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Tax Certiorari

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Northport power plant. File photo

Huntington’s elected officials are calling for changes to the structure of Long Island Power Authority despite being engaged in mediation with the utility company.

Huntington Town Board unanimously decided to send a message urging New York State Gov. Andrew Cuomo (D) and the state Legislature to enact the Long Island Power Authority Ratepayers Protection Act at its Nov. 8 meeting. The legislation, if passed, would require eight out of the utility company’s nine board members to be elected by public vote, among other changes.

“It is in the best interest of Town of Huntington residents to have a LIPA board that is elected by and answers to the ratepayers.

— Nick Ciappetta

“It is in the best interest of Town of Huntington residents to have a LIPA board that is elected by and answers to the ratepayers,” Town Attorney Nick Ciappetta said.

The bills were first introduced to the state Legislature in February 2017 by Sen. Kenneth LaValle (R-Port Jefferson) and Assemblyman Fred Thiele Jr. (D-Sag Harbor), co-sponsored by a coalition including state Assemblyman Andrew Raia (R-East Northport).

“I’ve been calling for the election of LIPA trustees forever, ever since there was a LIPA,” Raia said. “The best way to control our electric rates is to make LIPA trustees elected.”

Currently, LIPA’s nine-member board of trustees consists of five individuals appointed by the governor, two selected by the president or majority leader of the state Senate, and two chosen by the speaker of the Assembly.

The proposed ratepayers protection act calls for the state Legislature to create eight districts roughly equal in population based on the last U.S. Census, by May 1, 2019. A resident of each district would be elected to LIPA’s board to serve a two-year term as trustee, with the first elections to be held in December 2019. Candidates on the ballot would not be chosen by the political parties. Those elected to the board would not be paid, but could be reimbursed from the state for their related expenses, according to the draft of the bill.

In addition, proposed legislation would require LIPA to hold public hearings before making future rate changes, give residents 30 days advance notice of the hearing, and hold the event in the county it affects — Suffolk or Nassau. It would prohibit the utility company from increasing its rates to offset any losses from energy conservation efforts.

“It would make LIPA a whole lot more accountable than they are now,” Raia said. “Without a doubt.”

“The best way to control our electric rates is to make LIPA trustees elected.”

— Andrew Raia

The legislation, despite being proposed in 2017, has not made it out of committee to a vote before either the state Assembly or Senate, according to the Legislature’s website.

No action can currently be taken on the legislation, though, as the state Assembly’s 2018 session ended in June. There are no plans to reconvene before year’s end, according to Raia, particularly with midterm elections flipping the state Senate to Democratic control. The bill cannot be enacted by Cuomo without getting the legislative body’s approval. Raia said he suspects Huntington’s elected officials are hoping the governor will consider working it into his 2019 budget, which is currently
being drafted in Albany.

“I’m not the biggest fan of putting policy into the state budget, but many times it’s the only way to get things done,” he said.

Huntington Town officials had no further comment on the timing of the message. Mediation pertaining to the value of the Northport Power Station between the town, Northport-East Northport school district, LIPA and National Grid is ongoing, according to Ciappetta, as he anticipates the next mediation session before the end of November. The tax certiorari lawsuit’s next date in court is Dec. 5.

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Town of Huntington, Northport-East Northport and Port Jeff school districts lose third-party lawsuits

Port Jefferson Superintendent Paul Casciano and Northport-East Northport Superintendent Robert Banzer. The two districts had legal challenges shot down by a judge Aug. 16 pertaining to property tax assessment claims made by LIPA. File photos

By Sara-Megan Walsh & Alex Petroski

A New York State Supreme Court judge has ruled Long Island Power Authority “made no promises” to the Town of Huntington, Northport-East Northport school district and Port Jefferson School District not to challenge the taxes levied on its power stations.

Judge Elizabeth Emerson dismissed the lawsuits brought forth by the Town of Huntington and the two school districts Aug. 16 which alleged LIPA broke a promise by seeking to reduce the power plant’s taxes by 90 percent.

“The court’s decision affirms our customers’ right to pay reasonable taxes on the power plants,” LIPA said in a statement from spokesman Sid Nathan. “We remain committed to reaching a fair settlement for both the local communities and our 1.1 million customers to put an unsustainable situation back on a sustainable path.”

Port Jefferson Power Station. File photo by Alex Petroski

The judge’s ruling is a big victory for LIPA as it allows tax certiorari cases to continue to trial, rather than being dismissed, and could have a widespread impact across Long Island for other municipalities with similar disputes against the utility.

“Obviously, we disagree with this decision and plan to appeal,” Northport Superintendent Robert Banzer wrote in a letter to district residents. “Please understand that Justice Emerson’s decision is not the end of our fight in this case.”

Port Jeff school district also responded to the development.

“While this decision is not the outcome the district was hoping for, we vow to continue to explore our options as we work to protect our school district’s financial future and the needs of our community,” the district said in part in a statement. “The district will work to keep the community apprised of any updates on the matter.”

