Long Island Power Authority v. Shoreham-Wading River Cent. School Dist.

• Decision Date: 10 January 1994
• Docket Number: SHOREHAM-WADING
• Citation: 195 A.D.2d 140,606 N.Y.S.2d 325
• Parties: , Util. L. Rep. P 26,371 LONG ISLAND POWER AUTHORITY, et al., Respondents-Appellants, v.RIVER CENTRAL SCHOOL DISTRICT, et al., Appellants-Respondents.
• Court: New York Supreme Court — Appellate Division

Page 325

606 N.Y.S.2d 325

195 A.D.2d 140, Util. L. Rep. P 26,371

LONG ISLAND POWER AUTHORITY, et al., Respondents-Appellants, v. SHOREHAM-WADING RIVER CENTRAL SCHOOL DISTRICT, et al Appellants-Respondents.

Supreme Court, Appellate Division Second Department.

Jan. 10, 1994.

Lewis & Greer, P.C., Poughkeepsie (Lou Lewis, of counsel), for appellant-respondent Shoreham-Wading River Cent. School Dist.

Robert J. Cimino, Co. Atty., Hauppauge (Robert L. Garfinkle, of counsel), for appellant-respondent County of Suffolk.

Block, Amelkin & Hamburger, Smithtown (Richard Hamburger, of counsel), for appellants-respondents Shoreham-Wading River Public Library and Wading River Fire Dist.

Murphy Bartol and O'Brien, Mineola (Ernest T. Bartol and Jeffrey P. Sharkey, of counsel), and Emily Pines, Town Atty., Medford, for appellants-respondents Town of Brookhaven and Brookhaven Lighting Dist. (one brief filed).

Rivkin, Radler & Kremer, Uniondale (Evan H. Krinick and Merril S. Biscone, of counsel), and Richard P. Bonnifield, Garden City, for respondent-appellant Long Island Power Authority (one brief filed).

Robert J. Grey, Hicksville (Ronald J. Macklin, of counsel), and Shea & Gould, New York City (Michael Lesch and John G. Nicolich, of counsel), for respondent-appellant Long Island Lighting Co. (one brief filed).

Before SULLIVAN, J.P., and O'BRIEN, RITTER and JOY, JJ.

PER CURIAM.

In this declaratory judgment action, we are called upon to construe that section of the Long Island Power Authority Act that obligates the plaintiff Long Island Power Authority to make certain payments in lieu of taxes to the defendants, the taxing jurisdictions within which the Shoreham nuclear power plant is located.

I

In 1986, the Legislature determined that "a situation threatening the economy, health and safety" existed on Long Island due to "[c]onstantly escalating and excessive costs of electricity" (Public Authorities Law § 1020-a). As a result of these increased costs, there developed "a lack of confidence that * * * electricity can be supplied in a reliable, efficient and economic manner by the Long Island lighting company" (Public Authorities Law § 1020-a). The direct cause of these excessive costs and lack of confidence was the "imprudent" construction of the Shoreham nuclear power plant (hereinafter Shoreham) by the Long Island Lighting Company (hereinafter LILCO).

In order to remedy this situation, the Legislature enacted the Long Island Power Authority Act (Public Authorities Law § 1020, et seq.). This created the Long Island Power Authority (hereinafter LIPA) which was entrusted with the task of replacing LILCO "with a publicly owned power authority" (Public Authorities Law § 1020-a). LIPA was given the authority to acquire all or part of the assets of LILCO through a negotiated agreement, a tender offer for LILCO's stock, or its exercise of the power of eminent domain (see, Public Authorities Law § 1020-h). LIPA was given discretion to determine which mode of acquisition to employ (see, Matter of Citizens For An Orderly Energy Policy v. Cuomo, 78 N.Y.2d 398, 407-408, 576 N.Y.S.2d 185, 582 N.E.2d 568). LIPA's use of its powers was to be guided by the goal of minimizing electrical rates (see, Public Authorities Law § 1020-h[2]. LIPA, however, was specifically prohibited from constructing and operating a nuclear-powered facility and was specifically directed to "close and decommission" Shoreham "as soon as practicable" (Public Authorities Law §§ 1020-h[9], 1020-t).

As a tax-exempt public authority, LIPA is not required to pay any taxes or assessments "upon any of the property acquired or controlled by it" (Public Authorities Law § 1020-p[2]. However, to cushion the financial blow to those jurisdictions that taxed property acquired by LIPA from LILCO, LIPA is required, pursuant to Public Authorities Law § 1020-q(1), to make "payments in lieu of taxes" (hereinafter PILOTS) (see, Matter of Long Is. Light. Co. v. Assessor of Town of Brookhaven, 154 A.D.2d 188, 194, 552 N.Y.S.2d 336).

