LIPA Tax Grievance and Tax Cap Could Mean Trouble For Port Jeff Schools

A new state law capping property tax increases at two percent alongside the impending tax grievance by LIPA on the power plant it operates in Port Jefferson could mean a double whammy to the school district's revenue.

In a worst case senerio for Port Jefferson schools where LIPA wins its tax grievance with the new tax cap law in effect, the impact on the school district would be “significant" according to the assistant superintendent for business Mark Flower because the school could no longer raise additional money by increasing the tax levy.

“That revenue would be just be gone,” he said

This May, at exactly the same dollar amount as last year. Despite the fact that the actual money spent did not change, Port Jefferson's school property taxes went up by 8.93 percent.

Under the new law that passed in the state Senate last week and signed by the Governor, property tax increases will be capped at the lower of the Consumer Price Index (CPI) or two percent per year. If the law were in effect this year, Port Jefferson couldn't have passed its budget.

Flowers said that there are two factors that help decide the tax levy moving forward, the tax cap and the district’s pension costs. Based on the current CPI the tax increase would be capped at 1.6 percent and based on current costs to cover the district's pension program they could add an additional 1.3 percent to the tax levy. If the district had to calculate its maximum tax increase today, it would top out at 2.9 percent.

That 2.9 percent translates into $926,000. This year’s budget was set at a little over $37 million and came with that 8.93 percent increase in taxes for residents. The reason for the is because the school board decided not to touch any of the almost $7 million in reserves the district has on hand.

“The reason we chose not to do that is because we don’t know what’s going on with LIPA and we still don’t know what’s going on with LIPA,” said Flowers.

In 2010 in taxes for the power plant property. LIPA's grievence calls for a 90 percent reduction in taxes. If that happened across the board, then the school could expect only about $1.4 million from LIPA in taxes, a loss of $12.6 million in revenue.

"Should LIPA be successful in its tax grievance the district is developing a plan to use the $7 million in reserves it currently has to help buffer the loss of the LIPA revenue," said Flower. "By doing so, it might help to reduce the impact on the tax rate."

Even $7 million in reserves is not enough to make up for the dramatic drop in income that the school faces with LIPA's tax grievance and in the worst case senerio, program cuts will almost definitely be needed.

To comply with the new tax cap Flowers said that even if the district rolled over the same budget the school would have to have to make changes in the program.

"We would have to find ways to control costs," he said.