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March 5, 2012

AES Somerset offline

BARKER — Nothing is coming out of the AES Somerset smokestack and that may not change until June.

Meanwhile, Barker schools will try to fashion a budget under the cloud of uncertainty that surrounds the troubled facility and its $7.5 million payment-in-lieu-of-taxes.

In a meeting Monday with the Barker Central School District, Somerset Supervisor Daniel Engert said the troubled coal-fired plant went offline Saturday. Engert said AES indicated there wasn’t a plan to bring the plant back online before June, which would be the longest shutdown ever for the plant.

“I think that is a significant indicator,” Engert said. “That is a concern to us.”

AES makes PILOTs to the Barker Central School District, the Town of Somerset and Niagara County. Barker receives an annual payment of $7.5 million from the plant. AES is the largest taxpayer in the county.

AES is a major source of revenue for Somerset and Barker.

“We definitely have some challenges,” Engert said.

AES met with Somerset and Barker officials last week to talk about the status of the plant. Barker Superintendent Roger Klatt talked about the meeting, as well as the district’s budget, with Board of Education members Monday night.

Klatt said the AES bankruptcy reorganization plan was approved last week and would include an auction of the Somerset facility and the AES plant in Cayuga. The auction should take place before the end of the month.

The bondholders who now own the Somerset and Cayuga plants will be placing a minimum bid in the auction, which should be $262 million, Klatt said.

The bondholders will have a chance to match or surpass any bid that exceeds their original bid, which is referred to as the “stalking horse” bid.

“So it is very likely the bondholders will maintain control of the plant,” Klatt said. “And it’s in their best interest, they’re indebted $580 million. For them to lose the plant would be a major loss.”

Regardless of who wins the auction, part of the reorganization plan to make AES a more profitable company would be to negotiate a new PILOT, Klatt said. The PILOT and personnel are the biggest costs for AES.

Barker’s budget is between $19 and $20 million. Klatt shared a number of staffing cuts, but the district still faces a deficit of $319,000 for the 2012-13 school year.

Board members will decide on how much to raise the tax levy, the amount of budget revenue that comes from property taxes. Klatt recommended the board raise the levy, something Barker has not done in four years.

Under the state’s property tax cap, Barker can raise taxes by 31.6 percent. Klatt said obviously that won’t happen.

But a 2 to 3 percent raise is possible, as board members discussed it Monday. The Board of Education will meet again March 13.

Contact reporter Joe Olenick at 439-9222, ext. 6241.

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