Does a $261 billion company need hundreds of millions in local property tax subsidies – on top of NYS clean energy credits worth billions?
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TDI, the developer of the CHPE electric transmission cable from Canada to NYC, is quietly seeking to avoid property, school and other local taxes
As plans move forward for the Champlain Hudson Power Express (CHPE) – a project that would bury massive electric cables in the bed of Lake Champlain and the Hudson River – the true costs are coming to light.
Transmission Developers Inc. (TDI) is the CHPE developer owned by the Blackstone Company, a private equity firm worth $261 billion dollars. Pending approval by the Public Service Commission, TDI is in line for state subsidies worth billions of dollars in Tier 4 Renewable Energy Credits intended to subsidize transmission of low-carbon electricity to New York City. Those state subsidies are to be paid by utility customers across the state.
At the same time, TDI is quietly seeking another massive subsidy – hundreds of millions more in tax breaks from 13 counties along the route of the project. These communities stand to gain nothing in return. These tax breaks would ultimately be subsidized by local residents and businesses paying the company’s share of taxes for municipal governments, schools, libraries and emergency services.
Property tax subsidies are just one of many issues involved with the CHPE project. The CHPE project was one of seven under consideration for state renewable energy credits worth billions. It has the greatest impacts of any of the seven, because of its reliance on damaging hydropower in Canada as a source of electricity, and its transmission route through Lake Champlain and the Hudson River.
The developers intend to install cables by “jet plowing” through 7 feet of sediment in the Hudson, including areas that may be contaminated by PCBs, coal tar, and a range of other contaminants. Stirring up those contaminants during construction could cause ecological harm and could contaminate drinking water intakes used by seven communities along the Hudson, serving over 100,000 people.
The CHPE project fails to meet the most basic requirement of a clean energy project because it will not directly reduce greenhouse gas emissions and it will continue to emit greenhouse gases after 2040, when New York’s new climate law requires the electric grid to be emissions free. Hydropower, unlike wind and solar, often produces large amounts of greenhouse gasses, as vegetation decomposes underwater behind dams. Specifically, HydroQuebec, which will supply electricity for the CHPE cable, has estimated that its own hydroelectric dams are large emitters of carbon dioxide – equivalent to fossil fuel generating.
The project also has major environmental justice concerns in Canada due to impacts of dam construction and the flooding of the lands of First Nations communities. In a recent statement made to the Public Service Commission, Lucien Wabanonik, elected councilor of the Lac-Simon reservation in Quebec, pleaded with New Yorkers: “You need to know where the energy comes from. It doesn’t come from the line. It comes from the dams – and this is where our territories are, unceded – this needs to be understood. We need to be part of the discussion. Please don’t ignore our rights.”
Property tax is the CHPE developers’ largest operating expense
In 13 of the 15 counties where the CHPE transmission lines would be buried – either underground or underwater–TDI is asking for 30-year deviated payment in lieu-of-tax agreements, or PILOTs.
In New York State, county Industrial Development Agencies grant PILOT agreements with property tax reductions in order to catalyze economic activity. Historically, the size of these PILOTs are based on the number of short- and long-term jobs to be created by a proposed project. Under such an agreement, a company makes some fixed yearly contribution to a municipality or school system rather than pay property taxes, and the amount paid is typically lower than what the company would have paid if it was taxed normally. A deviated PILOT occurs when a project needs to “deviate” or to go outside the Uniform Tax Exemption Policy (UTEP) that outlines the various benefits provided by an IDA.
Last fall, Todd Singer, Executive Vice President and Chief Financial Officer of TDI, told the Ulster County IDA that “Property tax is TDI’s largest operating expense for the CHPE project and without financial assistance from involved IDAs, the project is at risk of not moving forward.”
TDI’s anticipated property tax bill in Ulster County alone is $94 million over 30 years. If the Ulster County IDA were to approve the PILOT request by CHPE, that amount would be reduced to a fraction – just $29 million over the life of the PILOT. The savings for the developer would be a whopping $65 million dollars. And that is just one of 13 local subsidies TDI has requested from county IDAs.
For a project that is fully permitted and ready to be built now, by a wealthy company in line for a massive state-level subsidy, why would any county, especially those in the mid-Hudson Valley, forgo taxes for a project that provides no direct community benefits? That’s one of the questions being raised around Ulster County.
