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Lawsuit filed against AES Corp. deal Gives 25 reasons to scuttle agreement, including alleged unlawful practices

A long-awaited lawsuit filed Monday charges that there are 25 reasons why the tax break the Niagara County Industrial Development Agency gave to AES Corp. should be invalidated.

The suit by the Barker Central School District asserts that the IDA violated its own policies and state law repeatedly between Sept. 21, when the AES request for a tax break was made public, and Oct. 27, when the IDA board approved an altered plan.

It accuses the IDA of unlawfully ignoring the school district's protests; inadequate and belated notice to the taxing jurisdictions of the terms of the deal; failing to make a proper environmental review; and usurping the authority of the courts and the local assessors.
"The only purpose of the final resolution is to provide a financially viable company a significant reduction in the real estate taxes it pays on existing real property improvements," the lawsuit says. It adds that the benefits AES received "do not advance job opportunities, health, general prosperity, economic welfare or standard of living in the district, the county or the state."

The lawsuit says the IDA's policies call on applicants to show how they would use their benefits to create or retain jobs. AES never did that, the suit alleges.

It argues that an IDA resolution that says AES met the IDA's policy requirements isn't backed by anything in the record.
The massive lawsuit -- a 79-page complaint buttressed by a stack of 54 exhibits about 3 inches thick -- aims to cancel the payment-in-lieu-of-taxes agreement on AES' coal-fired power plant on Lake Road in Somerset.
It does not seek any court order preventing the deal from taking effect while the case is being litigated.

Richard P. James, of the Syracuse law firm of Mackenzie Hughes, filed the suit. He said the district could amend its complaint to seek an injunction.
The lawsuit's exhibits include an e-mail in which Malcolm A. Needler, then majority leader of the County Legislature, seems to offer advice about how to proceed with the deal. The suit says the e-mail implies that there was an undisclosed meeting in advance of the public presentation of the AES request, showing at least one senior legislator had enough knowledge of the deal to worry about its impact.
"If there's some implication the Legislature was involved in this, it's absolutely not true," said the current majority leader, Richard E. Updegrove, R-Lockport, who said he took part in the meeting referred to in the e-mail. "I can understand why they'd be trying to grab at that link, but it's not there."

Needler, R-North Tonawanda, said, "This deal went straight from AES to the IDA."

The PILOT documents, signed Jan. 12 by AES President Kevin R. Pierce and IDA Chairman Henry M. Sloma, are to take the power plant off the tax rolls for 12 years, beginning with the 2007-08 Barker school tax bills and the 2008 Niagara County and Town of Somerset taxes. Originally, AES had sought a 25-year PILOT deal.
AES, which paid more than $19 million in combined taxes this year, is to pay $17.3 million next year. That figure will decrease by $500,000 a year until it reaches $15.8 million in 2011. That payment level will remain unchanged until the deal expires in 2019.
The power plant, assessed last year at $666.6 million, accounts for 77 percent of the school district's assessed valuation, the suit says.
James said the case has been assigned to State Supreme Court Justice Richard C. Kloch Sr., and the first court date is tentatively set for Feb. 22 in Kloch's Lockport courtroom.
James said the IDA and AES were not actually served with the suit Monday; it was merely filed in the county clerk's office.
"If in fact there's an action filed . . . it's imprudent for me to comment," said Sloma. Pierce also declined to comment.
James said, "I do believe there were numerous procedural errors. It took five weeks from the date the application was received until final action. That's quite amazing."
He said Sloma's effort to renegotiate the terms of the PILOT in effect constituted a rejection of AES' original application and should have triggered a second public hearing. The first hearing, in the Barker High School auditorium Oct. 24, drew overwhelmingly negative reviews for the 25-year PILOT proposal. In 48 hours, a new deal was hammered out by Sloma and AES representatives.
James also charged, "I believe the IDA may have acted on incorrect numbers."

The suit says the IDA estimated the revenue loss to the county, town and school would total $12 million. It's now estimated at $43.4 million in an analysis by county Real Property Tax Services Director William F. Budde Jr. and the Barker district's acting business manager, William R. Leardini.
Their figures assume neither the tax rates nor the plant's assessment will change in the next 12 years. Opponents of the deal, applying a 3 percent annual increase to the tax rates, reach a revenue loss estimate of more than $90 million.
AES filed two separate PILOT applications in September, one for its existing plant and another for the "clean coal" plant it hoped to build. It received a tax break on its existing plant.

AES entered a state bidding competition for the contract to build a second plant showcasing the low-emission technology the outgoing administration of Gov. George E. Pataki hoped to promote but in December, the New York Power Authority awarded the contract to NRG Energy for its Huntley plant in the Town of Tonawanda.

AES ended up with its tax break anyway, meaning that what Needler had called "the worst-case scenario" came to pass.
The then-Legislature leader made the comment in a Sept. 22 e-mail to Sloma, Updegrove and IDA Executive Director Samuel M. Ferraro, which appears among the lawsuit's exhibits.
It reads: "Gentlemen, I thought yesterday morning's meeting went well. Mickey [Sloma's nickname], you always do a good job on items like this. I thought most of our issues were discussed and handled. We still need to address the following:
"Tie the two projects together. The worst-case scenario for us is that we roll back the taxes and project two does not happen.
"We need to see the actual financials of both of their projects.
"We need to pursue Rick's [Updegrove's] training idea. I think we need to slant project two towards hiring Niagara County workers where possible."
Needler said Monday he was referring to a regular meeting that he, Updegrove and Ferraro had to discuss agenda items for upcoming meetings of the Legislature's Economic Development Committee, which Updegrove heads. "It wasn't anything clandestine," he said.
He said his request for financials referred to the possible tax impact of the PILOT. "I had the same issues, the same concerns as everybody else in Niagara County," said Needler, who eventually decided to withdraw from commenting on AES issues and abstained from voting on a series of resolutions about the PILOT at last week's Legislature meeting.
Updegrove said Sloma was at the Sept. 21 meeting. "My recollection of that meeting was that [Needler] and I both voiced some pretty strong concerns," said Updegrove, who has since succeeded Needler as majority leader. "I can see how a literal reading can make it look like more than it was."
Updegrove continued, "That's the only e-mail that could offer any reference to the PILOT. It wasn't like it was a double-top-secret meeting."


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