The pain that has come to the taxpayers of the Niagara County Town of Somerset is familiar in several other parts of New York. A large power-generating plant, which pays a huge share of local school and municipal taxes, has negotiated a significantly lower bill -- pressuring governments, the school district and, most of all, taxpayers.
The most important thing to know about this hardship can be summed up succinctly: It could be worse. A lot worse. The proof is downstate, among other areas. In Rockland County, two power plants have recently won court cases that have forced taxing entities to reimburse them for years of overtaxing. The result has been catastrophic increases in tax bills, enough to cause some homeowners to put up "For Sale" signs.
Some residents of Somerset are upset that AES Corp. struck a deal for significantly lower taxes. So are members of the Niagara County Legislature. Residents can be excused. Their taxes will almost certainly rise and many are probably unaware of the problems with power plant valuations. County lawmakers, though, seem to be playing to the stands. They aren't helping their constituents.
The issue, in its most basic form, is that as a result of deregulation of the power industry in the 1990s, many power plants have become less valuable. If they are worth less, the property taxes they pay should be lower.
It's a simple matter of tax fairness that anyone can understand. Nobody volunteers to pay more taxes than he fairly owes, whether it is a homeowner in Somerset or a multinational corporation in Manhattan. Fair is fair.
AES believes it has such a case. Instead of taking it to court, though, the company negotiated a payment in lieu of taxes with the Niagara County Industrial Development Agency, which relied on the authority specifically given to it by the Legislature.
Under terms of the deal, AES will pay significantly lower payments than it had been paying but, it says, still more than it might win in court. This year's tax payment was $19 million. The figure will shrink to $15.8 million by 2011. The plant will remain, far and away, Niagara County's single biggest taxpayer. Additionally, AES will forgo the kind of economically debilitating reimbursement from taxpayers that the plants in Rockland County won.
Separately, but as a byproduct of achieving tax stability, the company says it plans significant economic investment in the plant, including creation of a $20 million port on Lake Ontario, where it will make shipping available to other companies, and $60 million to $70 million in a wind power project on its property. Those projects are not included in thisPILOT deal.
This will be painful, but the reduction in payments is gradual and Sen. George D. Maziarz, R-Newfane, has promised to seek additional state aid to make up for as much as $830,000 the Barker Central School District will lose. More to the point, the alternative is much worse.
No one has to be happy about this development, but unless someone wants to argue that it is good public policy to levy property taxes unfairly -- with the real possibility of a disastrous court ruling or a corporate decision to fold the tent -- then there is little choice but to make the best of a difficult development. That's what Maziarz is trying to do. The sooner others take that lesson, the better.