Share this article

print logo

AES bid for tax relief brings out crowds If deal is approved, taxpayers in Somerset, Barker School District would take biggest hit

SOMERSET -- Look at the numbers and it's easy to see why overflow crowds in the hundreds showed up for two recent public meetings to protest a request by AES Corp. to lower its tax burden on its giant coal-burning power plant.

If AES -- the largest taxpayer in Niagara County -- gets the tax bill lowered on its Lake Road plant, every other county property owner will pay more.

County taxes would have to climb an estimated 1.4 percent to make up the difference, but the pain would be worse in Somerset, where other town taxpayers would collectively have to pay an estimated $165,000 more in the first year alone.

It would be worse still for taxpayers in the Barker School District, who now enjoy the lowest school tax in the county.

How much worse?

Today, a home assessed at $100,000 in Somerset has a school tax bill of $994 when the state's basic STAR program is taken into account. The owner of a similarly priced home in neighboring Newfane owes that district $1,777, including a STAR exemption.

If the IDA approves the AES proposal, that same Somerset taxpayer would see his or her school tax bill climb to $2,007, acting Barker School District Business Manager William R. Leardini calculates.

"It's kind of unacceptable until some compromises are made," County Legislature Chairman William L. Ross said Wednesday of the AES proposal.

Barker's tax advantage comes from the AES power plant, which pays more than 78 percent of the district's tax levy.

AES has been seeking a reduced assessment in a series of lawsuits against the Town of Somerset. That has yet to work, so it is trying another route to lower taxes.

At 9 a.m. Friday, the county IDA will vote on an AES request to make its assessed property value irrelevant by setting its payments in stone for the next 25 years.

Under a payment in lieu of taxes, or PILOT, agreement, the IDA would fix the payments on the power plant at $14 million a year.

AES paid a combined total of $18 million in county, town and school taxes this year.

During the 25 years, the figures would rise, but they would never go higher than $17.08 million.

In other words, 25 years from now, AES would still be paying less than it is now.

Based in Arlington, Va., AES has 30,000 employees and 123 power plants that generate electricity for 11 million customers in 26 countries, according to the company's Web site. It was founded a quarter century ago by two men who worked in energy-related departments of the federal government.

Its leaders have told the Niagara County IDA the company needs the lower tax payments to enhance its bid to build a new power plant using the state's favored "clean coal" technology. The company vows to pursue a new plant only if the IDA approves the tax-reduction request on its existing one.

Company officials say the new $1 billion plant would create up to 1,500 construction jobs over four years and provide full-time employment for 120 people. The company has 145 employees at its current plant.

AES President Kevin D. Pierce said if the company wins the right to build a new plant, the PILOT payments would be $5 million higher than those sought for the existing plant alone. If that happens, the Barker school district would receive more from AES than it does now, and so would the town and the county.

The problem is that other companies are also expected to bid for the right to build a new plant -- and only one or two construction plans will be approved. So the IDA runs a very real risk of approving a tax break that does little to soothe Somerset and Barker.

"There's no guarantee of this wonderful new plant," Dan Furmanek of Somerset said at Tuesday's IDA public hearing on the proposal. "It's pie in the sky."

The IDA would benefit. As part of the approval, the agency would get a commission now estimated at $1.1 million, and the county would receive 5 megawatts of electric power to foster new economic development from the existing plant and 5 more megawatts if a new plant is built.

Somerset and Barker school officials have offered blessings for a PILOT agreement only as it would relate to construction of a new plant. And Somerset Town Attorney Edwin J. Shoemaker got lots of applause at the IDA hearing in Barker High School when he announced the town and school district would sue the IDA if its board votes Friday to grant a tax break to AES on its existing plant.

Ross said the county would have to raise its tax rates 1.4 percent to make up for about $1 million it would lose on the AES deal.

"You have to take some chances in life, but you can't play Russian roulette," Ross said. "We realize there is a trade-off. If we get that second plant, people will be working. Is that application going to be approved? Nobody knows."

The Town of Somerset would need about $165,000 in taxes from other sources in the first year, according to a letter to the IDA last week by Shoemaker.

But school taxes are by far the heaviest burden for a property owner -- and for AES.

The school district receives 56.6 percent of the power plant's $18 million bill, said Leardini, the acting business manager. The county takes 34.2 percent and the town 9.1 percent.

Even though the school district would lose $3.22 million, or 23.6 percent of its tax revenue, in the first year of the deal, Leardini calculated that tax rates would have to more than double to make that up.

That's because 77 percent of the district's tax base -- the current AES power plant, assessed at almost $667 million -- would go off the tax rolls.

AES charges that the Barker district has been guilty of taking advantage of the company to lower everyone else's taxes. The school tax rate in Somerset is lower now than it's been in any of the previous six years, but the amount collected in taxes has gone up every year. The district's per pupil spending last year of almost $11,000 is by far the highest in Buffalo Niagara.

"It's time to vote no for excessive spending and yes for AES," company Vice President Karen Pavlock said at Tuesday's public hearing.

Somerset Supervisor John E. Sweeney Jr. said the town hasn't conducted a property reassessment in recent years, and the state Office of Real Property Tax Services says Somerset property is assessed at only 86 percent of market value. Town officials said the state pegs the value of the existing AES plant at $1.15 billion, reduced to a taxable figure of $792 million because of pollution control credits, a figure that's $125 million more than the value assessed by the town.

e-mail: tprohaska@buffnews.com

There are no comments - be the first to comment