LeRay officials met last week with executives from ReEnergy Holdings LLC, Albany, to negotiate a potential five-year payment-in-lieu-of-taxes agreement to make building its biomass energy plant at Fort Drum more affordable.
The company plans to invest about $34 million to convert the posts coal-fired plant to produce energy using biomass materials. To offset those costs, the company is seeking to approve a deal with officials from the town, Carthage Central School District and Jefferson County. The company hopes to have the deal approved by all boards by June.
ReEnergy CEO Larry Richardson and chief risk officer Bill Ralston, who met with town officials Thursday, have proposed a five-year PILOT agreement for the project, said Steven T. Harter, LeRay administrative clerk to the supervisor. But because the project is expected to be completed in two years, town officials instead are pushing for a two-year PILOT so that the companys property which will be tax-exempt for the term of the agreement will be placed back on LeRays tax roll sooner.
Specifics of the payment structure for the PILOT havent yet been discussed.
Under the towns two-year proposal, the company would still pay at a lower assessed value for property taxes for three years after the term. That assessment would be fixed at a predetermined transition rate by the town, which will determine the property tax paid to the Carthage Central School District.
But by placing the property back on the tax rolls after two years, the town will acquire additional sales tax revenue from the county based on the property. The county distributes sales tax revenue to municipalities based on their total assessed value, and the property value of the plant is expected to significantly increase LeRays share, Mr. Harter said.
The countys sales tax revenue, which accounts for 3.5 percent of all sales tax receipts, is divided by the following formula: Jefferson County receives 47 percent, the city of Watertown gets 24 percent, and the remaining 29 percent is divided among towns and villages based on their total assessed property value. According to the sales tax formula this year, LeRay receives about $32,000 in sales tax revenue from the county for every $10 million in assessed property value, Mr. Harter said. If ReEnergy has an assessed property value of $30 million, for example, the town would receive about $98,000 a year in sales tax revenue. That amount is much higher than what the town would collect in property tax revenue based on its current tax rate of $1.56 per $1,000 of assessed value; if the company is assessed at $30 million, it would collect $46,800 in property tax revenue.
If the property is financed by the PILOT and comes off the tax roll, we dont get our share of sales tax on what the property is worth, Mr. Harter said. We lose out more from the sales tax distributed by the county than we do on property taxes.
In effect, the deal would work like a five-year PILOT for the municipalities involved, because the company still would pay less in property tax for three years following the two-year term, Mr. Harter said.
The parties have agreed that the company doesnt need the PILOT extended longer after theyre done buying materials for the project; the property should be placed back on the tax roll, he said. This should be a non-issue for all parties except the town.
Regarding the companys negotiations with the town, Donald C. Alexander, CEO of the Jefferson County Industrial Development Agency, questioned whether officials should be intervening to change the terms of a PILOT agreement.
At the end of these PILOT agreements, the assessment of these towns dramatically improve, and theres a clear makeup for any revenue they might lose in sales tax over the life of the PILOT, he said. When jurisdictions start negotiating with developers it causes a great deal of uncertainty and drags out the process. Our mission is to get these developments in our community, and this makes it difficult.