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IDA, Town of Somerset spar over AES Corp. deal

If AES Corp. builds a port, a wind power project or anything else on its Somerset property, it will not be covered by the tax break the AES power plant just received, according to Mark J. Gabriele, attorney for the Niagara County Industrial Development Agency.

Edwin J. Shoemaker, Somerset town attorney, asserted Thursday that the payment-in-lieu-of-taxes, or PILOT, document that AES and the IDA signed last week contains a clause "that says it will exempt any construction" from being excluded in the deal.

Not so, said Gabriele.

"It is not the intent, nor should it state in the document, that any addition should be covered by the PILOT," he said.

The document contains a paragraph that says if AES builds anything new on its 1,800-acre Lake Road property, it is liable to be forced to increase the PILOT payments it is required to make under terms of the 12-year agreement. Those payments are to begin in 2008 with a $17.3 million tab, gradually decreasing to $15.8 million by 2011 and remaining flat until the deal expires in 2019.

The paragraph says the IDA can set the amount of the PILOT increase and if AES doesn't like it, its only recourse is to sue the IDA. AES must pay what the IDA imposes, but if it wins the lawsuit, it would receive a refund.

Shoemaker said that set-up "puts the IDA at a huge disadvantage in dealing with AES. They have no standard for determining value [of new construction]. . . . There's no involvement from the town, county or school."

AES Somerset President Kevin R. Pierce said, "The assets we have are owned by AES Eastern Energy. Further expansion we do, whether it's a port or a wind facility, would be [owned by] another AES entity."

He said that entity would likely apply to the IDA for a fresh PILOT agreement on the new facilities.

Pierce said at a news conference Tuesday that AES plans to construct a $20 million Lake Ontario port and a wind farm valued at $60 million to $70 million.

Gabriele recalled that AES submitted two separate PILOT applications when it was in the running for a state contract to build another coal-fired power plant, one for the existing plant and one for the new one. It received the PILOT on the existing plant, but lost the bidding for the new one.

"Any addition in any way, shape or form would have to pay the taxes or a new PILOT," Gabriele said. He said the IDA could decide the right amount for the PILOT increase is zero, but he added, "The only time the IDA ever did that was for a charter school."

Shoemaker also said that legal papers are being prepared for a lawsuit by Somerset and the Barker Central School District against the IDA, charging that the PILOT is illegal.

"We're letting the school take the lead. My guess is, in the next two weeks we'll be ready to file," Shoemaker said.

"I have not made the decision when we are going to file," said Barker School Superintendent Steven J. LaRock.

Meanwhile, Pierce definitively shot down hopes that negotiations on revising the PILOT will occur, as envisioned by a resolution the County Legislature passed Tuesday.

"I'm willing to talk to anybody, but if their idea of negotiation is asking us to pay more, that's a nonstarter," Pierce said. "Our PILOT payment is twice what our competition is paying."

Also Thursday, Assemblywoman Francine DelMonte, D-Lewiston, whose district includes part of the Barker school district, said she will introduce a bill to increase Barker's state aid. It's a companion to a bill introduced in the Senate by State Sen. George D. Maziarz, R-Newfane, which would increase Barker's school aid by $830,000 if this year's aid formula is the same as last year's.

"If the Barker school district is going to be impacted, we have to do what we can legislatively to assist them," DelMonte said.

Also Thursday, County Legislator Renae Kimble, D-Niagara Falls, was attacked for introducing a resolution seeking a state attorney general's probe of how AES received its tax break.

I. Kenneth Hamilton of Niagara Falls, a longtime enemy of Kimble, recalled that Republicans sought an investigation in 2004 of Kimble's time on the IDA board, when the agency plunged into the red during an unsuccessful attempt to take over Niagara Falls International Airport. There was a state comptroller's audit, but GOP requests for a criminal probe were rebuffed.

"She's saying, 'They did this to me, I'm going to do it to them,' " Hamilton charged.

"Not at all, and they would say that," Kimble said. "We need the attorney general to come in to make it impartial."

She said recent legislation places public authorities under greater scrutiny than in the past, making a probe, in her view, more likely than it was three years ago.


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