LIPA, Nassau reach tentative agreement to lower power-plant taxes

Nassau County and LIPA have reached a tentative settlement to lower the tax bill for power plants in Island Park and Glenwood Landing by just under half over five years, while LIPA continues to negotiate a settlement of separate litigation that could result in payments to school districts.

Under terms that still must be approved by the Nassau County Legislature and a State Supreme Court judge, LIPA agreed to reduce its combined tax payments for the two properties to $32 million over the next five years, from the current $59 million — a 46.5% phased-down reduction. The agreement can be extended up to five years at $32 million for “plants that remain open," though payments through 2027 are "guaranteed," LIPA said.

LIPA has begun work on a state-mandated plan that will see it phase out use of fossil-fueled plants by 2040. Its contract with plant owner National Grid ends in 2028. LIPA, in legal challenges that began in 2010, has argued the plants are taxed at four to five times their actual values.

"The problem is that the tax bills have gotten so overinflated that it's really just not sustainable," said LIPA chief executive Tom Falcone in an interview Monday with Newsday, noting the plants are 50 to 70 years old. "We're agreeing to phase down payments over time for infrastructure [power plants] that will go away." 

One large plant in Glenwood Landing was demolished a decade ago, and three smaller ones there are scheduled to be phased out in the next several years.

Falcone said separate talks are continuing with the Island Park and North Shore school districts that could result in settlement of the districts’ suits against LIPA over the tax case in return for payments from LIPA of millions of dollars to the schools. In Northport, a similar settlement resulted in payments to the Northport-East Northport School district of $14.5 million over several years. Falcone said the settlement offers are "adjusted for the size of the plants," for lesser amounts and not contingent on the broader tax-case settlement.

The North Shore Central School District, noted in a statement that it receives 28% of its annual tax revenue from LIPA and National Grid and said it was “obviously concerned about any cuts in that tax revenue support.”

As of Monday afternoon, the district said, it had not seen a copy of the proposed settlement, and it wasn’t party to negotiations but would review it once received to “assess its legality and financial impact.”

Representatives for the Island Park School District didn't immediately provide a comment.

Nassau County Executive Bruce Blakeman, who had telegraphed the settlement to Newsday two weeks ago, in a statement called the agreement “historic,” noting it stabilizes payments for up to a decade while protecting taxpayers from “hundreds of millions of dollars in refund liability.” The parties were scheduled to go to trial on the cases in May, and a loss would have meant refunds due to LIPA that could have exceeded $500 million.

"LIPA officials and my negotiating team have agreed on a formula that will relieve Nassau County of close to $1 billion in liability and ensure that Nassau County taxpayers are not burdened for mistakes made in the past," Blakeman said through a spokesman. 

Nassau County under former executive Laura Curran had negotiated settlement in 2019 for a 50% tax reduction over seven years but it was derailed by opponents on the Republican-controlled Nassau Legislature and taxpayers in Island Park who faced thousands in new annual payments as a result.

LIPA noted the 1950s-era E.F. Barrett plant in Island Park has seen its output decline by more than half over the past two decades, while Glenwood’s larger plant was dismantled a decade ago and only a handful of smaller peak-power plants remain, cutting overall output by 97%.

Falcone said the settlements were in the county and school districts' "best interests," given the potential of a "very, very bad" outcome in court. He also called the settlement a "fair deal for the LIPA customers," who would see $125 million in savings over the next five years as a result. But he stopped short of saying the tax challenges would result in immediate rate reductions. Rather, he said, they would allow LIPA to rein in costs as expenses have increased. 

LIPA has previously settled similar suits involving the Northport and Port Jefferson power stations.

Nassau Legis. Delia DeRiggi-Whitton (D-Glen Cove) called the tax reduction for LIPA “just so wrong.”

She said that even the smaller power plants at Glenwood Landing keep producing power and argued that output should be part of the assessment. She expressed concerns about the “big hit” the new tax bills would have on the community, and the likelihood of environmental impacts from the plants over time.

“I just feel like we need to fight this,” she said.

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

Mark Harrington, a Newsday reporter since 1999, covers energy, wineries, Indian affairs and fisheries.