In her 24-page decision, Emerson denied any notion that chapter 21, section 16 of the 1997 Power Supply Agreement signed by LIPA when it took over Long Island Lighting Company — which has been referred to as the 1997 Promise – was intended to benefit the school districts by preventing LIPA from challenging the tax-assessed value of its power plants.

Rather, she found it was to ensure other parties, including LILCO and GENCO, which owned the plants at the time, could not start initiating tax claims during the takeover process.

She also dismisses all claims that town governments or school districts were intended third-party beneficiaries of the contract.

“The Power Supply Agreement is clear and unambiguous and that it does not bestow any enforceable third-party-beneficiary rights on the plaintiff,” Emerson wrote.

The judge pointed to the PSA saying it “does not expressly name” either the town or school districts as a third-party beneficiaries.

“She applied contract law, not third-party beneficiary law,” said John Gross, the attorney representing Northport-East Northport school district. “That’s what we think she the mistake on.”

Gross said New York State law allows entities, like the school districts, to be recognized as third-party beneficiaries based on third-party conversations, letters, and promises. The school districts have filed thousands of pages of documents with the courts, according to Gross, that include official correspondence and records of conversations former LIPA chairman Richard Kessel had with school administrators and Huntington Town officials allegedly promising not to challenge the tax assessment of its power plants.

The judge ruled these “extra-contractual promises” made largely by Kessel “were gratuitious promises for which there was no consideration.” As such, the former chairman’s words “did not contractually bind LIPA.”

Gross said the school’s status as a third-party beneficiary “was wrongly decided.”

This recent decision could have large and profound impact not only on Huntington, Northport-East Northport and Port Jeff schools, but for all other municipal government and school districts that are LIPA’s power plants.

On Page 18 of her decision, Emerson wrote not only did the PSA contract not protect the Town of Huntington, Northport or Port Jeff school district taxpayers but “other similar situated school districts and municipalities.”

“This result was to a very large extent expected by the village, and that’s why the mayor and the board of trustees very early, initiated and drove settlement discussions with LIPA to resolve the issue,” Port Jefferson Village Attorney Brian Egan said.

The village board of trustees and Mayor Margot Garant in April passed a resolution approving “settlement concepts,” and the two sides are exchanging details of terms, expected to reach conclusion “at any time,” Egan said.

“When we’re a taxing jurisdiction and we’re going to subject ourselves to the back taxes on a longshot, that is not what we do with taxpayer dollars,” Garant said. “We have an obligation to not gamble, so to speak.”

“Please understand that Justice Emerson’s decision is not the end of our fight in this case.”

— Robert Banzer

Huntington town attorney Nick Ciappetta said the town plans to file an appeal of the judge’s decision.

“We believe there’s only one logical and legal way to interpret that provision,” he said. “That provision was there for the benefit of the taxpayers of Huntington.”

The town, Northport and Port Jefferson school districts will have 30 days to file an appeal once the decision is officially entered into court records, according to Ciappetta. He estimated an appeal of the decision could take 18 to 24 months.

“The decision does not affect the pending tax certiorari case between the Town of Huntington and LIPA scheduled for trial in December, nor do we expect it will impact the parties’ willingness to proceed with mediation,” Banzer wrote to the community.

Gross confirmed that Northport school district is still looking forward to sitting down for the first mediation session with the Town of Huntington, LIPA, National Grid  and third-party neutral attorney Marty Scheinman slated for Sept. 26.

Officials in Brookhaven’s Town Attorney’s office could not be immediately reached for comment, though the town has also said it is nearing a settlement in its case. Egan speculated settlements for municipalities attempting to resolve cases out of court might be held up by mediation in Northport and Huntington Town’s case.

This post was updated Aug. 17 to include a statement from Port Jefferson School District, and to attribute LIPA’s statement to Sid Nathan.

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Town wins two court decisions against utility

Northport power plant. File photo

Huntington Town is touting two court decisions boosting its case against the Long Island Power Authority in an ongoing challenge over the assessment of the Northport power plant and the amount the utility pays in property taxes on the facility.

The decisions, issued by State Supreme Court Justice John C. Bivona, were dated earlier this month and received by the town’s special counsel on Sept. 25. The first decision dismissed LIPA’s standing as a plaintiff in the case, since National Grid, and not LIPA, owns the plant, according to the decision.

The second decision granted a stay in the assessment case until there is a final court determination of the town’s argument that National Grid should be held to a 1997 pledge by LIPA not to challenge the plant’s assessment. So far, the town has won pretrial decisions in that case, according to a town statement.

LIPA is suing Huntington Town to recover some $270 million in property taxes it paid since 2010, arguing the aging Northport power plant facility is grossly over-assessed. Northport-East Northport school district is also a party in the lawsuit.

