Port Jefferson schools to join suit over LIPA's tax challenge

The Port Jefferson school board has voted to authorize the filing of a breach-of-contract lawsuit against LIPA and National Grid in the latest challenge to the utility's efforts to significantly cut taxes on the power plants it leases.

The suit would join cases already filed by the Northport-East Northport School District and Huntington Town that charge LIPA with reneging on agreements stating the utility would not grieve taxes on the Long Island plants.

LIPA in the past has said the plants -- in Northport, Port Jefferson, Island Park and Glenwood Landing -- are overassessed by upward of 90 percent, and have been depreciating in value for decades as they near the end of their useful lives.

The Port Jefferson school board called the Tuesday decision to file suit "a necessary step to protect the resources of our school district and the financial stability of our taxpayers."

LIPA and its 1.1 million customers pay around $30 million a year in taxes for the Port Jefferson plant, most going to the school district. LIPA pays those taxes under a long-term contract with plant owner, National Grid. LIPA also pays $73 million for the larger and more frequently used Northport plant.

"LIPA's attempt to break a promise not to challenge taxes on the power plants violates the formal and informal guarantees made to the school districts (including ours), which could cause significant financial harm," the Port Jefferson school board statement said.

John Gross, senior managing partner at Ingerman Smith, the law firm for both districts and the North Shore Central School District in Nassau, which has also filed suit, said the action by Port Jefferson was prudent. "It's always important for a school district like Port Jefferson, if they have a claim, to participate as a party."

In July, a four-judge appellate court panel agreed with a State Supreme Court justice who found that former LIPA chairman Richard Kessel and former Gov. George Pataki had promised not to challenge taxes on the Northport plant.

The ruling took note of a May 2, 1997, letter from LIPA saying the authority would "immediately drop all tax certiorari cases against all municipalities and school districts" when LIPA signed a contract with the plant. The letter said that neither LIPA nor the Long Island Lighting Co. "will initiate any further tax certiorari cases on any of their respective properties at any time in the future unless a municipality abusively increases its assessment rate."The appellate division's ruling rejected LIPA's effort to dismiss the cases, and allowed the Northport district's case to proceed to trial, though settlement discussions continue. "We are assiduously pressing our settlement discussions," Gross said.

A LIPA spokesman didn't immediately comment.

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

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