport and Port Jefferson school districts before her but all other similar actions before the court. That includes the Town of Huntington, the Village of Port Jefferson, the Island Park school district and the North Shore school district.

“She did say that yesterday [Wednesday],” said Stuart Besen, an attorney for Huntington Town, who added that he will “very much encourage” Huntington Town to appeal. A call to Emerson wasn’t answered. A spokeswoman for Huntington Town Supervisor Chad Luppinaci didn’t respond to a request for comment.

The decision is a significant win for LIPA in its nearly decadelong battle to cut the nearly $180 million it pays in taxes for the plants and plant properties each year. LIPA, in a statement, said the court’s decision “affirms our customers’ right to pay reasonable taxes on the power plants.”

LIPA has offered settlements that would effectively cut those taxes in half over an eight-year period. Taxing districts, faced with corresponding revenue shortfalls, have mostly balked, though Brookhaven Town has entered into a tentative agreement over taxes on the Port Jefferson plant. LIPA, which pays just over $80 million in property taxes on the Northport plant alone, said it “remains committed to reaching a fair settlement for both the local communities and our 1.1 million customers to put an unsustainable situation back on a sustainable path.”

The ruling took issue with assurances by former LIPA officials, including then-chairman Richard Kessel, who said in a May 1997 letter that “neither LIPA nor LILCO will initiate any further tax [challenge] cases” on plant properties unless a municipality “abusively increases” the assessment rate.

Emerson found that promise and others “may not be used to vary, contradict or modify terms” of a contract LIPA had with KeySpan/National Grid. The promises were “too vague and indefinite to be enforceable,” the judge found.

John Gross, an attorney for the school districts, said he believed Emerson’s decision was “wrongly decided,” adding, “We have certainly recommended to our clients that it be appealed.” He said Northport-East Northport has already decided to do so. A call to the district wasn’t returned. Port Jefferson’s school district office also didn’t return a call.

LIPA, National Grid, Huntington Town and the Northport-East Northport School district are scheduled for mediation over a potential settlement Sept. 26, Gross said.

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