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TAX BATTLE WITH NIMO IS COSTLY AND ONGOING

The Town of Tonawanda's seven-year battle with Niagara Mohawk Power Corp. over the utility's tax bill has cost the town $585,000 so far to hire outside lawyers and appraisers.

The town spent $421,504 from 1995 to 2000 to defend the taxable value it assigned to the Huntley Steam Station, which Niagara Mohawk later sold to NRG Energy of Minneapolis. The parties negotiated a settlement last year.

The town has spent $163,552 since 1998 to defend against Niagara Mohawk's challenge of the taxes it owes on its transmission and distribution lines in the town. That challenge is ongoing.

"It's important to sustain the assessment placed on property, in the proceedings, to protect the interests of all taxpayers," Supervisor Ronald H. Moline said.

Any drastic reduction in the tax burden on Niagara Mohawk or NRG property would have to be made up by other taxpayers, Moline said.

Before the Huntley tax fight was settled, the town, county and Kenmore-Town of Tonawanda School District faced losing $62 million in taxes, officials said at the time.

And in the worst-case scenario for the fight over the transmission and distribution network, the three governments could lose $4.6 million in taxes, plus interest, collected over six years, said town Assessor David M. Unmack.

Tonawanda is not alone in battling Niagara Mohawk. The utility this year has brought assessment challenges in 45 municipalities across upstate New York, said Kerry Burns, a Niagara Mohawk spokeswoman in Syracuse.

Niagara Mohawk challenges "unfair assessments" because of an obligation to its customers, whose electrical rates reflect the utility's tax bill, Burns said.

Unmack said the assessments on the transmission and distribution network in Tonawanda are fair.

In its most recent challenge of the network assessment, Niagara Mohawk is asking that property assessed by the town at $30.8 million be reduced to $16.4 million, Unmack said.

This challenge was filed in State Supreme Court and is in the discovery stage. Heydon and Associates, a Georgia firm hired by the town, still is appraising the network's value, Unmack said.

He expects the challenge, known as an Article 7 proceeding, to go to trial next year.

In the Huntley case, far more was at stake for the town, school district and county. Niagara Mohawk, joined by new owner NRG, had asked that Huntley's assessment be reduced by 40 percent.

The negotiated settlement reduces the Huntley tax bill by 25 percent over five years.

The town hasn't footed the whole bill on its own. The county earlier this year reimbursed the town $172,920 for half of the cost of the Huntley tax fight.

Unmack and Moline said the town has been required to hire outside lawyers and appraisers because the complex nature of the tax disputes requires specialized expertise.

Brown and Kelly, a Buffalo law firm, has received $195,438 for its work on both cases for the town, and Heydon and Associates has received $389,618 for both cases, town records show.

The town is just trying to match the legal and financial resources of the utility, Unmack said.

"It's very difficult to go up against a Niagara Mohawk," he said.

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