By Dan Hust
SULLIVAN COUNTY February 2, 2007 Ask some people, and the Millennium Pipeline Project is a windfall for Sullivan County.
Ask others, and the coming natural gas pipeline represents a financial hit the area can ill afford. It’s even become a rallying point for IDA reform.
The $375.1 million project is intended to replace Columbia Gas Transmission’s circa-1940s 12-inch pipeline with a 30-inch version. It extends 181 miles from Corning to Ramapo, traversing the western and southern sections of Sullivan County pretty much along the path of the existing pipeline.
The federal government has approved the project, and construction is slated to begin this year.
Late last year, the Sullivan County Industrial Development Agency (IDA) joined six other Southern Tier counties in approving the elimination of sales and use taxes on equipment and material purchases, along with a 15-year break on property taxes (75 percent the first five years, 50 percent the next five, and 25 percent the final five years, with no abatement thereafter).
The abatements are estimated to total $7.65 million locally.
Only Tioga County, on the western end of the pipeline, refused to grant any tax relief, arguing that it wasn’t warranted on what promises to be a lucrative business venture.
Millennium officials, however, have long argued that it is, saying the benefits far outweigh the disadvantages. For example, they estimate $20.5 million in materials and $40.9 million in labor will be spent in Sullivan County alone. The project will replace pipeline in an existing corridor and thus disturb surrounding areas less, and it will increase capacity and access to U.S. and Canadian gas fields.
IDA officials said Millennium’s tax payments will increase by $266,800 countywide, and the company is promising a $100,000/year payment to affected municipalities for economic development.
The ‘Real Deal’
But what apparently motivated the Sullivan County IDA the most was the warning from Millennium that without tax abatements, the project would die.
“Millennium would not do a 30-inch pipeline if we voted it down,” said IDA board member Ed Sykes, a Callicoon resident.
“The significance of the dollars was so much, it’s very unlikely the project could go forward [without abatements],” added Millennium project spokesman Michael Armiak, pointing out that a similar 1998 proposal never got off the ground because it was not economically feasible.
Armiak stated that if Millennium were to initially pay full taxes on such a huge project, the company would have to charge rates exceeding what customers like Con Edison and Keyspan Energy are willing to pay.
Sykes believes that, saying any fraudulent statements on Millennium’s part would be foolish in this post-Enron business world.
“And with the PILOT [Payments In Lieu Of Taxes] program, they can’t sue,” Sykes added, referencing the practice of many companies to sue for a tax adjustment after an assessment increase. “To me, it was a no-brainer.”
IDA Executive Director Jennifer Brylinski admitted that Millennium’s estimates of local expenditures could be overly optimistic, but she said it was a matter of getting something or getting nothing at all.
She, IDA CEO Allan Scott and the IDA board Chairman (and county legislator) Sam Wohl, Harold Gold, Joyce Salimeno, Ray Walter, Sykes, Charlie Barbuti and Harris Alport felt that Millennium’s no-project-without-abatements warning was genuine and a risk too large to ignore.
“You can believe that people are telling the truth or not telling the truth,” explained Barbuti, a Liberty businessman who once served on the local school board. “I couldn’t NOT believe them.”
Barbuti said that if he had voted against the abatements and Millennium had abandoned its plans, he would have felt “as if I was taking money away” from the affected municipalities and schools.
“We would like everyone to pay 100 percent of the taxes,” he acknowledged, but added that in a highly competitive world and region, Sullivan County has to have something to offer.
“People ask us, ‘Why do we give tax breaks to rich people?’” he said. “Because rich people will take their money and go somewhere else… You want to see Sullivan County grow and middle-class jobs come here that’s why I got on that board.”
The pipeline jobs may only last the construction period, but Lumberland Supervisor John LiGreci said the guarantee of more tax revenue is what everyone should recognize.
“We’re going to get five times [more] money than we’re getting from Millennium now,” he explained. (Actually, the numbers are closer to four times.)
While that’s not as much as what the area would receive if the project was fully taxed in its first 15 years, “sometimes you’re better off getting a piece of the pie than getting none of it,” LiGreci remarked.
Eldred Central School District Interim Superintendent Charlotte Gregory’s believes otherwise.
“I think they [the IDA] are suffering under veiled threats,” she said last week. “The Millennium Pipeline is going to make a significant amount of money… The minute they turn on the pipeline, they will be making tons of money… [and] they need to pay their fair share.”
Sullivan West Central School District Board President Arthur Norden agreed.
“I don’t believe it for a minute,” he said of Millennium’s warning. “I find it hard to believe that the profitability of this business is based on tax abatements.”
As a result of these abatements, Sullivan West officials are estimating the district stands to lose more than half a million dollars in potential tax revenue every year for the next 15 years, based on IDA-supplied figures showing how much less SW will get in the abatement program versus full taxation.
The IDA, on the other hand, says SW will receive much more from the abatement program than if the project didn’t happen at all.
SW gets $39,200 a year in taxes from the current pipeline, according to Brylinski. Through the PILOT program, SW can now expect $144,100 each year for the first five years, $288,100/year the next five years and $432,200/year the final five years.
