Plenty riding on tax deal with power plant

By Tom Dalton , Staff writer

Salem News

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."