TAX NEWS - JUNE 2010

New York Tax: Local taxing jurisdictions may get late payments

03 June 2010 -- Maple Ridge Wind Farm has reached a tentative agreement with local taxing jurisdictions to release $6.7 million that was withheld from last year's annual payment, probably within the next few weeks.

"This would be great for the school and community," said Kenneth J. McAuliffe, superintendent of the Lowville Academy and Central School District, which is slated to receive the largest share — roughly $2.8 million — of the unpaid funds.

"I think it's certainly a big win for the taxing jurisdictions," said Lewis County Attorney Richard J. Graham. "Our goal throughout has been to protect the 2009 payment in full, and we're going to get it."

Under the proposed agreement, Flat Rock Windpower, the company under which Maple Ridge was developed, would discontinue a lawsuit filed against the taxing jurisdictions. Flat Rock within 10 business days of a judge's approval of the discontinuance would then release the $6.7 million and any accrued interest to the municipalities. A target completion date of June 18 is suggested in the plan.

The company would not be subject to any late payment penalties, and each party would cover its own legal costs.

County legislators on Tuesday night, following an executive session, approved the proposed settlement — pending final review by Mr. Graham — by a 9-0 vote, with Legislator William J. Burke, R-West Lowville, abstaining. Mr. Burke and some of his family members are employed by Iberdrola Renewables, which co-owns the Maple Ridge Wind Farm.

The other involved taxing jurisdictions — the towns of Martinsburg, Harrisburg, Lowville and Watson and the Lowville, South Lewis and Copenhagen central school districts — also must sign off on the deal.

Mr. McAuliffe said Wednesday that attorneys for Flat Rock and the taxing jurisdictions are still putting the "finishing touches" on the proposal. While the Board of Education likely won't vote on the issue until its regular meeting June 14, the matter could be handled sooner, if necessary, he said.

Flat Rock last summer was decertified from the state Empire Zone program, but the state Empire Zone Designation Board recertified it on April 2.

In the interim, the company in December paid only $2.29 million of its $8.99 million annual payment in lieu of taxes, claiming it should pay only the so-called "fallback amount" without certainty of continued property tax reimbursement through the state program.

It also filed a state Supreme Court lawsuit seeking court approval of its interpretation and placed the disputed $6.7 million into an escrow account pending resolution of the matter.

Despite the EZ recertification, company representatives initially resisted releasing the funds until they received assurance from the state Department of Taxation and Finance that full state reimbursement of the 2009 payment will be forthcoming.

While that has yet to happen, the proposed settlement would allow Flat Rock to file another lawsuit if the state ultimately denies that reimbursement. If a judge were to rule that the company overpaid for 2009, the award would be deducted from remaining PILOT payments.

Flat Rock, in its lawsuit, also implicitly threatened to seek repayment of most of its $8.6 million payment from December 2008 if Empire Zone benefits were lost. However, the proposed settlement would eliminate that threat.

Lowville school officials last year established a $2.8 million reserve fund, just in case they were forced to repay their 2008 share. Once it becomes certain the fund won't be needed, that money will likely be freed up to use for other purposes, Mr. McAuliffe said.

Iberdrola officials declined comment on the proposed settlement.

Wind-farm payments are divided among the taxing jurisdictions through a revenue-sharing agreement based on 2004 and 2005 tax rates.