LEXIS-NEXIS® Academic Universe-Document

LEXIS-NEXIS® Academic

September 25, 2000, Monday, FINAL EDITION

SECTION: EDITORIAL PAGE, Pg. 4B

LENGTH: 512 words

HEADLINE: A RELATIVELY MINOR JOLT FOR TAXPAYERS

BODY:

No doubt, the tax break given to the Huntley Station is going to hurt taxpayers, particularly those of the Kenmore-Town of Tonawanda School District, but pain is a relative thing. A headache is coming, but it could have been a migraine.

The bottom line is this: The new owners of the Huntley power generating station were going to have their assessment reduced. That's a fact, an inevitable outgrowth of deregulation of the state's utilities. The question was whether the reduction would arrive as a result of negotiation or potentially expensive litigation and whether it would offer any cushion to taxpayers. In the end, the agreement hammered out by the plant's new owners, NRG Energy, local governments and the Erie County Economic Development Agency appears to do a fair job of balancing the public's interests with the company's right to a fair tax bill.

The issue, according to the state Office of Real Property Services, is that while most assessments are linked to a property's market value, those on power stations have been the result of a complicated mathematical equation. The reason is one of sheer practicality: Market value is largely a matter of sale prices, and before deregulation, power plants were almost never sold.

Today, though, with utilities dealing mainly in power transmission, rather than generation, those plants are changing hands. In most cases, a state spokesman said, they are selling for far less than their full-market assessment, creating, for the most part, an unanswerable case for a reduction.

That was the track on which the Huntley plant was proceeding. Its full-market assessment had recently been estimated at $ 335 million -- the same amount NRG paid for two plants, the Huntley station and another plant in Dunkirk. If the assessment on one equals the sale price of two, something is out of whack.

This could have been intensely painful. Had NRG proceeded to court and won, as it almost surely would have, it could have seen a 40 percent reduction in its assessment and recouped $ 62 million in overpaid taxes.

Instead, the reduction will be limited to 25 percent, and it will be phased in over five years. There will be no claim for overpaid taxes and NRG will invest $ 50 million in the aging plant, helping to ensure its continued viability. It will also receive some tax breaks from the county IDA.

Still, the loss will hurt. The reduced assessment means the Huntley plant will pay $ 3.8 million less in annual property taxes once the agreement is fully phased in. Almost certainly that will translate into budget cuts, tax increases or both. The Ken-Ton School District, in particular, may be hard hit. This will require creativity and flexibility by administrators and unions, if the blow is to be absorbed as painlessly as possible.

In the end, though, pain was unavoidable, just as it will be in most other areas where power plants have been sold. In Tonawanda, at least, the agreement shields taxpayers from an even harder hit and gives them time to prepare.

It could have been worse.

LOAD-DATE: September 27, 2000