Dec. 1 marks the beginning of a new property tax year in Suffolk County and payments due from the Long Island Power Authority to school and fire districts in Riverhead Town — and to the town itself — are still caught in a standoff over how the payments, totaling millions of dollars, should be collected.
LIPA owes Riverhead Town, two school districts and four fire districts within the town more than $5 million in payments in lieu of taxes, known as “PILOTs,” from the 2021/2022 tax year. That amount will more than double when the payments, due for 2022/2023 are added. The payments are due on LIPA assets such as transmission lines, power stations and electrical substations located within the taxing jurisdictions.
LIPA officials say the company remains ready and willing to pay the amount owed, but the utility needs a detailed invoice and says the town should provide one, consolidating the amounts due to every taxing district within its borders.
Riverhead Town has refused to provide a consolidated invoice, arguing that it has no authority under state law to do so. Riverhead is the only town in Suffolk that has refused to provide LIPA with the consolidated invoice the utility company seeks.
| MORE COVERAGE: Riverhead Town, school and fire districts are owed millions in payments in lieu of taxes from LIPA —which LIPA has been trying to pay |
The dispute is further complicated by a pending appeal in a lawsuit brought by LIPA against Suffolk County, which brought all 10 towns into the suit as additional defendants.
Jamesport Fire District Commissioner Chuck Thomas, who is the current president of the Riverhead Fire Districts Council, said in an interview this week the fire districts are frustrated by the situation.
“I understand we have the least amount of money at stake, compared to the school districts, but to us, it’s significant,” Thomas said. Jamesport Fire District is owed about $30,000 from the 2021/2022 tax year. Riverhead Fire District is owed about $100,000, according to the district’s counsel.
This summer, town officials agreed to issue the consolidated invoice if the various districts would sign an agreement that included a release in the event there was any mistake in the amount billed, collected or distributed.
The agreement and a cover letter were circulated by the lawyer representing Riverhead Town in the pending lawsuit, Scott DeSimone of Peconic. Riverhead Central School District and Shoreham-Wading River School District were both unwilling to sign the agreement. The fire districts signed on.
“The only clause in there that caused us to pause was that this was a one-time thing,” Thomas said.
“The tone of the letter was like, ‘We’re doing you a favor,’” Thomas said. “It shouldn’t be ‘us against them.’ We’re all on the same team,” he said.
“The same taxpayers are all paying for this,” Thomas said, “the town, the school district, the fire district. And they are also LIPA’s ratepayers.”
“I have a suspicion we’ll still be talking about this next year at this time,” Thomas said resignedly.
Thomas said the fire districts are waiting to see what the school districts do.
Riverhead School Superintendent Augustine Tornatore said the school district’s attorney has reached out to the town and LIPA for a solution in the hope the district can avoid litigation to collect the funds due.
“There have been conversations, but nothing concrete at the moment,” Tornatore said.
The Riverhead school district is owed about $3 million for the 2021/2022 tax year.
DeSimone in August recommended to the Town Board that it sue LIPA to compel it to pay the individual taxing jurisdictions directly. The Town Board has not authorized such a lawsuit. It has not publicly discussed the matter further, though the topic of “litigation between LIPA and the Town of Riverhead” was on the board’s agenda for an executive session discussion on Dec. 1.
“LIPA remains ready to resolve this matter and make payments to the Town of Riverhead as we have done with every other town in Suffolk County,” a company spokesperson said this week. “We are hopeful that an agreement can be found so that those entities waiting to receive their funds will receive them without further delay.”
DeSimone told the Town Board LIPA has no right to demand a consolidated invoice. The statute doesn’t require it, he said.
The statute he was referring to is the State Public Authorities Law, which requires LIPA to “make payments in lieu of taxes to municipalities and school districts equal to the taxes and assessments” it would otherwise owe if it were not a tax-exempt organization.
| MORE COVERAGE: Riverhead may sue LIPA to collect payments in lieu of taxes LIPA says it’s ready and willing to pay |
Riverhead Town Attorney Erik Howard said in an interview Friday that the town believes the Public Authorities Law is unconstitutionally vague. “There really isn’t anything in there that sets forth how you would collect and distribute PILOT payments,” he said.
“Typically a PILOT payment is made pursuant to a written PILOT agreement,” Howard said. “The town needs a written agreement with the taxing jurisdictions that allows us to get money on their behalf — or an amendment to the Public Authorities Law,” he said.
The town attorney explained the town’s concerns. “If we’re putting out these bills, and we don’t have written authorization — even if they accept the money — and there is a deficiency, who is going to be responsible? Without an agreement and a hold harmless, it leaves us hanging out there as a potential entity to sue to recover it,” Howard said.
In a reply brief filed by Riverhead Town July 27 in its pending appeal to the Appellate Division, the town acknowledges that LIPA’s argument that the State Legislature, when it enacted the vague provision of the Public Authorities Law, “expected the POLOTs to be paid in the same manner as taxes,” as spelled out in the Suffolk County Tax Act.
“LIPA’s reasoning on this issue is sound,” the town’s brief, filed by DeSimone, continues.
“The Legislature was aware of the procedure that the Towns, County and LIPA had followed concerning the assessment, billing, collection and distribution of property taxes, and naturally expected that procedure to continue, albeit with a two percent cap. Accordingly, the Legislature did not enact detailed provisions to implement and administer PAL § 1020-q(1); instead, it intended the parties to continue to follow the same procedures they had been following since at least 1998.” LIPA was created by an act of the legislature in 1998.
In a statement from DeSimone provided to RiverheadLOCAL by Howard, in response to a question about the apparent inconsistency in the town’s position, DeSimone said the reply brief is a “joint reply brief” submitted to support the towns’ cross-appeal of the trial court’s decision in April 2021, which dismissed LIPA’s 2017 lawsuit against Suffolk County over tax liens filed by other towns and dismissed the towns’ counterclaims as moot.
“The towns’ cross appeal was filed protectively,” DeSimone said in the statement, “and would only be decided if the Appellate Division were to reverse the portion of the judgment that…dismissed all claims seeking an interpretation of (Public Authorities Law) 1020-(q)(1) or reverse that portion of the judgment” pertaining to LIPA’s failure to timely challenge the tax bills issued by the towns from 2014/2015 through 2020/2021, DeSimone said.
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