Should $4.5B power project receive a Dutchess tax break? Company plans to resubmit request

The developer of a $4.5 billion project that would transport renewable energy from Canada to New York City through high voltage cables withdrew a proposal for a tax break with the Dutchess County Industrial Development Agency amid an outcry from local groups and officials.

However, Transmission Developers Inc., which withdrew its request for a tax exemptions approaching $120 million over 30 years on the eve of Wednesday’s IDA meeting, plans to present the application in a future meeting, after it became clear that there were topics that needed additional discussion with local stakeholders.

According to the application, the organization states the Champlain Hudson Power Express would need such an exemption to proceed.

The project would run hydro power down from Canada along 339 miles of transmission cables, both underwater and underground. The cables would enter the Hudson River just north of the Dutchess County border and continue south into New York City, with the exception of a small stretch of line above ground in Rockland County.

It would provide more than one million homes in New York City with energy, pushing New York State closer to achieving its ambitious green energy goal of having 70% of its energy come from renewable sources of power by 2030.

While the project is expected to produce 1,400 construction jobs statewide and billions in economic output, it is not guaranteed to create any jobs for Dutchess, specifically.

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"The IDA is established primarily to retain, expand and attract business and jobs and create a positive economic benefit in the community. Our assessment of this project, the project does not directly or indirectly benefit the county," said Ron Hicks, assistant county executive of Dutchess County, who is not a part of the IDA but planned to attend Wednesday's meeting to offer an opinion.

Transmission Developers stated the project would bring in $99 million in tax revenue over the first 30 years of the project. TDI is owned by Blackstone, one of the world's largest alternative asset management firms, with a market value of $113.82 billion.

TDI also proposed a payment in lieu of taxes in Ulster County late last year. The Ulster Legislature in March passed a resolution urging its IDA to deny the application because the project would provide "no meaningful benefit to Ulster County" and there was concern about the impact of the project to drinking water.

The resolution stated "there is no justification for tax reductions for this project" and that "TDI should be paying a Host Community Benefit to impacted communities not asking for tax pilots."

TDI said Wednesday it no longer plans to pursue a PILOT in Ulster County and will withdraw its application.

The Hudson River Drinking Water Intermunicipal Council, otherwise known as Hudson 7, issued comment Tuesday that it has "serious concerns" about with how installing the cable into the riverbed, which is believed to hold contaminants, may impact drinking water.

"Our 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. The Dutchess County communities that draw drinking water from the Hudson River have no backup water sources, and limited reserve capacity," stated Gary Bassett, chairman of the Hudson 7 in a letter to the IDA.

How do you tax a riverbed?

Though the company stated the project will be "100% privately financed," it is seeking tax exemptions from counties along its route.

According to its Dutchess IDA application, the organization would receive $105.48 million in estimated property tax exemptions over 30 years, along with $13.57 million in sales tax benefits and $1.25 million in mortgage recording tax breaks. The total cost to build the Dutchess portion would be $167 million.

It's unclear if any jobs would be created locally along the route. Since the cable will be submerged, there will be no need for day-to-day operations or maintenance, nor will any permanent jobs be created onsite.

The Hudson River is state-owned party and does not fall under the tax jurisdiction of a municipality. While municipalities are able to tax above-ground powerlines, it's unclear how the riverbed would be taxed with the proposed PILOT agreements.

"Theoretically there is no tax structure for state-owned land. The project is hoping to use the mechanism of a PILOT to provide tax stability along the entire route but also consistency of its market assessment along the route. Without a standard assessment, local assessors would have to assess the value of the pipeline and you could imagine along a 300-plus mile route there could be inconsistencies along the way," explained Sarah Lee, head of the Dutchess IDA.

When asked how they would assess property tax on the project if a PILOT was not approved, two municipalities, the City of Poughkeepsie and the Town of Wappinger, said the property did not fall under their taxing jurisdiction.

The tax exemptions would also provide the customers of the transmission line with predictable expenses over 30 years.

"The lender needs to know the project can pay its expenses and potential end users want to know their energy bill is not going to go up due to a change in assessment along the route, so a PILOT acts as that mechanism to provide stability," Lee said.

The county objected to the sales and mortgage recording tax exemptions, saying that "it is not an option."

"The county entrusts the IDA to use its incentives to retain, expand and attract businesses and full-time permanent jobs to our County. This project does not fit the bill," Hicks said.

TDI stated in its application that the project would "not be undertaken but for the Financial Assistance provided by DCIDA."

Drinking water concerns

Two five-inch cables would be installed in the riverbed by using robotic technology to first lay the cable on its route and then use "jet plowing" to push the cable into the waterbed. The process is meant to create as little disruption as possible, but would be expected to kick up a cloud of sediment as it passes along the route.

The Hudson 7 is concerned about the disturbance of sediment near drinking water intake, specially nine acres of coal tar, which is the subject of a Central Hudson Gas & Electric Corp. remediation, and unmapped hotspots of polychlorinated biphenyls, or PCBs, and other contaminants. The group claims the route taken by the transmission line will be in proximity to drinking water intakes. They asked that TDI move the route on land, but were denied.

Hudson 7 requested TDI to provide testing and monitoring protocols for the installation. The request included sediment sampling to locate contamination hotspots on the route near drinking water intakes; pilot testing the jet plow near an intake point and the development of an environmental management and control plan.

"They've agreed to do the test run and the soil sampling," said Paul Malmrose, who is volunteering as an engineering technical advisor for Hudson 7. A pilot test may be done this fall. However, they have not come to an agreement on details for the soil sampling.

"I think they are finally coming around to, yes, there is a tremendous risk, so they seem to be more willing to work with us," Malmrose said.

TDI and the Hudson 7 have been in discussion for two years, and are also talking with public water supply operators. A route for the cable has not been finalized yet.

The group has also requested an independent engineer to monitor water quality during the process and that the developer provide bottled water for the community if one of the intakes do become contaminated, which is still under discussion. Hudson 7 does not have jurisdiction over the project, but TDI may need consent from municipalities to be approved for a deviated PILOT.

"Dutchess defers to the local cities, towns, villages, and school districts to negotiate and approve payment in lieu of taxes agreements with the Industrial Development Agency, it is with the understanding that their written consent is required for PILOTs that deviate from the IDA’s Uniform Tax Exemption Policy. The taxing jurisdictions have not provided written consent as of this date and time," Hicks said.

TDI has said in a previous response the project has gone through several reviews at both the state and federal level, including by the New York Department of Environmental Conservation, U.S. Army Corp of Engineers and the U.S Fish and Wildlife Service.

"CHPE’s permits confirm that the project design and route are acceptable, the project is beneficial to the public and that environmental concerns have been assessed, addressed and mitigated as necessary," according to a document posted on the the project's website.

TDI stated in a document it would consult with public water system operators with water intake in the Hudson River regarding operations, monitoring of water quality and backup capabilities; hire experts to help with plans for monitoring during installation and finalizing the specific location of the cables in relation to the intakes.

"We all want renewable energy, but at the risk of polluting people's drinking water? It's a typical David versus Goliath story. New York City's got all the power in the world and they can do whatever they want," said Malmrose said.

Saba Ali: Sali1@poughkeepsiejournal.com: 845-451-4518: @MsSabaAli.

This article originally appeared on Poughkeepsie Journal: Champlain Hudson Power Express project pursuing Dutchess tax break