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Good Morning

Time for power players to deal

An aerial view of the Port Jefferson Power

An aerial view of the Port Jefferson Power Station, overlooking Port Jefferson Harbor, as seen from the air on Saturday, May 15, 2010. Credit: Kevin P. Coughlin

The Long Island Power Authority pays inflated taxes on four National Grid gas-fired plants. That means all of us do. It’s unfair, and it can’t go on.

LIPA, like many property owners, has filed tax grievances on behalf of its ratepayers, claiming the plants have been overassessed for years. Time is running out, the courts can’t wait forever for the sides to settle. The hope that these behemoths will be rejuvenated to justify their bills is a mirage.

The potential for economic ruin to Nassau County and Brookhaven and Huntington towns, which would have to pay the refunds if the court decides in LIPA’s favor, is growing. The school districts and villages benefiting from the windfall of taxes for hosting the Barrett, Northport and Port Jefferson plants and the remains of one at Glenwood Landing are not liable to repay any past overages, but would suddenly find the revenue spigot shut.

Art of the deal?

In 2013, a deal was introduced as part of the LIPA restructuring legislation that would have reduced the taxes 60 percent over 10 years and forgiven past overpayments. It did not make it into the final version because the municipalities and their state legislators would not agree, but a deal along those lines needs to be reached.

Here’s how bad it is. Glenwood, running the equivalent of two days a year, pays $17 million annually. Port Jefferson, running 28 days, pays $28 million. Northport, running 80 days, pays $76 million. And Barrett, running 97 days, pays $36 million.

The newest of these has been open for 50 years. All are relatively inefficient, compared to newer combined cycle plants like Caithness in Yaphank, which runs almost every day and pays $9 million a year in taxes. The result is that all Long Islanders owe about 15 percent of their high power bills to these unfair taxes, but only about 2 percent of Long Islanders benefit from huge tax breaks that come with over-assessed plants. These host communities certainly deserve to collect tax revenue based on accurate assessments, but they don’t deserve a windfall at the rest of the Island’s expense.

How did we get here?

To smooth political controversies and clear the path for a restructured LIPA taking over the failed Long Island Lighting Co. in 1998, then-LIPA chairman Richard Kessel put in writing an earlier promise of then-Gov. George Pataki, that LIPA would never challenge assessed values if the taxing authorities never raised those values.

But in 2010, LIPA filed multiple suits to get the plants reassessed, arguing the letter does not erase the legal right of ratepayers to challenge assessments. The school districts and host municipalities disagreed, and won the right to use the letter as evidence if these cases get to trial. But the legal challenges have mysteriously stalled, which prompted a business coalition seeking tax relief to write to the administrative judges for Nassau and Suffolk courts to ask why it is taking so long for the cases to come to trial. It’s clear the courts would prefer seeing a political resolution than handing down a legal one.

An adverse court ruling would be disastrous for Nassau, Huntington and Brookhaven, because the new assessments would be retroactive to 2011, generating massive refunds.

Assessments don’t line up

LIPA contends that these plants are 90 percent overtaxed. If it wins, only the municipality that assesses each plant, not all the beneficiaries of that assessment, would owe the back overpayments. Huntington could owe $500 million. Brookhaven could owe $200 million. And Nassau could owe almost $400 million. So not only have town and county taxpayers been subsidizing a few school districts and villages, they now would have to reimburse LIPA for its overpayment.

The assessments are out of whack, but it’s not clear that they’re as far off as LIPA claims. Still, the local officials whose constituents benefit want the plants to be modernized to produce more power more cheaply, thus justifying the high assessments. The problem is, Long Island does not need more fossil fuel-generated power. It won’t for at least 15 years, and it may never. Repowering makes no sense, particularly given a state plan demanding 50 percent of power come from renewables by 2030. A long-awaited LIPA study about future energy needs expected in the next few weeks is likely to show there is little need for more sources of generation and when there is, most of it will be from renewable sources. Repowering the old plants would be a terrible business decision for everyone except the communities that would benefit. And while the state has come to the rescue in communities upstate when private companies have shuttered plants, it did not in Rockland County when the Bowline plant won a similar tax challenge.

Ripple effect of a court win

LIPA, and through it all of Long Island, wouldn’t be well-served by all the spoils a court victory could deliver. A win like that would send Nassau and the towns scrambling to borrow huge pots of money and school districts and municipalities scrambling to fill huge holes, and risk damaging property values in those communities. LIPA officials are taking a hard stance in their talks with Brookhaven (and being rebuffed by the other municipalities entirely), but need to settle for a deal like the one nearly brokered in 2013.