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Votes scheduled on reduction of tax payments by power plant

The Town Board, the Barker Board of Education and the Niagara County Legislature will vote next week on sharply reduced payments in lieu of taxes for the new owners of the coal-burning power plant on Lake Road.

The employees at the bankrupt plant, which is not currently producing electricity, also have agreed to reduce wages and benefits, Somerset Supervisor Daniel Engert said Friday.

The new owners -- a group of U.S. and foreign banks that held bonds issued by the former owners, AES Eastern Energy -- have agreed to invest $71 million in operating capital in the plant.

The payments in lieu of taxes, or PILOTs, will go before the Niagara County Industrial Development Agency Wednesday, IDA Chairman Henry M. Sloma said. However, the IDA board is not allowed to approve the deal for 30 days, during which a public hearing must be held.

Wednesday, a U.S. Bankruptcy Court judge in Wilmington, Del., approved the transfer of the plant, effective April 30, to the bondholders' new company, Somerset Cayuga Holding Co.

AES was Niagara County's largest property taxpayer, with a total of $14.3 million in school, county and town taxes this year.

Under the revised deal, that figure will be cut to $10.85 million for 2012-13.

The following year, the total payment would be $6.7 million, and in 2014-15, it falls to $5.12 million.

By 2015, Somerset Cayuga hopes to sell the plant, Engert said.

"This isn't an energy company. This is a group of investors whose lot in life is to get a return," he said. "When that $71 million runs out, it either gets sold or gets closed."

But Engert said the new owners "believe if they put $71 million into the plant, there's going to be a return on that."

The sale contract says Local 966, International Brotherhood of Electrical Workers, will continue to represent the plant's workers. But Engert said his friends inside the plant have told him of "deep cuts, hurting cuts" in pay and benefits.

"But at least they have jobs," the supervisor added. There have been no layoffs.

County Legislature Chairman William L. Ross said, "I'm almost positive it's not going to close, and 120 people will still be working there. Sometimes you can survive on half a loaf, but it would be pretty hard if there were no loaf."

The reduced PILOT payments will be voted upon by the Town Board at 6 p.m. Monday, the Barker Board of Education at 7 p.m. Monday, and the County Legislature at 7 p.m. Tuesday.

"Any revenue they have off this is found money," Sloma said. "If [AES] had filed Chapter 7 and liquidated, the taxing jurisdictions would get nothing."

Engert said the lower PILOTs reflect the plant's "significantly depressed market value."

The state Office of Real Property Services has estimated the Somerset plant's value at $280 million, down from $480 million two years ago. Before there was a PILOT, the town assessed the plant at $667 million.

The Barker School District receives 59.25 percent of the PILOT. It will be able to keep the $8.47 million it was expecting in its 2012-13 budget, which goes before the voters May 15.

But the district's take falls to $3.97 million for 2013-14, and $3.03 million in 2014-15.

The county, which grabs 31.5 percent, will see its power plant revenue fall from $4.5 million last year to $2.1 million in 2014 and $1.6 million in 2015.

The town's 9.25 percent share was $1.3 million this year. It falls to $473,600 by 2015.

email: tprohaska@buffnews.com