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Five-year PILOT for Fort Drum biomass plant to be proposed to municipalities

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A five-year payment-in-lieu-of-taxes agreement for the biomass energy plant to be constructed at Fort Drum by ReEnergy Holdings LLC, Albany, will be proposed to taxing jurisdictions for approval in June.

The Jefferson County Board of Legislators will vote on the PILOT agreement June 5, Carthage Central School District will vote June 11 and the town of LeRay will vote June 14.

The five-year PILOT plan will take effect in 2013, and the plant’s $32 million property assessment will be fully taxable in 2018. The following payment schedule will start in 2013 and end in 2017: 40 percent of an assessed property value of $28 million; 45 percent of $29 million; 50 percent of $30 million; 55 percent of $31 million and 60 percent of $32 million.

ReEnergy CEO Larry D. Richardson said the deal was negotiated over a six-month span and that the five-year payment term — shorter than most PILOT agreements — was agreed on to make the deal palatable for the taxing jurisdictions involved. The company plans to invest about $34 million to convert the post’s coal-fired plant to produce energy using biomass materials.

“There was certainly some give and take in the negotiations, but we believe it will ultimately be attractive for all three taxing jurisdictions,” he said. “The actual payment in the first year that will be made will be similar to the last year under the plan, so the jurisdictions will not see a decrease in revenues.”

But the town of LeRay might not find the plan so attractive. During negotiations last month, officials advocated a two-year PILOT instead, so that the town could garner more sales tax revenue by placing the property — which will be tax exempt over the span of the PILOT — back on the tax roll sooner. The county doles out the towns’ share of the local sales tax revenue based on assessed valuation. The company still would have paid a lower assessed value for three additional years under that plan, which would have been fixed at a negotiated transition rate.

Steven T. Harter, LeRay administrative clerk to the supervisor who attended the negotiations, said officials were ultimately not receptive to that plan. Even though that two-year proposal wasn’t conceded by town officials during negotiations, ReEnergy still has decided to introduce the five-year proposal to town board members June 14 for approval.

“We’ve met and discussed the issue with county officials, and the discussion on sales tax distribution is ongoing,” said Mr. Harter, who also represents District 5 as a county legislator and will vote on the issue at the Board of Legislators meeting next week. He said county officials have agreed to introduce the sales tax distribution issue at a hearing for municipal officials this summer.

Robert F. Hagemann III, the Jefferson County administrator, said the two-year PILOT proposed by the town was regarded as a potential roadblock to the deal by county officials and that it could have significantly delayed the decision. He said ReEnergy officials are “extremely anxious to get the project going.”

“It became clear that it was getting a little bit too complex in the short-term, and from the town’s standpoint they acquiesced and went back to the five-year PILOT,” he said. “That approach has more of a bearing on the sharing of sales tax countywide than it does with the town, and there wasn’t enough time to get that discussion accomplished. It was the only major nuance in the discussions.”

The county’s 3.75 percent sales tax take is shared with the towns. 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 taxable 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 property value.

Jefferson County Industrial Development Agency CEO Donald C. Alexander also said the two-year deal proposed by LeRay introduced an element of controversy to the negotiations.

“The town and the county have agreed that this is a shift in policy outside of the project’s purview and warrants a hearing outside of this PILOT,” he said. “I make no guarantee that the town will vote for or against this resolution, but since the project has such enormous value, I hope they would be willing to pass it and then carry on the discussion (about sales tax distribution) later. It’s something all towns will want to weigh in on.”

Michael P. Chevier, president of the Carthage Central School District Board of Education, said Friday that the board hasn’t received or discussed the PILOT resolution yet.

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