Attorneys paid big bucks for PILOT

By October, the Jefferson County Industrial Development Agency had paid its consultants about $38,000 to develop a model property tax exemption policy for wind power developments.

But the big money paid to JCIDA attorneys came after Oct. 6, and that number will remain secret because it has been paid by the company bringing Galloo Island Wind Farm to Jefferson County.

JCIDA Chief Executive Officer Donald C. Alexander has estimated that $200,000 was spent by all parties on the payment-in-lieu-of-taxes agreement.

"In the first phase, it was the IDA's responsibility to figure out how to develop" the policy, Mr. Alexander said. "The money was absolutely necessary to be spent because the community deserved to have the best legal minds on this issue we could find."

The agency spent $37,816 on attorney and consultant fees beginning in July 2008.

From March 2009 through October, the agency paid $13,850.52 to Mark E. Quallen, who has experience in developing renewable energy projects. JCIDA paid $9,215 for attorney Justin S. Miller, Harris Beach PLLC, Albany, in bills from September through October. Local attorney W. James Heary was paid $4,380 for bills from January 2009 through May. And John P. Sidd, attorney with Menter, Rudin & Trivelpiece, Syracuse, was paid $10,290 for bills from July 2008 through January. An additional $80.48 went toward public notices.

But that changed when Upstate NY Power submitted its application for a PILOT and sales-leaseback agreement Oct. 6. From that point on, the consultant and attorneys, except Mr. Sidd, were paid by Upstate through direct billing.

Brian T. McMahon, executive director of the New York State Economic Development Council, said having the developer pay those fees is a common practice in the state.

"Most IDAs don't have the reserves to pay that," he said. "But the bigger reason is that the developer is the benefiting entity. The IDA's lawyer has an ethical obligation to the IDA."

Generally, industrial development agencies include that stipulation in their applications and in a final contract, he said.

A spokesman for the state Authority Budget Office said there was nothing in the law to preclude JCIDA from charging developers for work on their applications. Indeed, any work that goes toward the mission of economic development is valid for any money JCIDA has, no matter the source.

JCIDA has no record of how much the attorneys were paid, and Upstate declined to share that information.

Mr. Alexander said Mr. Heary had begun conversations with Mr. Sidd that were concluded after the application had been filed and JCIDA shouldered the bill for that.

When the PILOT stalled in the county Board of Legislators in January, Mr. Alexander claimed that $200,000 had been spent to work on the PILOT.

But after a Freedom of Information request from the Times revealed the actual cost of $37,000 for the agency, Mr. Alexander explained he hadn't meant all the cost was borne by the agency, but the cost for the process overall.

"The minute a developer fills out an application, the cost is the responsibility of the developer," he said. "The lawyers and consultant billed directly to the developer, but anecdotally, I was told the cost was more than $200,000, including the Nixon Peabody portion."

Nixon Peabody, Rochester, is the law firm that represented Upstate NY Power in the PILOT negotiations.

Jefferson County also spent $15,844.71 on the legal advice of Kevin R. McAuliffe, Hiscock & Barclay, Syracuse, from January 2008 through January 2010.

A sale-leaseback agreement would eliminate mortgage recording and sales tax for the $500 million investment on the island. That represents a savings of about $22.7 million, according to the developer's Oct. 6 application to JCIDA. But the amount in sales tax could be less because the state Department of Taxation and Finance has ruled for other wind farms that the entire turbine structure is exempt.

The town of Hounsfield, Sackets Harbor Central School District, county Board of Legislators and JCIDA board approved the PILOT, which is worth about $54 million.

The PILOT will run 20 years instead of the standard 15. Normally, proceeds are based on proportional distribution of property taxes among the jurisdictions. Instead, the Galloo Island PILOT gives Sackets Harbor Central School District 50 percent, the county 35 percent and the town 15 percent. That represents less than the school's proportionate share, and more than the town's.

The PILOT payments would begin at $2.14 million, increasing by 2.5 percent each year, plus supplemental payments if higher electricity costs prevail. That's also different from a standard PILOT, where businesses pay a portion of what their full taxes would be.