CHPE developers can’t commit to the number of jobs the project would create in Ulster County
The CHPE electric cable route in Ulster County would jet-plow the electric cable for a total of 18.5 miles underwater in the Hudson River. The CHPE developer said construction contractors would only be working in the mid-Hudson segment of the river for “1 to 2 months, and then you’d never see us again,” adding that the electric cable would be completely “invisible” in Ulster county. When asked how many jobs the project would create – the very foundation of any PILOT request – Singer said that TDI could not yet commit to a number. In reality, the crews working to install the cable are likely to be hired by a TDI contractor, and will not come from local communities.
Calling the project “invisible” while stirring up known and unknown contaminants from the river bed is inaccurate for the Hudson River, but it is fitting for Ulster County where there will be no visible benefits for taxpayers. The same is likely true in all 13 counties where TDI is seeking local subsidies.
In its application, the CHPE developers indicate that it might purchase supplies locally and provide jobs for construction workers. But consider: Given the specialized expertise and equipment needed to install High Voltage Direct Current (HVDC) cables underwater in the bed of the Hudson, there are only a few potential suppliers worldwide. TDI has identifed two partners for the project, an international firm with some presence in New York State, and one New Jersey-based firm.
Ulster and Dutchess County communities tell Ulster IDA to deny CHPE’s 30-year PILOT request of public dollars worth $65 million
Among those speaking out is the Hudson 7, an intermunicipal council of seven communities that draw drinking water from the Hudson River at Poughkeepsie, Hyde Park, Rhinebeck, Esopus and Lloyd. Their five public water supplies serve 106,000 residents, three hospitals, three colleges, and major regional employers, providing safe water for human consumption, firefighting, industry, and more.
In a letter dated December 3, 2021, to the Ulster County IDA, the intermunicipal council outlined its concerns about the CHPE proposal and its PILOT request:
“The Hudson 7 has serious concerns about construction-related risks posed by the installation of electricity transmission cables near drinking water intakes in the Hudson, including the intakes serving the Towns of Esopus and Lloyd. We write to urge the IDA to deny any tax incentive for CHPE because of its negative impact on Ulster County.”
In response, the Ulster County Legislature unanimously passed a memorializing resolution on March 16, 2022, requesting that the Ulster County Industrial Development Agency deny TDI / CHPE’s request.
“The proposed project would provide no meaningful benefit to Ulster County as the project’s sole purpose is to transmit electricity from Canada to New York City posing substantial environmental risks to the Ulster County communities of Esopus and Lloyd (drinking water) in Ulster County for which the towns have already been affected by being forced to address this issue, and they face the risk of contamination or shutdown if CHPE proceeds.”
Further north, TDI’s PILOT request in Albany County worth millions was approved after several public hearings through January, 2022. Albany County Legislators are just finding out about the PILOT and its impacts to the county, local municipalities and school districts. In a letter submitted during a recent Town of Bethlehem Town Board meeting, Albany County Legislator William Reinhardt wrote, “I have always felt that IDA tax benefits should only be used to support manufacturing enterprises that provide the community with ongoing benefits in the form of manufacturing employment in exchange for the tax breaks. Why should the CHPE project construction jobs be tied to a 30-year tax break?”
Counties are being asked to subsidize an energy project without receiving any of the benefits or any of the power.
TDI wants the Public Service Commission to have confidence that it is financially capable of building the CHPE project in order for an approval of a Certificate of Public Convenience and Necessity request that is currently on the table. At the same time, TDI is going county by county telling IDAs that without these PILOT agreements, the CHPE project will not be built. Maybe the truth is that TDI, as part of a $261 billion company, has the financing it needs to proceed, but local subsidies will just pad corporate profits.
Why should municipalities and school districts grant a rich company a break on their property taxes? That’s not fair.
To find out whether your county IDA is considering a CHPE tax break, look for agenda and minutes of recent meetings on your county IDA website. IDAs often operate with very little public scrutiny, so information is often difficult to find.
UPDATE:
On November 9, 2022, various members of the Dutchess County Legislature wrote to the Dutchess County Industrial Development Agency with concerns regarding TDI / CHPE’s request for $120.3 million in PILOT funding. “The Legislature fails to understand how this project would directly create a single job or have any economic impact in Dutchess County, being that its sole purpose is to transmit power from Canada to New York City.” Read the letter here.