DAILY GAZETTE
Schenectady, NY
September 16, 2009

GREAT SACANDAGA LAKE

Negotiations may reduce HRBRRD's revenue up to 80%

BY JASON SUBIK, Gazette Reporter

The Hudson River Black River Regulating District, which is working with federal regulators to rearrange its funding stream, issued a news release Tuesday saying that up to 80 percent of its operating budget hangs in the balance.

HRBRRD's budget has been in limbo since the U.S. Court of Appeals ruled Nov. 28 that the district has no authority to assess and collect revenues for its Great Sacandaga Lake operating costs from hydro plants licensed by the Federal Energy Regulatory Commission. Since the district's creation in 1922, state law had granted the district the power to assess - which essentially means to charge an annual fee - downstream beneficiaries for the cost of construction, maintenance and operation of the Conklingville Dam, which created the lake.

"The result will be a significant revenue shortfall which could approach $4 million of the Regulating District's $5.4 million operating budget for the Hudson River area," HRBRRD officials stated in a news release.

HRBRRD officials explained that the Court of Appeals ruled the Federal Power Act supersedes the state law that had enabled the district to collect operating costs from power companies licensed by FERC. The court ruled the hydropower companies can be assessed only using the part of the Federal Power Act that allows FERC to levy annual "headwater benefits" charges.

FERC has commenced a Headwater Benefits Determination process to determine what the HRBRRD can charge the FERC-licensed hydro plants, but no determination has yet been made. The Court of Appeals ruling came out of a case in which the power companies, led by Albany Engineering and joined by National Grid in June, sued FERC for allowing HRBRRD to assess them more than they believed was legal under federal law.

"After 83 years operating under New York state law and collecting assessments that, among other things, cover required property tax payments, we are no longer allowed to assess fees on the FERC-licensed hydro plants," stated HRBRRD Executive Director Glenn LaFave. "This shortfall in revenue will significantly impact the district's operations and challenges our ability to pay tax bills as mandated by law."

HRBRRD might shift a portion of its operating costs from the power companies to "others who benefit from its Hudson River area operations such as municipalities that receive flood control benefits," according to the district's news release Tuesday.

LaFave could not be reached for comment Tuesday but previously he has said owners of lakeside homes and camps are unlikely to have to cover HRBRRD's revenue loss. In July he said the district has not considered lake access permit holders to be beneficiaries of the lake and has gone as far as arguing against permit holders being considered beneficiaries during past lawsuits. He said he doubted the board's position will change.

On June 11, Gov. David Paterson halted a controversial lake access permit rules reform pushed by the state Department of Environmental Conservation. Judith Enck, state deputy secretary for the environment, cited concerns over how the FERC settlement talks could affect HRBRRD's operating budget as one of the reasons why Paterson stopped the permit reform process.


THE RECORDER
Amsterdam, NY
September 16, 2009

CFO: Regulating district's general fund 'virtually depleted'

By HEATHER NELLIS, Recorder News Staff

SARATOGA SPRINGS - The United States Court of Appeals issued a ruling that ends the Hudson River-Black River Regulating District's 83-year-old practice of levying annual headwater benefit charges from Hudson River hydroelectric power companies licensed by the Federal Energy Regulatory Commission - resulting in a shortfall of $4 million of a $5.4 million operating budget for the Hudson River area.

In 2000, an offer of settlement for the operation of the Great Sacandaga Lake negotiated terms that allowed for the continuation of the regulating district's apportionment and assessment of annual headwater benefits that cover the regulating district's operating expenses - including $2.6 million in property taxes. The federal courts determined, however, that the Federal Power Act pre-empts the regulating district's use of state law to collect these charges. The ruling came as a result of FERC being sued for its approval of the regulating district's authority.

This revenue stream made up approximately 83 percent of the Hudson River area budget, said Chief Financial Officer Richard Ferrara.

"[The court ruling] resulted in an unprecedented cash flow shortfall. The general fund is virtually depleted," he said.

In an attempt to gather funds to pay school taxes by October, the board was forced Tuesday at its meeting in Saratoga Springs to authorize the liquidation of Sentinel assets into revenue accounts as deemed necessary.

