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| 9/16/2009 1:08:00 AM | Email this article • Print this article | CFO: Regulating district's general fund 'virtually depleted'
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."
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Contact Heather Nellis at heather.nellis@recordernews.com.
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