Developer windfall: $23 million

PILOT AGREEMENT: Galloo Island project PILOT is $2.4 million

The proposed Galloo Island Wind Farm is ready to agree to spend more than $2 million per year as part of a payment-in-lieu-of-taxes agreement, but it stands to save nearly $23 million in other tax abatements.

Officials from the town of Hounsfield, Sackets Harbor Central School District and Jefferson County are firming up their division of a property tax PILOT, which will generate $2.14 million per year.

But developer Upstate NY Power Corp. will save $22.7 million in sales and mortgage recording tax, about $10.5 million of which would have gone to local governments.

Upstate NY Power said in an Oct. 6 application to the Jefferson County Industrial Development Agency that $253 million in the project could be subject to sales and use tax. The sales tax rate in the county is 7.75 percent, which means the developer would save $19,607,500. The county and town of Hounsfield shares of the tax collected would be $9,487,500.

The mortgage recording tax could total $3,093,750, with $1,031,250 going to the town of Hounsfield.

"I don't think there's anything typical about this project," JCIDA Chief Executive Officer Donald C. Alexander said. "The numbers look very different because of the scope of this project. It's the biggest we've ever had, by far."

But, he said, JCIDA uses the tools the law allows for helping development happen.

"This is a consistent approach we would take with any project," he said.

In the application, Upstate NY Power projects it will spend about $500 million to build the wind farm. The application for a mortgage recording and sales tax break agreement for the $153 million transmission line will come later.

The payments from the PILOT may not begin for two or three years.

JCIDA will levy a $1.2 million fee for its role in working on the tax breaks. Some of the fee will cover the cost of the attorneys and consultant who helped develop the PILOT. But most of it will go to the revolving loan fund, which gives low-interest loans to new and expanding businesses.

"Any money we keep here can be re-lent to other projects," Mr. Alexander said.

One county legislator has suggested some of the money from fees or the PILOT go toward capital improvements at Jefferson Community College, Watertown.

Scott A. Gray, R-Watertown, circulated a memo in early October, asking the legislators to consider asking that the JCIDA fee and additional payments from Upstate NY Power go to support the county's share of about $18 million in new and refurbished buildings at the campus.

"There's a need," he said. "This is a difficult time for finding funds in the county budget to support the master plan."

It has not been a subject of PILOT negotiations so far and Mr. Gray is not a member of the county's negotiation team.

"We should be bringing it up with the IDA now or anytime before we approve the PILOT," Mr. Gray said.

Legislature Chairman Kenneth D. Blankenbush, who is part of the county's PILOT team, said the use of the PILOT proceeds should be the second step.

"We're not even going to look at it until the PILOT is agreed to," he said. "What we're working on right now is finding out the distribution rates."

The precedent for directing money toward specific projects would be the PILOT with Residential Communities Initiative on Fort Drum. In that agreement, the county and JCIDA split $5.2 million in payments so that the county keeps $350,000 in each of the seven years for economic development projects and airport infrastructure improvements, while the balance of $380,987 goes to JCIDA, according to Times archives.

"With RCI, it was an agreement with IDA — a side agreement," Mr. Blankenbush said. "It has not really to do with the PILOT."

He said he thought the idea may be part of discussions in the future, especially as the legislators look ahead to the 2011 budget.

Mr. Alexander said he'd be willing to discuss the option with the county, but said the revolving loan fund has been running low with under $1 million.

"Our money is earmarked for economic development," he said. "This money would be absolutely critical to us."