II

The "closure of Shoreham was one of the overriding engines driving the emergency legislative initiative and package" that resulted in the LIPA Act (see, Matter of Citizens For An Orderly Energy Policy v. Cuomo, 78 N.Y.2d 398, 411, 576 N.Y.S.2d 185, 582 N.E.2d 568, supra ). In furtherance of this end, and pursuant to an agreement dated February 28, 1989, LIPA and LILCO agreed that Shoreham would be transferred to LIPA for $1 (see, Matter of Citizens For An Orderly Energy Policy v. Cuomo, 78 N.Y.2d 398, 408-410, 576 N.Y.S.2d 185, 582 N.E.2d 568, supra; Matter of Long Is. Light. Co. v. Assessor of Town of Brookhaven, 154 A.D.2d 188, 190, 552 N.Y.S.2d 336, supra; see also, Long Island Lighting Co. v. Cuomo, 888 F.2d 230). Shortly after the agreement was reached, Shoreham was granted a full operating license. On June 12, 1991, the United States Nuclear Regulatory Commission downgraded the license on Shoreham to a possession-only license. Shoreham was actually transferred to LIPA for $1 on February 29, 1992.

III

When the Long Island Power Authority Act was passed, the annual total of real property taxes assessed on the Shoreham parcel exceeded $60,000,000. The assessed taxes generally increased each year thereafter until they reached a total of $82,066,699 for the 1991-1992 tax year, when ownership of Shoreham was transferred to LIPA. During that tax year, the assessed valuations on the parcel where Shoreham is situated totalled $156,759,980. Prior to the transfer of Shoreham, LILCO had made one half of its tax payment for the 1991-1992 tax year, paying approximately $41,000,000. The second half of the payment was due on May 31, 1992 (see, Suffolk County Tax Act § 13[c].

Negotiations between LIPA, LILCO, and the defendants resulted in an agreement whereby further payments were made to the defendants. Pursuant to this agreement, on or about June 1, 1992, LIPA tendered a check to the Town of Brookhaven in the amount of $40,891,509.59. At the same time, LILCO tendered a check in the amount of $141,839.97, representing the taxes attributable to the real property LILCO retained after its transfer of the Shoreham plant. Thus, the defendants received payments totalling over $82,000,000 during the 1991-1992 tax year.

The agreement between the parties further provided that LIPA would make two subsequent payments to the defendants. The first was to be made on or about January 10, 1993, and would be $40,891,409.59. The second was to be made on or before May 31, 1993, and would be $36,802,358.00. LIPA has represented that these payments have in fact been made.

IV

The instant declaratory judgment action was commenced by LIPA in June 1992. LILCO was subsequently given permission to intervene as a plaintiff. As noted, the action seeks an interpretation of that provision of the Public Authorities Law that obligates LIPA to make PILOTS. Generally, the resolution of the issues raised by the parties will determine when and in what amount PILOTS are to be made.

Upon the parties' respective motions for summary judgment, the Supreme Court generally upheld the positions of LIPA and LILCO as to when PILOTS are to commence and how they are to be determined.

Public Authorities Law § 1020-q(1) provides as follows:

" § 1020-q. Payments in lieu of taxes

"1. Each year after property theretofore owned by LILCO is acquired by the authority by any means authorized by this title and, as a consequence, is removed from the tax rolls, the authority shall make payments in lieu of taxes to municipalities and school districts equal to the taxes and assessments which would have been received from year to year by each such jurisdiction if such acquisition had not occurred, except for such taxing jurisdictions which tax the Shoreham plant, in which case the in lieu of tax payments shall in the first year after the acquisition be equal to one hundred percent of the taxes and assessments which would have been received by such taxing jurisdictions. In each succeeding year such in lieu of tax payments shall be decreased by ten percent until such time as such payments equal taxes and assessments which would have been levied on such plant in a nonoperative state" (L.1986, ch. 517, § 1).

The plaintiffs take the position that LIPA's PILOT obligation commenced on March 1, 1992, the day after Shoreham was transferred. In this regard, LILCO specifically argues that it is entitled to a refund for any taxes that it paid, attributable to that portion of the tax year that remained after the date of its transfer of the Shoreham property. The defendants, on the other hand, argue that the PILOT obligation did not commence until after the 1991-1992 tax year ended on November 30, 1992. In support of their position, the defendants argue that the statute should be read as providing a two-pronged precondition for the commencement of PILOTS. They assert that property must be acquired by LIPA and removed from the tax rolls. So viewed, according to the defendants, the $40,891,509.59 paid by LIPA on or about June 1, 1992, pursuant to the negotiated agreement between the parties must be characterized as a tax payment and not, as the plaintiffs argue, the first installment of PILOTS.

As did the Supreme Court, we disagree with the defendants. The statute unambiguously states that PILOTS attributable to the Shoreham property "shall in the first year after the acquisition be equal to one hundred percent of the taxes and assessments which would have been received by such taxing jurisdictions" (Public Authorities Law § 1020-q[1]; emphasis supplied). No restriction is apparent, on the face of the statute, which would serve to postpone the commencement of PILOTS attributable to the Shoreham property. To impose the limitation urged by the defendants would be contrary to the clear import of the statute (see, McKinney's Cons. Laws of NY, Statutes §§ 94, 254; see also, General Construction Law § 58; O'Dea v....