Debunking myths about the Northport power plant

The Town of Huntington and the Northport-East Northport school district have resisted taking a settlement offered by the Long Island Power Authority to lower the assessment on the Northport power plant. Some flawed claims have been made.

The letter will save us!

Since the Long Island Power Authority filed a lawsuit to seek huge tax reductions on its four legacy power plants — Northport, Port Jefferson, Glenwood Landing and E.F. Barrett — the primary hope of victory for host communities has been the “Kessel letter.”

In 1997, then-LIPA Chairman Richard Kessel said in a letter that “neither LIPA nor LILCO will initiate any further tax [challenge] cases” on plant properties unless a municipality “abusively increases” the assessment rate.

But last year, Suffolk County state Supreme Court Justice Elizabeth Hazlitt Emerson ruled that the letter’s “gratuitous promises” did not bind LIPA and

was “too vague and indefinite to be enforceable.”

Our plant is priceless!

With annual taxes of $84 million, the Northport power station is reportedly the most highly taxed property in the United States. Now, 52 years after construction began, the outmoded plant runs only about 18 percent of the time and isn’t worth much anymore. According to industry experts, accepted accounting methods for calculating depreciation on a power plant of this vintage give great weight to LIPA’s $198 million estimate of value, and none to the $3.4 billion tag Huntington Town has placed on it. The Bowline Plant in Rockland County, of similar age and with two-thirds the capacity of Northport, is now valued at $134 million after years of legal wrangling.

Seize that plant!

A Huntington Town councilman and some leaders of a grassroots movement fighting LIPA argue that if a judge rules in favor of LIPA and sets the valuation of Northport at $198 million, the town should take over National Grid’s plant via eminent domain and operate it as a municipal utility.

They argue that profits from selling power will lower property taxes and utility rates for residents. But if the town loses the case, it will already owe LIPA about $650 million in prior-year overpayments. The town might have no customer, because LIPA’s power-purchase agreement is with National Grid, not the Northport plant. Besides, the old and inefficient plant can’t generate power cheap enough to be profitable on the open market. And the plant would generate no property taxes, because publicly owned property is tax exempt.

But there is other revenue!

In casting about for ways to justify Huntington’s valuation of the plant, LIPA opponents point to other operations at the site adding value. The Iroquois pipeline that comes ashore there supplies natural gas to the region. An offshore oil platform sits at the site. A crucial fiber optic line carrying data across the Atlantic Ocean terminates at the plant. And the power plant is the connecting hub to the Cross-Sound cables that carry power from Long Island to the mainland.

But industry experts, LIPA and National Grid officials say these operations are conducted via fairly inexpensive land leases and easements and do not add significant taxable value to the property or significant revenue to National Grid’s coffers.

Hold out for more!

One accusation leveled against LIPA — that it’s not willing to negotiate much off its offer to the town of a 50 percent reduction in taxes over nine years — is worth debating. The authority accuses Huntington Town of not coming to the negotiating table, but says the utility won’t offer much wiggle room if the town does come to the table. And the argument of LIPA opponents that the deal is actually a 68 percent tax reduction, not 50 percent, because the amount won’t jump with annual tax hikes, is strong.

But these are not issues a judge can consider when deciding value. And court valuations of similar properties suggest LIPA is right to say it’s already giving plenty with an offer that would cut the taxes on the plants by 50 percent over nine years rather than 90 percent immediately.

Albany will save us!

Some residents of Huntington Town and of the Northport-East Northport school district hope to be saved by a bill recently introduced by state Sens. James Gaughran and John Flanagan that would bar LIPA and National Grid from clawing back property-tax overpayments from any municipality or school district. This would erase the $650 million payback Huntington could owe LIPA if the town loses in court, even though LIPA would still pay less tax in the future. However, this bill is dead on arrival in Albany because if it did pass, municipalities could assess plants at infinitely high valuations while knowing the state would guarantee any refund. Besides setting a dreadful precedent, it is likely unconstitutional.

Albany must save us!

Since LIPA started filing tax grievances, there’s been a push for the State Legislature to pay to help residents in the Long Island communities that would be hit hard by big reductions in plant taxes. But a bailout is not likely. Rockland County residents were not saved by the state in 2006 when a court-ordered $275 million refund and a huge reduction in taxes on two plants resulted in the doubling of property taxes. And with as many as 40 aging power plants likely to wind down operations in New York in the next 20 years, Long Islanders have no special claim to help.

We’ll deal if we lose!

The last-stand plan of residents who oppose taking LIPA’s deal is the idea that even if LIPA wins in court, it would agree to the same deal it is offering Huntington now. And it is true that LIPA doesn’t want to crush Huntington or the Northport school district. But if LIPA does win in court, the $650 million it could reap in prior overpayments could mean a $325 check for every household on Long Island, plus huge payouts for commercial customers. Then, the pressure to give the town and school district a break would face off against the rest of Long Island demanding, “Where’s my refund check? ”

 —  The editorial board