Northport School District Outlines LIPA Tax Battle

About 200 residents crowded the Northport-East Northport School Board meeting last week at the William J. Brosnan School to hear the latest on the Long Island Power Authority’s litigation challenging its tax assessment on the Northport power plant.

The newest update in tax certiorari challenge is LIPA’s settlement offer, in which the power authority would drop tax challenges in exchange for reducing its tax payments to the district and Huntington Town over a 10-year period. 

The real estate taxes on the Northport plant are $74,442,383 for the 2012-13 year. In its tax challenge, LIPA claims that its plant is over-assessed by 90 percent.

“We have asked LIPA for reports of where they got the 90 percent and they have not been forthcoming,” John Gross, from Ingerman Smith LLP, who serves as the district's counsel on the matter, said. 

If the power authority is successful in court, the school district would see a significant drop in revenue, considering that LIPA’s payments to the schools make up 37 percent of the district’s tax base.

Gross explained that if the settlement offer is accepted, it would reduce the district's annual tax base by $2.9 million, starting in 2015-16 and taxes paid by LIPA would be reduced by more than $4 million every year for 10 years. The total reduction in tax revenue to the school district would be $43.6 million over 10 years.

The revenue lost from LIPA’s smaller payments would be made up by the residential taxpayers.

“The impact is not a loss of tax revenue but a shifting of tax revenue to residential taxpayers, which would be very problematic,” Gross said. 

The school district and Town of Huntington have until Oct. 20 to accept LIPA’s offer and withdraw their lawsuits. If not, the town and school district run the risk of enduring costly court expenses until a judge makes a ruling. Gross said he is not yet ready to advise the district on whether to accept LIPA's settlement. 

While the town has started its own countersuit against LIPA, the school district has legal standing in the case as a third-part beneficiary of a 1998 power supply agreement, in which Richard Kessel, then-CEO of LILCO, which later became LIPA, agreed not to challenge the assessment of the plant for 15 years. The Town and school district claim that LIPA violated those terms by challenging the tax assessment three years early. 

In addition to the school district’s lawsuit, Board of Education president Stephen Waldenburg attempted to file a personal lawsuit on behalf of individual taxpayers who would be left to carry the millions of dollars that LIPA would no longer pay to the district if it were successful in its tax challenge. However, a judge dismissed his case. 

Although Gov. Andrew Cuomo’s office called LIPA's offer to settle the 2010 tax assessment challenge a "fair and reasonable approach," the Town of Huntington considers the offer only a "starting point" in advancing toward a resolution that would include repowering the Northport plant.

"They know we're going to go forward with this, that we're not going to sit back and accept a reduction in taxes that still raise the school taxes by $20,000 over 10 years. Absurd!" Supervisor Frank Petrone said in a previous interview with Patch. "People can't live here with that. That's our first order of business, to put our foot down, and we did." 

As the tax battle goes into its third year, residents want action. 

“My house is currently for sale I have no one who will go into contract until this settlement gets declined. And if we accept this settlement, we have to understand that us as Northport residents are in for a huge change, a huge devaluation of our properties and essentially it’s going to put us at a huge disadvantage. It is clear-cut that we have got to fight this and fight it hard,” resident Steve Shorrock said.

The attorney’s presentation is available on the Northport-East Northport School District website.