LIPA faces possible $154 million bill in Suffolk County tax case

The Long Island Power Authority’s potential exposure in a long-running tax case with Suffolk County has ballooned to more than $154 million, according to a recent LIPA filing that notes ratepayers could be on the hook for that amount and more if LIPA loses an appeal.

In year-end financial filings, LIPA estimated the dispute, which revolves around the utility's implementation of a 2% cap on taxes it pays for LIPA properties in the county, has resulted in “potential exposure with penalties and interest” of $154 million. That's more than double the approximately $70 million in possible exposure estimated in 2021, according to a Newsday story.

According to the financial filing, LIPA also faces a “a potential addition of up to $34 million per year in the event of an adverse result on appeal.” It’s unclear why, but the case involves tax payments going back to 2014. 

According to LIPA, the $34 million a year “would be additive to what's in rates if we were to lose the appeal and we’d also have to recover the $150 million.”

But the utility noted there are “a lot of potential outcomes and that's somewhat a worst case. We could win or we could win some and lose some arguments, and the impact would be less.”

Suffolk County in July filed suit against LIPA and four Suffolk towns — Babylon, Brookhaven, Huntington and Islip — seeking to force LIPA to cover “alleged shortfalls” in property tax payments for the 2021-22 tax year.

Town representatives either declined to comment or didn't respond immediately to requests for comment Thursday. 

The case stems from the 2013 LIPA Reform Act enacted by former Gov. Andrew M. Cuomo that placed a 2% cap on tax increases local municipalities could charge LIPA for its properties each year. LIPA owns thousands of properties across the region, including rights of way, work yards, substations and other power facilities.

Faced with tax shortfalls, some town tax receivers in Suffolk simply passed along the partially unpaid bills to Suffolk County, which under Suffolk tax law automatically makes up the difference to pay the towns.

As part of his effort to collect the difference, Suffolk County Comptroller John Kennedy in 2017 began putting liens on LIPA properties with tax delinquencies — some 1,700, according to past Newsday coverage. LIPA in 2017 sued the county to block the liens in state Supreme Court.

In 2021, then-acting State Supreme Court Justice John Rouse dismissed the suit, ruling that LIPA must pay the county tax bills because, among other things, the utility began applying the cap six months too early, starting in the 2014-2015 tax year, before the tax cap took effect.

LIPA has appealed the case. Kennedy, who in the past has vowed to foreclose on the LIPA properties, said his office continues to pursue the case. State law does not allow foreclosure on government properties. 

“The law is very clear,” Kennedy said. LIPA is “no different than any other property owner in the county of Suffolk. And they have an obligation to go ahead and to pay in full all raw tax and interest and penalties due.” LIPA on its books is deferring the cost in case of a judgment “until LIPA is required to submit payment for such judgment, at which time LIPA would also need to collect such charges in electric rates.”

It’s unclear whether a judgment against LIPA would prompt an immediate rate hike. Every $40 million in LIPA costs results in an approximately 1% increase in customer bills. Customers in 2024 already are facing a monthly increase of approximately $20, Newsday has reported.

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

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