If LIPA wins, Huntington Town taxpayers could see a 15 percent increase in town property taxes and a 60 percent increase in school taxes, according to the town’s website.

The judge dismissed LIPA’s standing as a party initiating tax certiorari proceedings. In one of his decisions, Bivona said that while LIPA believes its financial interests are adversely impacted currently by a wrongly overstated assessment of the power plant, “the result is still remote and consequential and certainly does not constitute a direct loss because the property taxes levied upon the Northport Power Station are actually and directly paid by National Grid Generation, LLC.”

In the second decision, Bivona granted a stay to the town on each of the four tax certiorari proceedings National Grid commenced challenging taxes from 2010 to 2013. The stay was granted until completion of a case involving the town’s contention that National Grid, as the successor to LIPA, should be held to the 1997 pledge.

In previous decisions, the Appellate Division of State Supreme Court cited both a letter then-LIPA chairman Richard Kessel sent to the town and statements Kessel made to the Nassau-Suffolk School Boards Association, during which he said he would drop any pending tax certiorari cases and not initiate any further ones at any time in the future. In return, the town promised not to increase the assessment on the plant. The town has not done so.

Most significantly, Bivona’s second decision means the court needs to consider the validity of the town’s 1997 pledge argument before embarking on a trial on the actual tax challenges — which promises to be complicated, lengthy and expensive.

“These two significant decisions help clarify the process for resolving these cases by first addressing the town’s key contention: that at the heart of the case is our belief that promises made by both sides should be kept,” Huntington Supervisor Frank Petrone said in a statement. “In the long run, resolving that question first should save taxpayers money by potentially obviating the need for a lengthy and expensive trial on the technical question of the assessment.”

A spokesman for the Long Island Power Authority said the utility didn’t have a comment on the issue.

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State appellate court sides with municipalities in rulings

Northport power plant. File photo

Huntington Town and Northport-East Northport school district’s fight to knock the lights out of a Long Island Power Authority lawsuit that looks to drastically decrease how much the utility pays in taxes on the Northport power plant recently got a big boost.

Last week, a New York State appellate court ruled in favor of the municipalities, clearing the way for both to go to trial against the utility and engage in pretrial depositions and discovery. In 2010, LIPA filed a tax certiorari lawsuit against the town, claiming the town greatly over-assessed the Northport power plant and that it should be paying millions less in taxes.

Northport-East Northport schools, along with Huntington Town, filed companion lawsuits in May 2011 that claimed LIPA didn’t have the right to file to reduce its taxes and that it breached a 1997 contract promising it wouldn’t. In 2013, a New York State Supreme Court justice upheld the district and town’s rights to sue LIPA and National Grid, and last week’s court ruling upheld that lower court ruling.

LIPA sought to have the school district tossed out of the suit, but the district claimed it was a legal third-party beneficiary of a 1997 power supply agreement between LIPA and the Long Island Lighting Company. Last week’s court ruling upheld that claim. It cites a 1997 letter from LIPA to the Nassau-Suffolk School Boards Association, to which Northport-East Northport belongs, that upon the issuance of a 1997 power supply agreement, “LIPA will immediately drop all tax certiorari cases against all municipalities and school districts,” and that “neither LIPA nor LILCO 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,” as “spelled out in the [PSA].”

Stuart Besen, the town’s attorney on the case, said he believes the letter from Richard Kessel, former chairman of LIPA, was integral in swaying the judges to rule in favor of the municipalities.

“I just think that Supervisor [Frank] Petrone really deserves a lot of credit for having the foresight for one, making sure the clause was in the [power supply agreement], and two, demanding that Richard Kessel reiterate that position in a letter.”

If successful in the suit, the town wouldn’t have to pay approximately $180 million in taxes the utility claims it overpaid in a three-year period, Besen said. LIPA pays roughly $70 million in taxes on the Northport power plant, town officials have said.

The utility contends the plant is worth less than 11 percent of the value reflected by its current assessment. If LIPA was successful in lowering its assessment and thus the amount it pays in taxes, town residents could be hit with tax increases of up to 10 percent. Those who live in the Northport-East Northport school and library districts could get a whopping 50 percent increase in their taxes.

John Gross, senior managing partner at Ingerman Smith, who represents the school district in the case, said the next step is to move forward with discovery and a motion for summary judgment in favor of the district.

“And if we win that, that means the claims they made to reduce the value of the plant are thrown out,” Gross said in an interview on Tuesday.

The town and the school district are partners in the lawsuit, Gross said.

Asked what town taxpayers should take away from the development, Besen said “that the town is fighting.”

“The town is fighting a big entity, both National Grid and LIPA. But we feel we’re right. We feel that those three years we don’t have to pay, that LIPA and National Grid made a promise to the people of Huntington and the town is going to do everything possible legally to uphold that promise.”

Sid Nathan, a spokesman for LIPA, said the authority couldn’t comment on ongoing litigation.

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