Norden, however, remains unsure of those numbers, saying the IDA based its original abatement decision on inaccurate figures regarding district expenditures.
He’s also critical of the IDA board’s lack of any local district representation.
“They are, in effect, controlling our tax levy,” he said. “That’s dead wrong and has to be changed.”
He and SW Superintendent Alan Derry are gathering forces to do just that: petition the State Legislature to change the way IDAs dole out tax abatements.
“The frustrating part is, we really don’t have a say in whether or not this happens,” said Derry of such abatements, although he added that he does advocate for light industry in the area and associated tax incentives.
Dissatisfaction in Cochecton
Cochecton Town Supervisor Sal Indelicato may join that reform effort, as he too is upset with what Millennium got.
“I have no issue with Millennium itself,” he said. “I don’t blame them [for seeking abatements].
“But why would I settle for $16,000 a year when I could be getting $80,000?”
Indelicato was referencing the IDA’s estimate that Cochecton will receive from Millennium $16,600 in payments each year in the first five years, followed by $33,200/year the next five, followed by $49,700/year in years 11-15.
Currently, Cochecton receives $4,700 in taxes every year from the existing pipeline, according to the IDA and that will drop due to depreciation.
The $80,000 figure is what Indelicato estimates he could be getting from Millennium when it replaces the pipeline no abatements included.
But what of the company’s warning that no abatements means no project?
“It’s not true,” Indelicato claimed, saying the IDA should have called Millennium’s “bluff” rather than accepting their word.
“I feel the IDA’s overstepping itself,” he added, pointing out that only one of the board members Sykes lives in the pipeline-affected townships. (Ray Walter, however, lives in the Town of Highland, which does host a small part of the pipeline.)
What the Other Town Supervisors Think
Indelicato, though, seems to be the most passionate voice amongst fellow supervisors. Some, like neighboring Delaware’s Jim Scheutzow and his board, have also protested the abatements. But others, like Bethel’s Harold Russell and his board, have little difficulty with what’s happened at least within their own borders.
“The landowners were satisfied with the settlements,” remarked Fremont Supervisor Jim Greier of Millennium’s deals with property owners. “And we [the town board] thought this would offer a clear road for the next 15 years and bring three times more money for the town.”
Greier agreed that a lot was given to Millennium, but he said the avoidance of tax lawsuits meant they could at least count on a good deal of money coming into town coffers.
Like Fremont, Tusten also approved of the IDA abatements, said Supervisor Ben Johnson, but he was sympathetic to neighboring towns.
“The only reason we’ve been treated fairly is because we have such a short run [of the pipeline] through our town,” Johnson explained.
Highland also doesn’t have a long amount of pipeline within its borders, which is why “we don’t get a whole lot of tax money from it now,” remarked Supervisor Steve Barnes. “And we’re not going to get a lot [more] from it. It’s nothing to get excited over.”
He did add, however, that some towns in the county aren’t being treated fairly by the IDA.
But his neighbor to the east, Lumberland Supervisor John LiGreci, is adamant that this is a very good deal.
“It’s going to create 3,000 union jobs,” he pointed out, with a portion of them coming from Sullivan County and most of them working, eating and shopping in the area while here. “It’s better for Sullivan County.”
That’s the IDA’s position as well. Even Barbuti, who agrees talk of reform should continue and considers school districts’ arguments fairly legitimate, said it’s about looking at the big picture and determining what’s best for the entire county.
Sullivan County’s primary economic development agency takes the same stance.
“Are those municipalities going to be better off tomorrow than they were yesterday?” asked Sullivan County Partnership for Economic Development President/CEO Marc Baez. “The answer is ‘yes.’ … At the end of the day, it’s a better situation than they had before.”
And, he explained, tax dollars aren’t disappearing the affected towns and schools will not receive any less than what they get now.
The disagreement, it seems, is whether or not they could have gotten more.
Millennium officials say they aren’t taking anything away from Sullivan County and are, in fact, adding quite a bit.
Armiak said that just during the abatement period alone, tax revenues overall will increase 7.5 times.
He added that union workers will buy gas and food locally, will use area hotels for lodging and may even bring families along on extended stays all of whom will likely patronize local stores.
Millennium has also pledged to use area businesses like E. Tetz and Sons, Schmidt’s Wholesale, Arthur Glick Truck Sales, Callicoon Supply, Cochecton Mills, Peck’s Supermarkets, Delaware Valley Farm and Garden, Roche’s Garage, and Kenneth G. Redard Excavating for various needs.
The aforementioned companies are all on Millennium’s list of “preferred vendors.”
And if larger local businesses want to tap into the pipeline, Armiak said that could now be a possibility, as opposed to the current pipeline, which cannot handle any more customers. Armiak explained that local utilities would work with area businesses to determine what’s feasible, as Millennium does not sell natural gas directly to consumers.
As for Tioga County, Armiak said Millennium is confident it can proceed without an agreement in place, although they plan to approach the county with alternatives.
“We’ve tried to put something together that all the counties could live with,” Armiak noted. “In no way are we taking dollars away from anybody.”
Sullivan West Supt. Derry genuinely hopes Armiak’s right.
“Is this a question of a great boon to our county, or the rich getting richer?” Derry wondered.