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Court to hear AES' appeal on PILOT

The state's highest court decided Thursday that it will hear an appeal of a ruling that invalidated a controversial tax break for Niagara County's largest property taxpayer, the AES Corp. power plant in Somerset.

The Court of Appeals announced without comment that it will take the case, as requested by AES and the Niagara County Industrial Development Agency.

The Appellate Division of State Supreme Court in Rochester ruled unanimously May 1 that the IDA violated its own policies in October 2006, when it handed AES a 12-year payment-in-lieu-of-taxes, or PILOT, arrangement that would have saved the company at least $43.4 million over the 12 years.

Somerset Supervisor Richard J. Meyers said the town has worked out an out-of-court settlement with AES under which the company would pay a total of $15.8 million per year to the town, the Barker Central School District and Niagara County, as well as assorted special districts.

That figure just happens to be the amount AES' PILOT payments would have been for the final nine years of its deal with the IDA.

"I don't think [the Court of Appeals' decision] is going to have a negative impact on the negotiations, to be honest with you," Meyers said.

He said the talks are no longer with AES but among the taxing entities to decide how to split up the money.

County Attorney Claude A. Joerg said, "We're still talking. We're getting closer, but it's not a done deal."

AES officials and attorneys did not return calls seeking comment, and Barker School Superintendent Roger J. Klatt declined to comment.

Any settlement between AES and the taxing entities would settle a series of lawsuits AES filed against Somerset to try to reduce the assessed valuation of the coal-burning plant on Lake Road.

Mark J. Gabriele, the IDA's attorney, said he is glad the sides are working out something, but he would like the Court of Appeals to rule because of the possible impact on IDAs around the state if the Appellate Division ruling stands.

"I thought the Appellate Division missed the boat," Gabriele said. "The law they cited didn't make any sense. To us, it wasn't a very good decision, and we're glad the Court of Appeals will hear it."

In late 2007, State Supreme Court Justice Richard C. Kloch Sr. ruled the PILOT was valid and was adopted properly, but the Appellate Division reversed him.

It said that AES presented no financial data that the IDA could use to determine whether the company really needed a tax break. Nor did it find any evidence to back up the IDA's conclusion that having AES drop its lawsuits over assessments, with the threat of tax refunds for past years if the company won those cases, would make up for the lost tax revenue caused by the PILOT.

The Appellate Division ruling reinstated the assessment lawsuits, in which Kloch is scheduled to conduct a pretrial conference Oct. 14. But the appeal request to the Court of Appeals reinstated the validity of the PILOT agreement, Kloch ruled in June when he told AES it did not have to pay additional tax bills from the town and the school district.

The current net assessment on the power plant is $524 million; AES' latest lawsuit tries to cut that to $80 million.


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