"We don't need it all now. The board has the authority to liquidate the assets as needed," said Executive Director Glenn LaFave.

The board authorized two separate accounts for liquidation - $1.2 million from the Hudson River area and $2.6 million from the Black River area. The latter figure is considered a loan, "not a gift," Chairman Philip Klein said, that will be paid back with the hope that a reapportionment study will regenerate funding. FERC has commenced a headwater benefits determination to establish charges for the FERC-licensed hydro plants, which will take at least a year to complete.

All budget transfers are subject to review and written approval from the state Office of the Comptroller.

While the regulating district will be able to pay this year's taxes, next year holds an uncertain fate. Board member and Finance Chairman Ronald Pintuff said the transfers are a short-term fix, noting the court ruling "dealt a severe blow" to the regulating district's operation.

"It's gutted our ability to finance ourselves," he said.

"There's no guarantee we will have the money to pay school and county taxes next year," said board member Pamela Beyor. She said the rest of the board should grant LaFave the authority to write letters to area schools and counties to let them know there is no guarantee they will be able to meet taxes for 2010.

"They should be aware of that in their planning," Beyor said.

The aforementioned budget transfers will allow the regulating district to operate until June, and after it will "have to look at other sources of revenue," Ferrara said.

"We're hoping the reapportionment will do," Pintuff said, but noted earlier the district might have to consider "looking at upstream beneficiaries" - otherwise known as the counties, villages, and towns around the GSL.

"I use that term cautiously; I haven't wanted to use that term at all. I avoided it. But we need to maintain the district and the dam - and the courts say we can't collect money. The state won't come forward and give it to us," he said.

"There's obviously economic benefit derived from the lake," Pintuff continued. "Fulton and Montgomery counties both reap those benefits. It's time to take a look at both the public and private sectors. ..."

Pintuff said later he "hasn't thought about it at all," but admitted looking at upstream beneficiaries might mean assessing the towns and villages around the lake.

In the meantime, the court ruling has put a wrench in the regulating district's "capital approach" to dam maintenance projects, but Beyor said "anything of health and safety significance will be addressed."


LEADER-HERALD
Gloversville, NY
September 17, 2009

River district faces budget shortfall

By ZACH SUBAR, The Leader-Herald

The Hudson River-Black River Regulating District will soon be faced with a $4 million budget shortfall, thanks to a recent U.S. Court of Appeals decision that said downstream entities no longer are required to pay assessments for benefits they receive from the Conklingville Dam.

The decision came after Federal Energy Regulatory Commission ordered talks between the regulating district and its downstream beneficiaries in front of a Washington, D.C., administrative law judge broke down.

FERC had ordered the talks after the Court of Appeals issued a decision in November that said the regulating district was overcharging Albany Engineering, a company the district had determined was receiving headwater benefits from the upstream Conklingville Dam, for the benefits it was receiving from the dam's operation. It required the agency to negotiate appropriate benefits that all downstream beneficiaries should pay to the district.

Regulating district Executive Director Glenn LaFave said he cannot comment on why the talks broke down, citing FERC regulations. The Court of Appeals has said the downstream beneficiaries no longer have to pay any of the assessments they had previously been charged by the regulating district.

Those benefits make up $4 million-or 82 percent-of the regulating district's $5.4 million operating budget. About $2.6 million of that $4 million is property taxes the regulating district pays to the various municipalities it covers.

"The catch-22 here is the feds are saying we cannot collect the money to pay property taxes from the [hydroelectric plants], but under the state statute, we still have to," LaFave said Wednesday.

As of now, the regulating district plans to use $3.8 million in reserve funds it has to help cover its costs. That fix, however, is only temporary, and LaFave said the regulating district would not be able to use reserve money in future years if it is depleted.

"You've got to play the hand that's dealt you," LaFave said Wednesday. "Am I concerned? I would say yeah, and I think about this, and our board and staff are very concerned and are spending a lot of time investigating and researching and looking at what our options are."

LaFave said the board does not have any plans at this point to start charging upstream municipalities, such as those around the Great Sacandaga Lake, or other upstream entities' fees for benefits they receive from the dam or from the lake. He also said the regulating district's financial shortfall would not affect permit fees.