Archive: News

Two weeks ago representatives of AES Cayuga and the Tompkins County Industrial Development Agency (IDA) tried to explain to the Lansing Board of Education why a Payment In Lieu Of Taxes (PILOT) agreement was reneotiated so soon after the initial signing.  The new agreement will downgrade Lansing's biggest taxpayer's property assessment from what would have been $255 million in four years to $100 million.  In a statement last week Superintendent Stephen Grimm asked the IDA to adjust the agreement.  But the school board went further, completely rejecting the renegotiated PILOT.

"It's mind boggling to me that last year they were looking at $255 million of tax assessment and now they're looking at $100 million," said school board member David Dittman.  "That's two and a half times difference within two months.  Either they have very poor forecasters -- in which case why should we believe that they forecasted right? -- or we got gamed."

Grimm made several points in a statement he sent to IDA members and released to the public on the school district Web site last week.  The reason for negotiating a PILOT is to create a stable predictability for all parties.  The business can predict its tax assessment into the future and fold that into its strategic business planning as a given, rather than a variable.  The taxing authorities also gain the stability of knowing the value of that property over the years of the agreement.  Such a drastic change so soon after the original agreement was signed undermines the whole purpose of having the PILOT in that stability is removed from the period covered by it.

The loss to the school district next year alone will be a half million dollars, and that's not counting the additional $300,000 that would have come to the district if the original agreement remained.  With the original PILOT the school district was able to predict the additional income.  That planning fell through a hidden trap door with the new negotiation.

Grimm said that if the value of the plant has, in fact, dropped so drastically the PILOT should ratchet down in digestible increments for the school district, just as the original version ratcheted up in favor of the power plant.  Grimm says that the PILOT is 'front-loaded' in a way that will cripple the school district in a time when state and federal aid are also drying up.  The renegotiated contract calls for a $30 million drop the first year, with $10 million drops each year after that.  He said that minimally the IDA should renegotiate $15 million per year increments, evening out the district's pain over the four year period, and noted that even that drop would have a significant impact on all the other taxpayers in the district at a time when they can least afford it.

But Dittman said that even smoothing out the decreases is being too generous.  He quoted a Fitch financial report on AES that downgraded the company's bonds, saying that in 2008 they were running at 90% capacity, and in 2009 at 54%.  Both Dittman and board member Glenn Cobb said that since the rating downgrade the plant's capacity has come up somewhat.


"Apparently this is system-wide on their coal-fired plants," Dittman said.  "But Fitch also said it's temporary.  So I'm not sure that I would want to have a four year agreement where (the assessment) is going down, down, down and then we have to renegotiate.  Why not hold it at $160 million and let's see what happens for a year?"

Board member Glenn Cobb agreed with Dittman that the model used to predict future revenues and value of the plant are flawed.

"The model worked great for 40 years, but the market never changed for 40 years," Cobb said.  "That tells you that the model is ineffective.  If they try to use that model again next year I hope we can get in front of them in time to take the position that the model is ineffective.  "If they need to adjust it, adjust it for one year," Cobb said.  "Keep the target at $155 million.  We're negotiating for this year.  Why did they all of a sudden rebuild the whole structure of the agreement?"

School board member Richard Thayler made a motion that the board go on record to endorse Grimm's statement.  Board member Michael Cheatham suggested an amendment that takes specific numbers out of the equation.  "As a board of education and in behalf of the taxpayers of the Town of Lansing we simply do not accept the proposal that the IDA is putting forward," Cheatham proposed.

Board member Aziza Benson agreed with that, saying board members should attend the public hearing scheduled in the Town on February 16 to talk about the numbers there.  She advocated merging Thayler's motion publicly endorsing Grimm's statement with Cheatham's amendment.  Eventually, with some changes to the wording of Grimm's statement that is what they passed.


The IDA has asked affected stakeholders to pass motions endorsing their negotiations.  Last month the Town of Lansing passed such a motion.

"They gave me a sample resolution for us to vote on," Grimm said wryly.  "They said 'I suppose you're not going to be taking this to your board.'  It was based on the Town of Lansing's resolution supporting the negotiation.  It is anticipated that the County is going to endorse it."

The County Legislature was about to do just that in their last meeting earlier this month.   But Legislator Pat Pryor, who represents the Town of Lansing, requested that the board postpone the vote to their February 16 meeting to allow more citizen input at a public hearing scheduled in Lansing earlier that day.  Pryor herself is holding a town meeting on the topic tomorrow (February 13 at 10am at the Lansing Town Hall) to get more input from taxpayers.

The school board's bark may not be up to its bite, because the PILOT is negotiated between the IDA and the power plant.  The school district may offer opinions, but it is not actually a party to the agreement.  The reason for this is that the PILOT sets the dollar amount of the property assessment of the plant, not the tax rate or tax levy (the pieces municipal taxing authorities like the school district set).  That is the County's responsibility in much the same way that the County Assessment Department sets the value of other businesses and all homes.  Grimm pointed out that the school district has no direct way to influence the terms of the PILOT.

"We've got a lot of taxpayers in Lansing," Dittman retorted.  "We have a lot of taxpayers in Lansing who vote for the County Board.  Let's figure this out.  It's not that we're just people that get dictated to.  If we don't like what they're doing there are a lot of votes in Lansing and we can vote a new County Board in.  The County Board needs to understand that we don't like this and that we want them to be negotiating our best interests, not what is easiest for them to do.  You don't miss a budget by two and a half times."

----
v6i6