Ulster County”™s Marlboro public school district and Orange County itself are facing what could be a significant impact on a major source of tax revenue: Dynegy.
The company, whose plants have generated electricity and revenue for both the county and the school district, has been successful in getting its assessments lowered considerably in the town of Newburgh. It is now in negotiations with both Orange County and Marlboro to finalize its revaluation.
Dynegy, owners of the Roseton and Danskammer electric generating plants on the Hudson River waterfront, worked out a settlement with the town of Newburgh in the amount of $3.4 million, representing reimbursement of taxes paid for calendar years 2003 through 2007.
The Houston-based company bought the plants in 2001 from Central Hudson Gas & Electric and has aggressively sought a reduction in its assessment since 2002. Now that a settlement has been worked out with the town, according to Dynegy spokesperson David Byford, the next hurdle is to reach a financial settlement with Orange County itself and the Marlboro schools.
All three entities based their valuation on the increase in residential prices and the state”™s equalization rate. Over a five-year period, the plants”™ assessments rose from $900 million to nearly $1.5 billion.
Byford said, “This (situation) has been going on several years. The valuation was never in sync with the physical assets or revenue-producing capability of the plants.” Dynegy argued that while residential prices may have gone up dramatically, their own property values have not and fuel costs have been prohibitive.
Faced with the decision whether to let the courts decide or to work out a private negotiation with the electric plants, both Orange County and the Marlboro schools must decide: Is it worth having a court decide for them?
Taxpayers in the town of Newburgh have already spent more than $1 million in legal fees fighting the reassessment. Supervisor Wayne Booth said settling, rather than spending more taxpayer dollars, made the most sense for the community.
“We”™ve already paid Dynegy the $3.4 million we negotiated with them and we”™re already looking at next year”™s budget; there is $1.75 million in the tax stabilization fund that will go toward the shortfall,” said Booth. “The rest will be worked into the town budget ”“ cuts will be made and we are going to have to tighten our belts.”
The five-year agreement with Newburgh stipulates the current agreement will remain in place even if Dynegy sells its plants.
Booth pointed south to North Rockland as an example of why the town decided that settling was more advantageous than engaging Dynegy in a court battle: North Rockland”™s own financial court fiasco with energy provider Mirant ended with taxes tripling and the school board scrambling to make up for the shortfall. The town and village of Haverstraw, the town of Stony Point and the North Rockland School District”™s battle over Mirant”™s reassessment ended up in a total payback to Mirant over an 11-year period of over $250 million.
The town”™s $3.4 million payment to Dynegy includes liabilities for Dynegy”™s payments to the town”™s general fund, highway fund, consolidated water districts I and II, as well as the Middlehope Fire District.
According to Booth and the Town Board, if the town had pursued the action through the courts, it could have been liable for millions of dollars more than the $3.4 million negotiated in its settlement.
Booth noted that Marlboro school district contributed $75,000 for expert services in the legal wrangling, but the county had contributed zero in support of the town”™s defense. The town of Newburgh spent $1 million in legal fees.
Richard Mayfield, spokesman for Orange County Executive Edward Diana, said, “The county is weighing its options. We know the town of Newburgh has reached an agreement, but we want to explore all avenues before we make a decision.”
Louis Ciota, the superintendent of the Marlboro School District, did not return calls for comment
