Deal Would Reduce Canal Power Plant's Valuation By $60 Million
By: JAMES KINSELLA, April 9, 2014
The Sandwich Board of Selectmen will ask voters at the May 5 Annual Town Meeting to approve an agreement that will cut about $60 million over four years from the assessed value of the canal plant.
Under the proposed agreement between the town and plant owner NRG Energy, the plant’s assessment would fall about 37 percent by the fiscal year that begins in July 2017.
Town officials say the agreement recognizes the depreciating value of the aging machinery in the plant and the reduced demand in the market for its oil-fueled electricity.
As the owner of the plant, NRG, which is headquartered in New Jersey and Texas, is by far the largest taxpayer in the town.
In the fiscal year that ended last June, NRG paid Sandwich $2,371,093 in real estate and personal property (that is, machinery) taxes.
In that fiscal year, NRG’s sprawling plant along the Cape Cod Canal was assessed at $172 million.
Edward L. Childs, the town’s director of assessing, said Monday that the real estate and machinery at the plant now are valued at about $160 million.
According to a copy of the proposed agreement, the assessed value would fall to $137.5 million for the fiscal year starting July 1.
The value would continue to drop for the life of the agreement, falling to $120 million for Fiscal Year 2016 and $110 million for Fiscal Year 2017 before falling to $100 million for FY 2018.
Mr. Childs said the proposed decrease in the plant’s value will ripple out to affect other property owners in Sandwich.
He estimates the new valuation will add about $12 to the annual property tax bill of the average Sandwich home.
The proposed valuation agreement reflects the latest chapter in the steep decline of the plant’s share of the town’s property tax burden.
Mr. Childs said the plant, which was built in 1968 and expanded in 1975, at one point accounted for about 40 percent of Sandwich’s tax base.
Under the proposed valuation agreement, Mr. Childs said, the plant’s proportion of the town’s tax base would fall to about 4.5 percent in the coming fiscal year.
James W. Pierce, chairman of the board of selectmen, said Tuesday that the plant would represent about 2.5 percent of the town’s tax base by the end of the agreement.
Mr. Childs said the proposed agreement includes language that would allow for the plant’s value to be adjusted outside the four-year schedule should substantial changes occur, such as NRG Energy’s closing the plant.
For years, Sandwich town leaders have been seeking to encourage economic development in town, to decrease the property tax burden on residential properties and to offset the decline in the plant’s valuation.
Most recently, the leaders have been trying to find a developer who, on the town’s terms, would purchase and develop 56 acres of town-owned land in South Sandwich.
In February, a deal fell through with a prospective developer, the Tsakalos Realty Trust. In recent months, the selectmen have held a series of executive sessions to plot the best way to sell the land and see it developed on the town’s terms.
But Mr. Pierce said Tuesday that the best case scenario for the Tsakalos plan would have yielded up to $200 million in new valuation—and would have taken a decade to reach that value.
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The aging power plant already is valued in that financial ballpark.
Mr. Pierce said that economic development, while important, does not translate into a silver bullet that will solve the town’s financial challenges.
But the selectmen said renovating the plant to make use of natural gas as a fuel to generate electricity could substantially boost the value of the plant in a year’s time.
To that end, Mr. Pierce said, the town’s interests will be advanced by reaching a realistic agreement on the plant’s current value, one that will encourage NRG to keep the plant going.