City, Dominion reach 1-year tax deal Power
plant will pay $250,000 more
By Chris Cassidy , Staff writer
December 15, 2007
SALEM - An eleventh-hour tax deal was struck yesterday between the city and its largest taxpayer, Dominion, the owner of the Salem Harbor Station power plant.
The one-year agreement gives the city an additional $250,000 in tax revenue and buys both sides more time to iron out a longer-term tax deal.
Dominion will pay $4.75 million in taxes next year - its highest payment since fiscal 2003. For the last four years, the power plant has paid $4.5 million, making it the city's largest revenue source.
The agreement was finalized yesterday afternoon, just three days before the City Council meets to set the tax rate.
"Every dollar from the power plant definitely has an impact on what the homeowner pays, so any time we can get an increase, that's good news," Mayor Kim Driscoll said. "The additional money is a big plus, but also the stability of having the funding in place for this year was critical to help us set the tax rate and help us settle collective bargaining agreements."
Earlier this week, the city announced it had reached a tentative agreement with the teachers union and a definitive deal with about 90 public works employees, city office workers and inspectors.
Facing a $1.8 million school budget gap that will likely grow, the city needed some good financial news.
"I think we have a good relationship with the city of Salem and local government there," Dominion spokesman Dan Genest said. "They were in financial stress, and we were happy to sign this deal and help them work out those issues."
Negotiations were put on hold after last month's steam-pipe rupture that killed three power plant employees. The plant has been shut down since the accident and not generating electricity - or money.
Soon, both sides will return to the bargaining table to negotiate a long-term deal, and the stakes are high. Several proposed environmental regulations are likely to force Dominion to assess the future viability of the plant as it adds up the cost of upgrading the coal-powered plant to meet the new standards.
The one-year agreement gives both sides breathing room as the exact details of the new regulations become clearer.
It's also the end of a process that began in the spring.
"They delivered, and I think they should be commended for it," Driscoll said of Dominion. "We had a tough negotiation, but at the end of the day it's another $250,000 in city coffers due to their efforts."
Staff writer Chris Cassidy can be reached at 978-338-2526 or by e-mail at firstname.lastname@example.org.
The power plant's tax bill
Fiscal year and Amount in millions
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Plenty riding on tax deal with power plant
By Tom Dalton , Staff writer
November 28, 2007
SALEM - Mayor Kim Driscoll has reached decision time in tax talks with Dominion, the owner of Salem Harbor Station and the city's biggest taxpayer.
A 10-year-old tax deal with the power plant expired in June, and the mayor wants to get a new agreement nailed down in the next few weeks - in time for tax bills to be mailed out by the end of December.
"We're at crunch time," the mayor said.
The power plant is one of the city's largest employers, with 145 workers, and the No. 1 revenue source. Dominion paid $4.5 million in property taxes last year, or 7 percent of the city's total tax levy. That was seven times more than the second-highest taxpayer, Shetland Properties.
"It's pretty unusual to have one taxpayer this large," Driscoll said.
The anticipated deal with Dominion will have multiple impacts. It will help determine how much the city can spend in next year's budget and what to set for a property-tax rate, and will play a role in contract talks with city unions.
Negotiations with the Salem Teachers Union, which have been in mediation for nearly a year, are tied, in part, to the Dominion deal. The mayor has to know how much money she has in her pocket before she can approve raises.
"I am assuming that has been part of the slow pace of these negotiations," said Joyce Harrington, president of the teachers union.
The talks with Dominion were progressing well, officials said, when tragedy struck at the power plant on Nov. 6. Everyone's focus turned to the three workers killed in a steam blast accident, their families and other plant workers. It wasn't until a few days ago that Driscoll tried to contact Dominion representatives to resume tax negotiations.
"... We haven't had serious talks since that time, but we hope to soon," the mayor said on Monday.
From Dominion's vantage point, there's a lot at stake and a lot to weigh. Salem Harbor Station is the second, and much smaller, coal-burning plant it acquired in 2005 from PG&E National Energy Group. Brayton Point in Somerset, twice the size of Salem, is considered the prime acquisition.
Brayton is also where the company has spent most of its money in the last two years.
"What's so interesting to me is Dominion has been investing millions of dollars in Brayton Point to refurbish that plant, and it appears they have not invested much of anything in Salem, and I think that's curious," said Jane Bright of HealthLink, a North Shore environmental watchdog group.
For Dominion to meet new emission regulations will require "some pretty substantial capital investments," Bright said.
Dominion is adding up the cost of making those improvements and trying to determine the future viability of the plant.
The first large check Dominion has to write could come after the carbon credit auction scheduled for January under the Regional Greenhouse Gas Initiative, a cooperative effort by Massachusetts and eight other states. Dominion may have to pay anywhere from $5 million to $25 million, according to state Rep. John Keenan, a member of a joint House and Senate committee on telecommunications, utilities and energy.
The company also faces tougher and surely costly state emission regulations in the coming years, with key deadlines in 2011 and 2012. It will have to file a plan by next July on how it plans to meet those new standards.
The company made general comments about the tax negotiations but declined to discuss any details or its plans for plant improvements.
"We've been actively working with the city to try to reach an agreement that satisfies both the company's need, as well as the city of Salem's," said Dan Weekley, a Dominion official. "We understand the budget crisis the city is in, and we're trying to work on that matter."
The plant, meanwhile, has been shut down since the accident and is not generating electricity or making money. In addition to a cleanup, it will undergo a boiler safety inspection. The company and state officials both want to make sure the plant is safe before it reopens.
Against this clouded backdrop of government regulations and company finances, the city and Dominion are trying to hammer out a tax deal. It's not easy.
"There are so many different factors that could impact the value of the plant it's very difficult to look into any crystal ball with any sort of certainty," Keenan said.
The clock also is ticking, with tax bills due in a few weeks. For that reason, the best solution may be a temporary one.
"My sense is right now, because of the number of unknowns, we may end up with the shorter-term agreement than we would like," Driscoll said. "But that would allow both sides to revisit the issue when regulations are a little further along."