Sullivan IDA approves pipeline tax break

Tioga County likely to receive full tax payments

By FRITZ MAYER

MONTICELLO, NY — A county agency has agreed to grant the Millennium Pipeline Company millions of dollars in tax breaks. The board of the Sullivan County Industrial Development Agency (IDA) voted on December 19, 2006 to approve a payment in lieu of taxes (PILOT) agreement that will result in tax breaks of millions of dollars over the next 15 years.

Allan Scott, the CEO of the IDA, said the decision to approve the break was unanimous, and was based on the benefits to the county, which include jobs and increased tax revenue. Scott said he did not have an overall figure for the amount of the tax breaks over the 15-year life of the agreement, but he said that with the agreement in place, every taxing entity in the pipeline’s path would eventually receive three times as much revenue from the pipeline as they now receive, and the Millennium Pipeline Company will become the fifth largest taxpayer in the county.

The agreement is structured so the company will pay 25 percent of full taxes through the first five-year period, 50 percent of full taxes through the second five-year period and 75 percent of full taxes through the third five-year period. After 15 years, the company will pay full taxes.

The pipeline would go through eight towns: Bethel, Cochecton, Delaware, Forestburgh, Fremont, Highland, Lumberland and Tusten. PILOT payments would also go to school districts and the county. As one example of the tax payments, the Town of Delaware now receives $8,238 a year from the pipeline. In the first year of the PILOT agreement, the town would receive $12,357; after the PILOT agreement ends, the payment to the town would be $49,428. The savings to the company would be about $370,000.

Scott said one of the main reasons the board approved the PILOT agreement is because the company represented that without it, the project would probably not happen, and the county would lose all the anticipated additional revenue. The action marked the second time during 2006 that the agency voted on the matter. In the spring of 2006, the IDA voted seven-to-one in favor of granting the PILOT agreement. However, the agreement was structured in such a way that the project needed approval from all eight counties along its path in order for it to move forward.

In early June, the Tioga County IDA voted unanimously not to grant a PILOT agreement. After unsuccessfully lobbying Tioga officials to change their votes, the company amended the agreement, this time excluding Tioga County from the agreement.

Tioga County now will likely receive full tax payments from the company. According to Doug Barton, the director of economic planning and development for Tioga County, to his knowledge the company still plans to place the existing pipeline on the original route. He said the difference in revenue to the county would be about $14 million over the 15-year life of the PILOT agreement.

Barton said Tioga County is very rural, with few retail outlets to provide sales tax revenue. In view of that fact, coupled with the knowledge that the project would not provide much in the way of other economic benefits such as permanent jobs, IDA members decided not to grant the tax breaks.

After the Tioga vote, the company went back to the other counties, and again asked for the PILOT agreements. Again the company said that without the PILOT agreements from the remaining IDAs, the project would likely not go forward. The IDAs in all seven remaining countiesūSullivan, Rockland, Orange, Delaware, Broome, Chemung and Steubenūgranted the PILOT agreements.

Plans to build the pipeline began back in 1998, with the project initially planned to go from Corning through New York State and across the Hudson River. The Federal Energy Regulatory Commission (FERC) approved the initial plan in 2002. But the plan met stiff opposition from environmental and other groups who raised concerns about placing the pipeline in an environmentally sensitive part of the Hudson River.

Court battles ensued and eventually the developers redesigned the project to have it end in Rockland County, rather than crossing the river into Westchester County. FERC approved plans for the scaled-down version of the pipeline on December 21, 2006. The largest part of the plan calls for replacing the 12-inch Columbia Gas pipeline, which was built in the 1940s, with a new 30-inch pipeline.

Ownership of the Millennium Pipeline Company has shifted over the years, with three companies with gas distribution experience now sponsoring the project: NiSource Inc., KeySpan Corporation and DTE Energy.

Controversy has erupted along the route, with some residents criticizing the tax breaks. A group of residents in Broome County on December 8, 2006 asked the local IDA to reconsider its decision to grant the tax breaks. “It is my claim that this is corporate welfare,” Windsor resident Scott B. Clarke said, according to the Press & Sun-Bulletin.

Richard D’Attilio, executive director of the IDA, said the tax break was approved to ensure that the project would be completed and provide additional revenues to the county. The board refused to reconsider its decision.

According to the paper, John Kopalek, a member of the board of the Chenango Valley school district, said the pipeline would have been built with or without the PILOT agreement. He called the tax break “nuts.”

TRR photo by Eileen Hennessy
The Millenium Pipeline will replace the Columbia Pipeline, which has maintenance piping located in Cochecton Center, NY. (Click for larger version)