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Tax break for AES may exceed $40 million IDA chief says deal will not be rescinded

Local officials say the property tax break for AES Corp.'s Somerset power plant will cost Niagara County taxpayers at least $40 million -- and perhaps more than twice that amount -- but the man who engineered the deal said Thursday that it will not be rescinded.

"No" was Henry M. Sloma's concise answer when asked after a meeting of the Niagara County Industrial Development Agency whether the board of which he is chairman would yield to demands by public officials and residents in Somerset that the tax break be canceled.

Barker School Superintendent Steven J. LaRock, acting Business Manager William R. Leardini and a few district residents attended Thursday's meeting, even though AES was not on the agenda and the IDA does not permit a public comment period.

LaRock said he has been authorized by the Barker Board of Education to sue the IDA if the 12-year tax-abatement package is not rescinded. AES had sought a 25-year tax break on its Lake Road plant, but after the Oct. 24 public hearing, Sloma negotiated a 12-year package that the IDA board passed Oct. 27.

"To give away $40 million without getting anything in return is highway robbery, and they're not even using guns," Leardini said.

The IDA board spent 45 minutes behind closed doors, discussing its legal strategy if it is sued by the school district, the Town of Somerset, or both.

Sloma suggested that Somerset would do better to negotiate its own "host community agreement" with the company.

The IDA chairman also said the terms of the deal cannot be altered because to do so would require the agency to hold another public hearing. The Barker Central School District is threatening to sue the IDA in part because a second public hearing was not held, even through Sloma and AES substantially revised the deal in 48 hours after an Oct. 24 hearing in Barker produced a public outcry against the tax break.

Sloma said another hearing might result in a delay that would prevent the closing of the payment-in-lieu-of-taxes deal before Feb. 28. That is the day before Somerset is to finalize its assessment roll for use in charging 2007-08 school taxes and 2008 town and county taxes.
Leardini said the $40 million loss estimate assumes that tax rates will not change in the next 12 years. If one assumes a 3 percent annual rate increase, he said, the lost revenue increases to $82 million over the 12 years.

Leardini said his "snapshot" doesn't take into account increases in special district taxes such as water, sewer, refuse and fire protection, which are to be skimmed off the top before the school, town and county take their shares of AES' payments. Increases in those taxes would reduce the amount available for the general budgets of the three entities and further exacerbate the revenue loss, Leardini acknowledged.

Normally, the IDA seeks creation of new jobs in return for tax breaks, but AES is not promising to create any. "Part of the IDA's business is to retain jobs," Sloma said. But when asked if AES had threatened to close the power plant, he answered, "No, they haven't."

LaRock said of the tax break: "It's wrong. For Henry Sloma to say what's best for the county is ridiculous. We elect legislators to decide what's best for the county."

"Wrong and right is an issue of perspective," Sloma commented.

County Legislator Harry J. Apolito, D-Lockport, announced Thursday he will introduce a resolution to ask the IDA to rescind the AES deal at the Legislature's next regular business meeting Jan. 16. He said the Legislature cannot require the IDA to do so.

AES said it needed the tax break to enhance its bid for rights to build a $1 billion "clean coal" power plant, but the director of the state agency that started the competition said AES' tax load was not relevant to the bidding. AES lost out this week to NRG Energy's Huntley Station in the Town of Tonawanda for the clean coal plant.

Leardini's updated estimate of revenue loss from the deal was calculated after a meeting last week between Leardini and County Real Property Tax Services Director William F. Budde Jr. They showed a loss of more than $23 million for the school district, almost $14 million for the county and $3 million for the town.

The $40 million is an increase from Leardini's previous estimate of $24 million. The difference results because his October calculations did not take into account the fact that AES' assessment rose from $530 million to $666.6 million for 2007. That causes its total tax bill to rise by more than $1.2 million for 2007, to $19.4 million.

AES is the largest property taxpayer in Niagara County and will continue to be even after its payments are set at $17.3 million when the tax break takes effect with the 2007-08 school taxes and 2008 town and county taxes. However, the total payments by AES will decrease by $500,000 a year for the next three years before being fixed at $15.8 million from 2010 to 2019, when the deal expires.

Leardini said the impact of the lost revenue will be felt immediately. "We can have the same budget as this year and still have a 35 percent [residential] tax increase," he said.

LaRock said many employees, including teachers, would have to be laid off. State Sen. George D. Maziarz, R-Newfane, has said he will introduce a bill in Albany to send Barker extra state aid, but LaRock said, "I have nothing from Mr. Maziarz other than a statement in the paper that he will introduce legislation."

e-mail: tprohaska@buffnews.com

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