NOTE: Updated March 2, 2017 to include a correction in the ninth graph on the scheduled PILOT agreement for NRG when the plant was mothballed, along with a quote from NRG Spokesman David Gaier, who provided WRFA with the correction.
JAMESTOWN – The Chautauqua County Industrial Development Agency met on Tuesday and gave its approval to a renegotiated tax abatement agreement for the NRG power plant in Dunkirk.
Under the revised agreement, NRG – which was the largest tax payer in the county before the power plant was mothballed in 2015 – will make a total annual payment in lieu of taxes (PILOT) of $420,000, which will be split between the county, the Dunkirk School District, and the city of Dunkirk. That payment will continue for the next two to three years, depending on when the power plant repowering project – which involves converting the facility from a coal burning one to natural gas – will be completed.
Chautauqua County IDA Finance Director Richard Dixon said the renegotiation was needed to accommodate for the time it will take for the power plant to resume operation, but once it’s running, they original PILOT schedule will resume.
“It’s going to be a great project, repowering and moving forward,” Dixon said. “As we discussed, it’s going from 530 megawatts to 450, but they’re still going to make their full PILOT payments that they promised to make once the facility is up and running, so it’s a win-win for everybody.”
A public hearing on the renegotiation took place last week in Dunkirk, with some residents voicing concern that the city was not invited to be part of the renegotiation process and also were disappointed that the NRG plant will not have as many employees working once the conversation is complete. As with most tax abatement deals, the number of employees a project will yield is one of the factors typically considered.
However, North County Legislator and IDA board member George Borrello (R-Irving) said that all parties were represented in the process.
“All the stakeholders, the taxing entities, were a part of this process,” Borrello said. “And when you think of where we were a year ago, when repowering wasn’t even on the table at that point, to where we are now with the lawsuit behind us and NRG ready to move forward, this is a huge step in the right direction and I think that is an important point. The bottom line is this PILOT agreement gets them to agree to pay at a higher rate, even though they are not going to be producing as much electricity, is a huge boon and a big win for Dunkirk, the North County, the School District, and everyone else involved.”
Once the power plant is back on line, NRG will again follow the original PILOT schedule that was agreed to in 2008, which goes up to over $10 million in the last year, despite a power capacity reduction from 530 megawatts to 450 megawatts.
The renegotiated PILOT payment is still about 85 percent less than what would have been paid had the NRG plant not been mothballed by the company. According to NRG spokesman David Gaier, the company actually had the option to not make any PILOT, but still opted to move forward with a payment.
“To provide some tax relief and certainty at this time, we’ve agreed to pay $420,000 annually until the first Dunkirk unit returns to service on natural gas. In addition, NRG paid $13.9 million more than we were required to – purely out of goodwill to the community rather than obligation – for tax years 2014 and 2015,” Gaier told WRFA, adding, “NRG continues to work on advancing the Dunkirk natural gas project, assuming that all other stakeholders continue to meet their previous commitments to the project.”
The loss in revenue due to the mothballing of the facility and also during the time it will take to convert the plant and get it back online will likely be offset by state mitigation aid, which Sen. Cathy Young and Assemblyman Andy Goodell have both said they are committed to bringing to Dunkirk in the upcoming state budget.
In other news, the IDA Board also approved an amendment to the subordination agreement with the Stannard Group, which involves changing financial positioning in regard to where the IDA falls in line when it comes to the group repaying on an Al Tech loan.
The IDA board also approved the creation of a Transactions Committee, which will allow the IDA to move forward with preliminary actions without the need to meet as a full board. The committee will be comprised of the board chair, the executive director, the finance director, and the project manager.
And the board approved a preliminary resolution to begin the process of negotiating a tax abatement deal with Great Lakes Cold Storage, as an incentive to get the company to build a 110,000 square-foot storage freezer warehouse at a location in Dunkirk to help assist the Fieldbrook Foods plant. Officials say if the warehouse is built, 27 new jobs would be created and there cold also be the potential for a 100,000 square-foot expansion. However, the company is also considering building a warehouse at a location in Pennsylvania, so officials want to move forward with drawing up a proposal and seeing if it will be enough to convince the company to build in Chautauqua County.
The board is expected to consider the proposed PILOT agreement for Great Lakes Storage during the March board meeting, which will also be when the full board reviews the 2016 audit.