Opinion ID: 2015169
Heading Depth: 1
Heading Rank: 2

Heading: The Duration of LIPA's Obligation to Pay PILOTs on the Shoreham Plant

Text: LILCO's position on this issue is that PILOTs on Shoreham should terminate entirely after the expiration of the first year following LIPA's acquisition of the Shoreham plant. LILCO, thus, reads Public Authorities Law § 1020-q (1) as requiring PILOTs at 100% of taxes and assessments in the first year after the acquisition, and then requiring declining PILOTs only until such time as such payments equal taxes and assessments which would have been levied on such plant in a nonoperative state (Public Authorities Law § 1020-q [1]). Since no one disputes on this appeal Supreme Court's declaration that Shoreham was in a nonoperative state at the time of transfer, LILCO argues that PILOTs should have terminated one year after the date of transfer. We agree with the courts below that the statute is not subject to LILCO's interpretation. First, LILCO's reading of the statute would only be tenable if section 1020-q (1) limited the continuation of all payments in lieu of taxes to the point when they were the equivalent of taxes and assessments properly levied on the plant in a nonoperative state. The LIPA Act, however, only expressly limits the decreases in PILOTs to that point of equivalency to tax levies on a nonoperative facility. Thus, the most reasonable construction of section 1020-q (1) directs gradual reduction of the size of PILOTs until they reach a floor level of taxes and assessments which the taxing jurisdictions would have received from LILCO based upon a properly assessed valuation of a defunct Shoreham plant. Our reading of Public Authorities Law § 1020-q (1) is confirmed by the Assembly sponsor's legislative memorandum in support of the LIPA Act proposal, and also by basic real property tax assessment principles. The sponsoring memorandum outlined that, as to the general acquisition of LILCO properties envisaged by the LIPA Act LIPA is required to make payments in lieu of taxes and assessments to municipalities equal to the taxes and assessments that would have been received if its properties were owned by a private entity (Mem of Assembly Sponsor, Bill Jacket, L 1986, ch 517, at 13). However, the memorandum further explained, with respect to the real property on which the Shoreham Nuclear Plant is located, in lieu payments are required in amounts which phase-down their inordinate and inequitable size  ( id. [emphasis supplied]). Thus, although LILCO relies on documents indicating that officials who did not directly participate in the legislative process of enacting the LIPA Act may have interpreted section 1020-q (1) differently, what was contemplated by the Legislature was a phase down to PILOTs equivalent to the taxes and assessments which LILCO would have paid based on a properly assessed valuation of the defunct Shoreham plant. A total elimination of PILOTs on the Shoreham plant in its nonoperative state would have defeated the overriding purpose of Public Authorities Law § 1020-q (1), to provide a substitute stream of municipal revenue on all LILCO property acquired by LIPA, for the taxes which fairly and properly would have been received from year to year by each [taxing] jurisdiction if such acquisition had not occurred ( id. ). Even nonoperative property of a public utility has assessable value for purposes of local taxation. In People ex rel. Lyford v Allen (286 App Div 621) then-Justice Bergan held that [e]ven if a railroad is defunct as an entity, the value of its real estate apart from utilization for railroad purposes is not only assessable but it must be assessed `at the full value thereof', and would have remitted to the trial court to fix the salvage or usable value of the structures in the absence of a stipulation by the parties to a specified increase in assessment to reflect an estimated approximate value of the utility's property above the value of the land ( id. , at 626, 627; see also , Matter of Onondaga County Water Dist. v Board of Assessors , 39 N.Y.2d 601, 606 [utility's property assessment may be reduced for functional obsolescence]). Correspondingly here, the LIPA Act concededly contemplated PILOTs of indefinite duration on all acquired LILCO property other than the Shoreham plant to be based upon the level of taxation LILCO would have paid but for LIPA's acquisition. There is nothing in the statutory language or the legislative history to indicate that the PILOTs on LILCO's Shoreham property were to be treated differently except to gradually reduce their size to eliminate inordinate and inequitable assessments on Shoreham (Bill Jacket, L 1986, ch 517, at 13) and ultimately to reflect its true value as a defunct plant. It follows from the foregoing that the courts below properly held that PILOTs on the Shoreham plant will continue as a perpetual obligation of LIPA, subject to reduction until its attainment of its legally and properly assessed valuation in a nonoperative state, as determined by way of agreement among the parties to this action, or by a court of competent jurisdiction. We also agree with the Supreme Court and the Appellate Division that the literal language of Public Authorities Law § 1020-q (1) controls regarding the rate of reduction of PILOTs, that is, [i]n each succeeding year [PILOTs] shall be decreased by ten percent until the statutory floor is reached. Hence, PILOTs on Shoreham are to be reduced each year by 10% of the PILOT of the preceding year.