LIPA bid for tax reduction threatens I.P. school funding

District faces potential cuts as Barrett tax cert. ruling nears

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Lawyers for the Long Island Power Authority and the Island Park School District will confer with a State Supreme Court judge on Nov. 3 over how to proceed in a tax certiorari case for which the Long Island Power Authority is seeking a 90 percent reduction in the assessed valuation of its E.F. Barrett Power Plant in Island Park. Taxes on the Barrett plant make up around 46 percent of school district’s tax base.

“We are staring down the barrel of a gun,” State Sen. Todd Kaminsky said at an Aug. 28 public school board meeting, urging the board to strongly consider negotiating a settlement in the case.

If the district were to settle with LIPA at 50 percent, which is the electric provider’s standing offer to all municipalities in related suits, the school district could lose almost a quarter of its nearly $39 million budget — a loss that could potentially be shifted to taxpayers, said Bob Cohen, an attorney for the district.

According to Cohen, LIPA is willing to carry out the 50 percent reduction over an eight-year period. He said that the district would like to negotiate a smaller reduction over a larger period of time, to lessen the annual impact of the revenue loss.

At the August meeting, Kaminsky brought up a Rockland County school district in a similar suit that decided to see the case through and lost. “They didn’t think a judge would hit them like that,” Kaminsky said, “but they did.” Now, he added, that district is facing debilitating debt, and risks being dissolved because it is set to go over a fiscal cliff in two years.

In that case, the North Rockland School District was ordered to pay a $275 million tax certiorari refund, one of the largest in state history, to the Mirant Corporation. The district must pay $11.5 million annually to the company, according to a 2006 ruling by a state judge.

Cohen said at the Aug. 28 meeting that the Nov. 3 conference would serve as an opportunity for Judge Timothy Driscoll, who is overseeing the case, to “twist some arms” in an effort to move the proceedings forward, and clarified later in a phone interview that he expected LIPA’s lawyers and the judge to “take some time to explore a settlement” with Cohen. The judge, Cohen said, would end up “pushing this case forward one way or the other.”

Cohen said that LIPA is offering to settle with municipalities, including Island Park, at a 50 percent reduction in assessed value over eight years, or an averaged 6.25 percent reduction in assessed value per year. School officials said the losses would likely translate into cuts to music and arts programming.

“There are places on Long Island that won’t even entertain a settlement because they want to fight the power company,” Kaminsky continued, “and one of them is going to end up in a really bad place ... If we could do this in a responsible way, we could be a model for all the other places that are facing this. No one has [settled] yet. No one wants to be there to make sometimes really tough, awful decisions.”

In a February report, LIPA laid out its side of the feud. In it, the company discussed its efforts “to reduce customer bills by paying only the reasonably and economically justified levels of taxes.” Part of the goal of the report is to inform customers of their “hidden tax burden,” which company officials said is disguised in customers’ monthly bill.

In the report, LIPA argued that Island Park residents receive a disproportionate benefit from the taxes that the company pays on the plant. According to a graph in the report illustrating the disparities in the dispersion of tax revenue from LIPA, the Island Park School District receives about 10 times more of that revenue than the Town of Hempstead.

Cohen said that the district’s suit relies on promises made by former LIPA Chairman Richard Kessel, that the district’s tax base would not face cuts like those currently in question. “It’s right there in writing,” Cohen said. The district’s legal argument, he added, is based on a rule that states that “if the language of an agreement is clear and unambiguous, you go by the language of the agreement.”

LIPA’s case, Cohen said, claims that Kessel did not have the authority to make the promises that the district’s argument points to, and that even if he did, they should not be considered permanently binding.