Long Island, N.Y., governments will benefit from a New York state appellate court decision to allow a lawsuit to prevent the Long Island Power Authority from challenging the assessment on its Northport, N.Y. power plant, according to Moody's Investors Service.
The July 29 ruling is a credit positive for the Northport-East Northport Union Free School District in Suffolk County since allowing LIPA to challenge the power plant assessment could result in lower property taxes, according to the Aug. 6 Moody's report. LIPA pays roughly $78 million in property taxes annually on the plant with around $52 million supporting the Northport school district's operations. LIPA filed the original lawsuit challenging the plant's 2010 assessed value and was seeking to recover nearly $270 million in property taxes paid since then.
"A loss of annual property tax revenue from LIPA, which was 40% of the district's tax revenue in 2014, would shift the tax burden to other property taxpayers in the district, with a likely adverse effect on local businesses and homeowners," said Moody's analyst Tiphany Lee-Allen in her Aug. 6 report. "The court's decision is also credit positive for other Long Island local governments where LIPA has filed tax appeals because it may set a precedent for similar cases against LIPA."
Lee-Allen said that the initial state appellate court ruling also affects the Town of Huntington where LIPA is responsible for roughly 7.7% of the town's property tax revenue. Huntington officials estimate that making up for the lost revenue from a successful LIPA tax appeal would require a 2.8% increase in the town's property tax rate, according to Lee-Allen
A similar suit looking to prevent LIPA from challenging tax assessments has been filed on behalf of the North Shore Central School District in Sea Cliff, N.Y. The district receives $24 million annually in revenue from LIPA properties in the district. Lee-Allen said if the North Shore is successful in court it could positively affect Nassau County since it guarantees tax appeal settlements and tax levies for its underlying school districts.
LIPA, which has roughly $7.6 billion in debt outstanding, is rated Baa1 with a stable outlook by Moody's and A-minus with a negative outlook by Standard & Poor's. Investor-owned PSEG-LI took over LIPA's operations in 2013 after the utility drew criticism for its response to Hurricane Sandy.
