Maple Ridge withholds payment

LAWSUIT FILED: Wind farm owner holding balance until issue of Empire Zone decertification is resolved

LOWVILLE — Lewis County has received only one-quarter of its requested $8.99 million payment from Maple Ridge Wind Farm, with the balance being held until its Empire Zone status is cleared up.

Flat Rock Windpower, the company under which the 195-turbine wind farm was developed, also is seeking court approval of a proposed escrow agreement that local taxing jurisdictions recently rejected — and the possible repayment of millions of dollars already sent to the county, towns and school districts.

Based on a 15-year payment-in-lieu-of-taxes plan, the county billed Flat Rock for $8.99 million but received a payment of only $2.29 million, according to County Treasurer Vicki A. Roy. That amount is the fall-back payment required under terms of the PILOT if Empire Zone benefits are rescinded.

"Our position has been and remains that the jurisdictions are entitled to the full payment under the PILOT," County Attorney Richard J. Graham said.

The funding is being shared among affected taxing jurisdictions through an agreement based on 2004 and 2005 tax rates.

Along with making the lesser payment, Flat Rock on Wednesday also filed a lawsuit in state Supreme Court against the county and other involved taxing jurisdictions — the towns of Martinsburg, Harrisburg, Lowville and Watson and the Lowville, Copenhagen and South Lewis school districts — that provides its justification for withholding the full payment.

The amount billed by the county was based on the wind farm's 140-tower Phase I being covered under the state Empire Zone program, which reimburses tax payments to eligible companies that have created jobs or made capital investments. The lawsuit, filed by David M. Schraver of Rochester law firm Nixon Peabody, claims the PILOT plan requires Flat Rock to pay only a so-called "fallback amount" on those towers, since the state Department of Economic Development in June notified Flat Rock that it had been decertified from the Empire Zone program.

Officials from the company and taxing jurisdictions in August informally appealed the decision during a meeting with the commissioner of economic development in Utica, but were unsuccessful, the suit states.

Flat Rock — like 368 other decertified businesses — has since submitted a formal appeal that is to be reviewed by the state Empire Zone Designation Board. While that board ruled on a handful of companies Dec. 15, it has not convened since then and no hearing schedule has been established.

According to the lawsuit, Flat Rock has put a balance of $6.7 million into an escrow account with U.S. Bank that will be given to local taxing jurisdictions upon Empire Zone recertification. Flat Rock recently asked the municipalities to enter such an escrow agreement, but attorneys for the jurisdictions ultimately recommended against the proposal.

"In communicating their rejection of Flat Rock's proposal, the taxing jurisdictions made clear that payment of any amount less than the invoiced amount would be treated as an event of default under the PILOT agreement," the lawsuit said.

The company is seeking court orders preventing the municipalities from taking such action and directing that the escrow funding be distributed according to terms of the rejected agreement, which was not included in court filings.

Since the Empire Zone decertifications were made retroactive to Jan. 1, 2008, Flat Rock also is seeking a judicial ruling that its payments since 2008 be recalculated to the fallback amount.

While not stated in the lawsuit, such a determination could mean that local municipalities would have to pay back much of Flat Rock's $8.6 million payment from a year ago.

Recertification of the wind farm likely would end any legal and financial wrangling. According to Flat Rock's lawsuit, the company had offered to "exhaust all anticipated appeals at its expense in the event that the ... decision was unfavorable."

Flat Rock was decertified because of its designation as a "shirt-changer," defined as a company reincorporated as a different entity that claimed it created jobs when it actually just transferred employees from one entity to the other. Flat Rock Windpower apparently was included in the category based on its 2006 financial report to Empire State Development, Mr. Graham said.

The county attorney on Thursday declined to comment specifically on the lawsuit, saying that he and other attorneys had yet to review the document fully.

"We will be meeting shortly with other taxing jurisdictions to plot a course of action," Mr. Graham said.

Affected municipalities budgeted for fallback payments to avoid a potential revenue shortfall next year. If the wind farm retains Empire Zone benefits, the unbudgeted revenue would bolster their respective budgets.