AES Wants 25-Year Tax Break for 2 Plants

Sep 24 - Buffalo News

Niagara County's largest property taxpayer is seeking a double- barreled 25-year tax break, which it says it needs to have a chance to build a $1 billion coal-fired power plant on its property in Somerset.

AES Corp. wants a payment-in-lieu-of-taxes arrangement on the proposed new plant, as well as the existing coal-burning power plant. It has been fighting Somerset's assessment on the property for years and has lawsuits pending seeking reduced assessments and resultant tax refunds for 2004, 2005 and 2006.

Thursday, AES officials made their pitch during a special meeting of the Niagara County Industrial Development Agency board in the IDA offices here. Two years ago, a request for a tax break for the existing plant was derailed by opposition from the Town of Somerset and the Barker Central School District.

AES pays the lion's share of both budgets, and a tax break would be a financial blow, at least in the short term, to those entities. Niagara County also would lose about $1 million a year, said County Legislature Chairman William L. Ross, C-Wheatfield.

"New economic development, new jobs is what we've been hoping for," Ross said. "But there is a tax revenue disruption, and you can't run away from it."

On the other hand, AES officials said, the new plant would create 1,000 to 1,500 construction jobs for a three- or four-year period, and 100 to 120 permanent jobs thereafter.

But that plant is no sure thing. AES intends to enter a competition for rights to build one or two "clean coal" power plants the state intends to allow. Proposals are due by Oct. 31, with the winners to be selected by the New York Power Authority by Dec. 31.

Christopher Wentland, business development manager for AES New York, said AES has three potential sites among the six power plants it owns in New York. Besides Somerset, there are contenders near Geneva and in Chenango County.

"We think [Somerset] is an excellent site," Wentland said, adding that there is plenty of room on the 1,800-acre Lake Road parcel, which has access by boat and rail and electrical transmission capabilities.

Wentland said the Power Authority will judge the proposals based on the cost of the power, the reliability of the technology and the environmental performance of the plant. The tax break would enable the company to be more competitive on cost, Wentland said.

The Power Authority must buy electricity from the clean coal plants for 10 to 20 years, Wentland said.

If AES wins the competition and builds in Somerset, it would give the IDA 10 megawatts of power from the plant for economic- development use, Wentland said.

That's not the only benefit for the IDA if this plan, which would be the biggest project in agency history, comes to fruition. The agency charges 1.25 percent of the project value as a fee, which would be $12.5 million on a $1 billion project.

However, IDA Chairman Henry M. Sloma said that AES wants to negotiate a lower fee and that he is willing to discuss it. "We want a reasonable fee to run the agency, but we don't want to gouge businesses," he said.

AES Somerset President Kevin R. Pierce said the company paid a total of more than $18 million in county, town and school property taxes this year. Five years ago, the figure was $10 million. He said AES would want the tax break on the existing plant even if it loses out in the "clean coal" contest.

The payments in lieu of taxes would total $450 million over 25 years, but Pierce said the company would save about $5 million a year at current tax rates. The annual payments divided among the county, town and school district would increase from $14 million to as much as $19 million during the term of the deal.

Sloma told the AES officials, "Our responsibility goes beyond this room and this agency, and we want to make sure we get the best deal for the community and help us stabilize your business."

IDA staff would meet with Barker school and Somerset officials, he said, and a public hearing on the tax breaks must be held sometime in October, although the time and place hadn't been selected Thursday. The IDA expects to vote on the deal at its October meeting, which has yet to be scheduled.

Leaders of Laborers Local 91 and the Operating Engineers union attended the meeting to hear about the plan. IDA board member Frank V. Roma said he supports the project. "It'll help the building trades and put people to work," he said.

e-mail: tprohaska@buffnews.com