Nassau and Huntington should seek to make LIPA tax deals

For eight years, the municipalities and school districts hosting the Long Island Power Authority’s four legacy gas-fired power plants were united in their fight to keep receiving huge tax payments from LIPA. Now that alliance has crumbled, and a state Supreme Court justice has debunked the main rationale of the municipalities’ claim.

In 2010, LIPA filed a lawsuit seeking a 90 percent reduction in the $175 million a year in property taxes it pays on the Glenwood Landing, Port Jefferson, Northport and Barrett plants. In response, the taxing entities involved argued that LIPA could not grieve because former LIPA Chairman Richard Kessel had made a binding promise in 1997 that, absent abusive increases, “neither LIPA nor LILCO will initiate any further tax [challenge] cases” on the plant properties.

In August, a state Supreme Court justice ruled Kessel’s promises did not erase LIPA’s right to grieve. And this month, the Town of Brookhaven reached a court-approved deal to lower the taxes on the Port Jefferson power plant from $33 million to $17 million over nine years, cutting the current obligation in half and erasing Brookhaven’s potential exposure to $200 million in refunds.

The unified front is gone, and the risk of holding out is growing intolerably for taxpayers in the communities that have refused to make a deal.

It’s hard to dispute that the power plants are massively overtaxed. The Northport facility, with its bill of about $82 million annually, is the most highly taxed property in the United States, but operates just 18 percent of the time. LIPA pays $23 million on Glenwood Landing, and the plant on that site was demolished. The $42 million LIPA pays for Barrett provides 51 percent of the local taxes for Island Park schools. All four are more than 50 years old. In contrast, the Caithness generating plant in Yaphank, built in 2009, generates as much or more power than any of them, and pays only $9 million a year in taxes. Communities that host power plants face hardships and should be compensated, but these tax bills are too high, and power bills on Long Island are unfairly high partially because of them.

Two sets of taxing bodies remain in this fight. The ones with huge exposure are Nassau County, which could owe LIPA $400 million in refunds if LIPA wins in court, and Huntington Town, which could owe $500 million. Then there are the school districts, which have no exposure to refunds, and no play left except a court appeal regarding Kessel’s letter.

Nassau County is close to a deal like Brookhaven’s. Huntington, which has steadfastly refused to give an inch, is not. Huntington and the Northport-East Northport school district are in mediation with LIPA, with a meeting scheduled next month, but there has been no progress.

The LIPA suit seeking large, immediate tax cuts and massive refunds is due to go to trial in February. When power companies win such suits, the consequences to host communities can be devastating.

Nassau needs to finalize its deal, and Huntington needs to move toward one. Ratepayers all over the Island have faced inflated power bills for years thanks to the overtaxing of plants, and that has to end. Taxpayers in the affected communities face the potential of huge tax increases if they lose their suit, and that threat has to end, too. — The editorial board