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The City of Lackawanna and the Lackawanna School District each owe Bethlehem Steel more than $1 million as the result of the company again successfully arguing in court that the city has over-assessed its property.

State Supreme Court Justice Robert E. Whelan has ruled the property should be valued at about $38 million, rather than the $47 million value the city put on it.

As a result the city owes a tax refund for the years 1990-94 of $1,390,371, including more than $235,000 in interest. The school district, which uses the city assessment rolls, owes $1,149,443. The county owes $375,223.

The amounts will increase when the 1995 and '96 taxes are factored in.

And, the lower assessment will hurt for years to come as other taxpayers have to make up the difference.

In 1989 Bethlehem brought the city to its knees when its assessment was slashed by $90 million and the city owed a $4.5 million refund.

The most recent ruling was not unexpected and likely will result in the city and school district borrowing money to pay the refund.

One of the arguments Bethlehem successfully used is the 1,028-acre site is not worth as much because it's polluted.

And, of course, it was the company which polluted it.

"I think it's absurd they pollute their own land and then we have to reduce their taxes," Mayor Kathleen M. Staniszewski said.

"But apparently the courts look at it differently and as long as it's not marketable it doesn't matter who caused it."

A Bethlehem spokeswoman said the company would have no comment because the matter still is under litigation.

Board of Education President Kevin Reed said he was not aware of the decision but pointed out the burden the lower assessment will put on other businesses.

He said he assumes the board will authorize a bond issue to finance the refund.

"But you never know," he said. "We've got a federal judge telling us to comply with the American Disabilities Act (for Franklin School) and we haven't done that yet."

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