Surprise, Surprise, Surprise!!! New York Municipalities suing Flat Rock Windpower for $6.7 Million annual payment.

Yeah, I know … not exactly a huge shock, is it?

Here’s the story courtesy of National Wind Watch:

Municipalities countersue wind farm

Credit: By STEVE VIRKLER, TIMES STAFF WRITER, Watertown Daily Times, 18 February 2010

LOWVILLE — Maple Ridge Wind Farm municipalities are countersuing the wind company, claiming it is in default for failure to make its full annual payment in December.

“Plaintiff has no valid excuse or defense for its failure to pay,” states a recent legal filing from Kevin R. McAuliffe and David G. Burch of Syracuse law firm Hiscock & Barclay.

The firm is representing the involved taxing jurisdictions — Lewis County, the towns of Martinsburg, Harrisburg, Lowville and Watson and the Lowville, Copenhagen and South Lewis school districts — in a state Supreme Court lawsuit filed in late December by Flat Rock Windpower, the company under which the 195-turbine wind farm was developed.

The municipalities’ counterclaim asks the judge to dismiss the complaint, declare that Flat Rock was not entitled to make a lesser payment and is, therefore, in default of its 15-year payment-in-lieu-of-taxes agreement and order the payment of $6.7 million plus interest, penalties and legal fees.

Lewis County Attorney Richard J. Graham earlier this month sent a notice of default to the company, according to legal filings.

Flat Rock was billed in December for an $8.99 million annual payment but paid only $2.29 million and filed a lawsuit to justify the payment. Flat Rock claims it should pay only the so-called “fallback amount,” since it was decertified in June from the state Empire Zone program.

The company is appealing the state ruling but also seeking court approval of its PILOT interpretation, just in case its appeal is denied.

The attorneys for the municipalities dispute Flat Rock’s interpretation of the PILOT agreement.

They state that the fallback clause should only be invoked if the company’s property tax credits were “eliminated, reduced or capped through a change in law or regulation, but not as a result of Flat Rock’s failure to comply with the requirement of the Empire Zone Act.” That section of the PILOT specifically refers to Section 15 of state Tax Law, which has not been amended since Dec. 1, 2007, the counterclaim adds.

The filing also lays out a number of legal defenses the municipalities may employ, including failure to state a cause of action or act in good faith.

According to the Flat Rock lawsuit, the company has put $6.7 million into an escrow account with U.S. Bank that will be given to local taxing jurisdictions upon Empire Zone recertification.

The countersuit refers to the escrow as “an entirely self-serving act that allegedly permitted the Plaintiff to claim a tax deduction for the amount of deposit, but at the same time, deprived the Defendants of the benefits of the monies deposited.”

Flat Rock was one of 363 businesses that appealed their zone decertifications statewide. So far, the state Empire Zone Designation Board has recertified 10 companies and upheld the decertification of 93.

The board is slated to meet again at 9 a.m. Friday in Albany, but there is no indication which appeals will be acted upon.

Most of the companies awaiting decision on their appeals — including Flat Rock — were targeted as “shirt-changers,” or companies reincorporated as different entities that claimed they created jobs when, in reality, they transferred employees from one entity to the other.

While Flat Rock doesn’t seem to fit that definition, it was apparently lumped into the category based on the company’s response to a question in its 2006 financial report to Empire State Development, Mr. Graham has said.

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