County Looks at Tax Options for Nuclear Plants

By Barry Leemann, Chairman, Oswego County Legislature

For many years I have heard people talking about the taxes paid by our nuclear plants. Many have asked what is happening now that the plants’ tax agreements are getting close to the end. So I thought I’d give everyone an update, and write about the pros and cons of placing the plants on the tax rolls, versus entering into a tax agreement with the plants’ owners.

The Town of Scriba is the assessing unit for the three nuclear plants. The owners of the plants, Entergy and Constellation, have asked Scriba to negotiate new tax agreements. The Town, County and the Mexico and Oswego school districts are working cooperatively together to determine the future tax status of the plants. We have hired the Duane Morris law firm from Washington DC, one of the top energy law firms in the nation, to help us with the negotiations. We’ve also hired the top nuclear plant appraiser in the nation, the George Sansoucy firm, to help us establish the plants’ values for the tax roll.

We all agree that, under the current tax agreements, the payments made by the plants to the four government entities are too low. We also want to ensure that the nuclear generators pay their fair share of taxes, just like any other business in the community.

The question is, is it better to do this with a new tax agreement or by returning the nuclear plants to the tax rolls? There is no clear answer. I will try and explain the pros and cons of each.

Tax Rolls: Placing the plants on the tax rolls has the benefit of making sure the plants are taxed according to their assessed value, just like any other business or residence. In some cases, placing a business on the tax rolls results in higher tax payments than a tax agreement. However, it has the disadvantage of risking yearly legal challenges to the assessment, called a tax certiorari. (A nuclear plant can grieve their assessment just like you can.)

Those legal battles can cost taxpayers significantly. If an owner of a nuclear plant proves to a judge that the assessed value of the plant is too high, the County, Town and school may be ordered to refund the difference in the taxes. Depending on the order, the County may have to front the entire refund first, and then charge the Town’s and school’s portion back to them in the following year. This can potentially cost millions of taxpayer dollars. Placing the plants on the tax rolls can also affect the State’s school aid formula in such a way that schools receive less State aid, and that could cause local school taxes to rise.

For a high-value, market-driven facility such as a power plant, the assessed value can vary greatly year to year. This destabilizes tax rates and puts taxpayers on a roller-coaster ride of rising and falling taxes.

Tax Agreements: Placing the plants into a tax agreement has the benefit of removing the risk of costly legal challenges and settlements every year and it stabilizes budgets and taxes. It can also include other benefits, such as the low-cost power program in the current agreement with Entergy. A negotiated agreement also provides an added benefit to school districts related to the State’s school aid formula and assists them in maintaining stable school taxes.

Tax agreements have the disadvantage of requiring the governments and the company to engage in costly negotiations and agree to the property value, or the tax payment. As a result, the payments may differ from the amount of revenue that would otherwise be received if the plants were put on the tax rolls.

The tax agreements for the Nine Mile I and FitzPatrick plants expire first. At a special legislative session on Feb. 25, the County Legislature passed Local Law Number 1 of 2010. This law allows us to return those two plants to the tax rolls if a favorable tax agreement cannot be reached.

All our options are being fully analyzed by the Town, County, and the two school districts, and we will recommend to our boards whichever option is most favorable to the taxpayers and our communities.

I hope this helps to explain why we don’t just “put them on the tax rolls.” We may, but not until we are sure what is the best thing for our Scriba, County, and School taxpayers.