Village of Freeport overvalued power plant by $65 million, judge says

The Village of Freeport is appealing after a state judge found the municipality overvalued a power plant by $65 million, a ruling that could require Freeport to make a substantial tax refund.

Freeport had valued the power plant property at nearly $98.1 million in the 2018-19 tax year, and $102.7 million in 2019-20, court documents show. In April, after a bench trial and years of litigation, State Supreme Court Justice Vito DeStefano lowered the property's valuation to about $33.4 million for both years, according to a copy of the decision.

J-Power USA leases the natural gas-powered plant, which is adjacent to another village-owned power plant. The company's plant operates as a "peaker" or "peaking plant," generating electricity during times of high demand, according to court documents.

J-Power USA had a PILOT, or payment in lieu of taxes agreement, with Freeport that ran through 2017. The company sued Freeport in 2018, after the agreement expired. The company, its attorneys wrote in court papers, has paid $3.7 million in excess village property taxes over a five-year period beginning with the 2018-19 tax year.

In his decision, DeStefano said "the court holds that the Village of Freeport over assessed" the power plant during the 2018-19 and 2019-20 tax years. He ordered Freeport to "correct the assessment roll" for  those years. 

In July, DeStefano ordered the village to use the 2019-20 assessment for the 2020-21, 2021-22 and 2022-23 tax years. 

Representatives for the village and power plant did not respond to requests for comment. 

The village appealed DeStefano's ruling in August, arguing the court "erred" in its decision, filings show.

The company had paid $680,000 to the village annually under a lease agreement that began in 2004, according to village financial records. The village had been receiving a PILOT payment of approximately $315,000 per year until Dec. 31, 2017. In 2018, after the PILOT expired, the company began paying village property taxes. 

The first village tax bill totaled $1.1 million in 2018, court filings show. 

During the trial, the company and village submitted appraisals of the property using their own experts and methodologies. The village’s appraiser valued the property at $65 million. The company’s appraiser valued it at $9 million, court documents show.