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LIPA plant

The LIPA plant as seen from Harborfront Park. Photo by Kyle Barr

A New York State Supreme Court judge approved the Town of Brookhaven’s settlement with the Long Island Power Authority over the Port Jefferson Power Station’s tax assessment. 

In the agreement signed Dec. 14, the $32.6 million tax assessment on the power plant will be reduced by around 50 percent incrementally over the next nine years to $16.8 million, starting with the 2017-18 tax year.

It’s a not-so-final finale to what has become years upon years of grinding legal battles and anxiety over what will happen to local taxes should LIPA, which claimed its power plant has been overassessed by hundreds of millions of dollars for nearly a decade. LIPA’s lawsuit wanted its assessments reduced by
approximately 90 percent.

Town of Brookhaven Supervisor Ed Romaine (R) said in a statement the settlement will benefit Brookhaven in the form of lower electric bills.

“This deal puts an end to the uncertainty of this plant over the course of nine years and gives finality to this issue,” Romaine said. “I have always believed that all property assessments should be fairly based on property value.”

Brookhaven officials said that without a settlement, taxpayers faced the potential of being liable for $225 million to LIPA, and the power authority has said LIPA customers will save a total of $662 million by 2027.

“It was a reasonable settlement, one we can justify to our 1.1 million customers,” LIPA CEO Thomas Falcone said.

While this settlement promises savings for Brookhaven residents, the agreement has made Port Jefferson residents, especially those living close to the two red-and-white smokestacks, question what their taxes will look like in the near future. In October the Port Jefferson School District released a series of slides showing they annually received a $17 million payment through LIPA’s tax payments, but this would be reduced to $13.8 million by 2027. While Superintendent Paul Casciano said he and his staff are still reviewing the impact of the settlement, he sees the outcome could be even worse. He expects school programs will have to be cut in the next few years, with tax increases for residents.

“It’s going to affect the tax base,” the superintendent said. “Even if our budget was voted down, there’s a high likelihood that residents will see a
double-digit increase in their tax rate.”

The settlement will also require the district to amend their plans for the 2019-20 budget next year.

Falcone said the school district already enjoys lower annual school taxes at $6,273 compared to neighboring districts calculated at little more than $10,000 based on 2015 tax data.

“It means they will go from a ‘great deal’ to a ‘good deal,’” Falcone said. “They’re still going to have the lowest taxes of their neighborhood.”

The CEO added that it was unfair for the rest of LIPA customers to have to subsidize the Port Jeff school district through their higher bills.

“I think at some point you have to say what’s fair for those 1.1 million other customers because they pay their school taxes, too,” he said.

The Port Jeff superintendent said the village has been conciliatory about letting a power plant operate within its boundaries, whereas other places in Brookhaven would have barred the plant from existing in the first place.

“Are you, as a Brookhaven resident, really going to make out on your LIPA bills? I doubt it,” Casciano said. 

In April Port Jefferson Village board passed its 2018-19 budget of $10,642,146, about $233,000 up from last year’s budget. The new budget included $107,000 in reserve funds in anticipation of the glide path agreement with LIPA resulting in reduced payments.

Village Mayor Margot Garant said she agrees with the settlement, and it could lead to more use of the plant. In 2017 the facility was only powered on for 41 days, or 11 percent of the year, according to LIPA officials.

Falcone said the Port Jeff power plant operates based on the electricity needs of residents.

“This is an important step we made today to stabilize our tax base moving forward and the viability of any opportunity to repower our power plant,” Garant said in a press release.

The settlement also comes after big wins for LIPA in the courts against the towns of Huntington and Brookhaven, and Port Jeff Village, allowing LIPA to move ahead with its effort to challenge its assessments. Huntington Supervisor Chad Lupinacci (R) has publicly asked New York State Gov. Andrew Cuomo (D) to enact legislation that would protect residents taxes should LIPA get its way in court.

“Are you, as a Brookhaven resident, really going to make out on your LIPA bills? I doubt it.”
— Paul Casino

PSEG Long Island customers pay power plant taxes through monthly surcharges on their electric bills, but LIPA owns the electric grid and has agreements with National Grid for the power plants in both Port Jefferson and Northport. In 2009 LIPA challenged both the towns of Brookhaven and Huntington saying it had been overassessed for years, especially since the Port Jeff plant runs for so little time.

The Port Jefferson School District along with the Northport-East Northport school district and Huntington Town filed a lawsuit saying LIPA had made past promises not to challenge the taxes levied on their power plants, but they were dealt a blow in September when a state Supreme Court judge ruled LIPA “made no promises” about challenging the taxes levied. 

Garant and other Port Jeff Village officials have expressed past desires to renovate the power plant once the tax assessment issue was settled.
In September the village board advocated for the refurbishment and repowering of its base-load plant to update its decades-old technology and to justify the property’s tax assessment.

This is despite Cuomo setting a goal for 50 percent of the state’s energy to come from renewable sources
by 2030.

Falcone said they do not currently have any plans to run the plant more or do any renovations to plant that has been there since the 1940s. 

Through being used so little and with the push for more green energy, residents have questioned how long LIPA will keep the plant running. The LIPA CEO said the plant will continue to operate for the next seven years, but in the future could be upgraded or transformed into some other space used by the power authority, such as a storage facility or a new, modernized facility.