The months-long dispute between Riverhead Town and the Long Island Power Authority regarding the invoicing of PILOT payments due school and fire districts is about to be resolved.
An agreement between the town, LIPA, Suffolk County and all the town’s special districts to collect what is likely more than $10 million of payments-in-lieu-of-taxes, also known as PILOTs, owed by LIPA for properties containing transmission lines, power stations and electrical substations in Riverhead, has been drafted and agreed on by Riverhead and LIPA, according to Town Attorney Erik Howard.
The agreement is currently undergoing minor last-minute revisions requested by the county’s attorneys, Howard said.
The agreement authorizes Riverhead Town to send consolidated PILOT statements to LIPA for the 2021-2022 and 2022-2023 tax years, on behalf of all taxing jurisdictions in Riverhead, on properties subject to PILOTs under the Public Authorities Law, according to a copy of the agreement posted with the agenda for tonight’s Riverhead Board of Education meeting.
The consolidated statements will include the PILOT amounts owed for all taxing jurisdictions on each LIPA-owned parcel, calculated in the same way as property taxes. The statements will contain all the information that the town would ordinarily provide in its property tax bills issued to the parcels, the agreement states.
Within 30 days of receipt of the PILOT statements, LIPA will be required to pay the town the amount that LIPA determines to be its PILOT obligations after applying the 2% cap imposed by the State Public Authorities Law, the agreement states.
The agreement protects Riverhead Town from liability if there is a dispute between LIPA and the taxing jurisdiction over the amount owed by LIPA.
A spokesperson for LIPA declined comment for this story.
LIPA CEO Thomas Falcone last year asked for a consolidated invoice so it could remit PILOTs for the 2021-2022 tax year, but town officials rejected the request on the advice of outside counsel.
Riverhead is the only town in Suffolk County that did not send LIPA a consolidated invoice or collect the 2021-2022 PILOTs, LIPA representatives said in previous interviews.
The town has been under pressure from a fire district representative and school district union officials to collect the funds to avoid the potential for budget cuts.
“To me, I think it’s a no brainer,” said Chuck Thomas, a Jamesport Fire District Commissioner and president of the Riverhead Fire Districts Council, who sounded the alarm to the Town Board last summer. “I’m glad the town is taking the position that they’re taking.”
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 town’s outside counsel, Scott DeSimone, previously said he prepared individual PILOT invoices for each taxing district and sent the invoices to the districts for them to submit to LIPA for payment directly to the taxing district. DeSimone told the Town Board LIPA had no right to demand a consolidated invoice. He blamed LIPA for refusing to pay. He suggested the town bring a lawsuit against LIPA to compel the authority to pay, but a lawsuit never materialized.
MORE COVERAGE: Riverhead may sue LIPA to collect payments in lieu of taxes LIPA says it’s ready and willing to pay
Attempts to resolve the dispute by the town last year were met with backlash from the Riverhead Central School District’s attorneys, who advised against a proposed agreement for fear it would involve the district in ongoing litigation between the town and LIPA.
MORE COVERAGE: Riverhead school district rejects agreement with town for collection of $2.9 million from LIPA, for fear it will involve district in litigation
The Riverhead Board of Education has a resolution authorizing the revised agreement on its agenda for tonight’s meeting. School district officials, through a public relations representative, declined comment.
Howard said in an email that the agreement is “essential to protect the interests of all parties since this is an interim arrangement and there is litigation pending.” He said that the Town Board will need to authorize the agreement but “can’t presently guarantee that it will be ready for the [March 7] meeting.”
LIPA sued Suffolk County in 2017 to stop the county from filing tax liens against LIPA-owned properties and to prevent the county from taking tax deeds to the authority’s properties for unpaid taxes.
The 1986 LIPA Act established the power authority as a nonprofit entity exempt from property taxes. The LIPA Act required the authority to make payments in lieu of taxes — PILOTs — to municipalities and school districts on properties previously owned by the for-profit Long Island Lighting Company in amounts equal to the taxes and assessments that LILCO would have paid had it continued to own the properties. LIPA became the owner of properties formerly owned by LILCO in 1998. The 2014 LIPA Reform Act limited PILOT increases to 2% per year beginning in January 2015.
Since then, LIPA has limited its PILOTs to 2% increases, according to the complaint filed against the county.
The county filed a third-party complaint naming each of the 10 towns as defendants because necessary because the towns are necessary parties to the action, according to the county’s complaint.
The trial court in a decision entered Oct. 8, 2021, dismissed LIPA’s complaint and ordered LIPA to pay the county unpaid real property taxes for the tax years 2014/2015 through 2020/2021.
The court also dismissed the county’s third party complaint and the towns’ counterclaims as moot.
LIPA, the county and all 10 towns have filed appeals to the State Supreme Court’s Appellate Division. That appeal is still pending.
MORE COVERAGE: As tax bills are issued for new year, ongoing dispute over LIPA payments leaves fire and school districts still waiting for last year’s cash
The Riverhead Central School District approved a tax levy last year that included the money that was expected to come from the PILOT payments — an estimated $2.9 million. In January, both the Riverhead Central School District and the Shoreham-Wading River Central School District, each represented by the law firm Guercio & Guercio, authorized litigation against undisclosed parties “with respect to payments in lieu of taxes.” No lawsuits have been filed by either district yet. An attorney for the Riverhead district did not respond to a question regarding the lawsuit at that time.
In the last few months, members of the community have inquired both at Town Board and Board of Education meetings about the status of the issue. Both the Riverhead Central Faculty Association and the Riverhead Administrators Association — unions for employees at the school district — made public statements to the Town Board last month.
“We’re delighted that this town has finally resolved this issue after about 18 months,” RCFA President Greg Wallace said in an interview. “The impact of not getting this money would have been detrimental to our students. And we are just happy to move forward and continuing to fight for our kids here in Riverhead.”
Supervisor Yvette Aguiar did not return a call seeking comment for this story.
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