Montague, FirstLight settle tax dispute out of court

  • The Northfield Mountain Pumped Storage Facility, operated by FirstLight Hydro Generating Co., uses water from the Connecticut River. STAFF PHOTO/PAUL FRANZ

Staff Writer
Published: 9/10/2019 11:03:52 PM

MONTAGUE — Six years of tax disputes between FirstLight Hydro Generating Co. and the town of Montague were settled out of court last week, amounting to a partial refund for the last three years’ taxes and an agreement on taxes for the next two years.

Also in the agreement, FirstLight drops its legal challenge of its tax bill for the 2014 fiscal year, and promises not to challenge any bill through 2022, which it had previously threatened to do.

Per the settlement, Montague pays FirstLight about $790,000, as a partial refund of its tax bills for fiscal years 2017, ‘18 and ‘19, which will be taken from Montague’s $2,257,992 overlay account. The payment reflects a reduction to the assessed value of the company’s Montague properties. In the most recent valuation in 2017, the properties were valued at $135 million; the settlement agreement changes it to $125 million.

The settlement resolves a tax dispute that dates to 2014, when the town was legally required to re-assess its taxable property values. Montague hired an outside firm to assess the value of FirstLight’s properties, as is common practice in cases beyond the expertise of a town’s assessing department, said Montague Director of Assessing Karen Tonelli.

FirstLight’s Montague properties were valued at $114 million that year, Tonelli said. FirstLight challenged this with the state Appellate Tax Board. The hearing was in June 2017, and six months later the board decided in favor of the town, Tonelli said.

It took another year for the board to produce its “findings of fact,” a statement explaining its rationale in the decision, Tonelli said.

At that point, FirstLight said it would appeal the decision to a higher court, and in the meantime would continue to challenge its tax bills, Tonelli said.

Rather than continue the legal battle, the parties began talks this spring to settle out of court. The settlement was finalized with all necessary signatures last week.

In the agreement, Montague does not bend on its 2014 valuation of FirstLight’s properties, but does give a $10 million reduction to the 2017 valuation, resulting in the $790,000 payment, Tonelli said.

“We felt strongly that the ‘14 case that fell in our favor should be recognized,” Tonelli said.

The agreement holds the new 2017 valuation until the next legally required revaluation in 2022, Tonelli said. (Revaluations were previously required every three years; the law has since changed to require them only every five years, she said.)

Now that a court-ordered payment to FirstLight is no longer a possibility, the town can reduce its “tax overlay,” an account that a town’s assessing department keeps for cases like this or other tax refunds.

Montague’s overlay has been relatively high since FirstLight, the largest taxpayer in town, challenged its tax bill in 2014, Tonelli said.

Tonelli and Town Administrator Steve Ellis emphasized that although the overlay was large, it was appropriate to the town’s financial exposure in the FirstLight case and not excessive.

For comparison, the amount of overlay raised each year from 2008 to 2013 was always between $100,000 and $180,000, averaging about $130,000 a year. In 2014, when FirstLight challenged its tax bill, $357,654 was raised for overlay; every year since was between $400,000 and $450,000.

Total overlay is now $2,257,992, Tonelli said. The town’s $790,000 payment to FirstLight for its partial refund for its tax bills in 2017, ‘18 and ‘19 will come from overlay.

With the FirstLight situation settled, the town will likely have excess overlay that can be put toward other uses, Tonelli said; although the exact amount to be marked “overlay surplus,” if any at all, has to be determined by the Board of Assessors.

If the board determines that there is surplus overlay, the money may be spent with approval from Town Meeting. In August, the Selectboard and Finance Committee met to pitch ideas on how the money might be spent, but did not come to any conclusions. If the money is not spent by the time the fiscal year ends at the end of June, it becomes free cash.




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