Taxes
Frequently Asked Questions
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What will the bill cost taxpayers?
Nothing. As a norm, publicly-owned energy utilities are not subsidized by taxpayers, and neither will the Hudson Valley Power Authority. This is in contrast to other types of authorities that are designed to be subsidized, such as transit authorities like the MTA. HVPA will be a public benefit state corporation that is independently financed, separate from the state’s budget, through authority bonds it issues and revenues it collects from bills people pay. The model of a public authority was designed precisely as a workaround to undertake massive public projects without having to fund it through taxpayers.
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What taxes are HVPA exempt from?
As a publicly-owned corporation, HVPA will not pay (1) federal and state taxes (2) taxes on bonds. It will continue to make a payment in lieu of taxes to municipalities to make up for the local taxes it will be exempt from.
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Will municipalities lose property taxes?
No. As is common with publicly-owned utilities, the bill specifies that HVPA will make payment in lieu of taxes to make up for the lost property taxes. The bill sponsors are actively working on strengthening this provision with any amendments as needed, to ensure municipalities will not lose revenues when Central Hudson switches to HVPA.
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Will the state lose revenues in state taxes?
Not really. First, the state regularly gives up revenues that would have been collected through state taxes. For example, it gives tax breaks to certain types of for-profit businesses, including real estate developers, and it also gives various types of tax credits. Fortunately, the state has a myriad of choices through which it can make up for the revenues that would otherwise have come from the state tax Central Hudson pays, which is paid by the ratepayers. For example, it can easily collect the difference through a very minor tax increase on large corporate profits made in the state by big companies such as Apple and Walmart.
Second, taxpayers fund the Public Service Commission to regulate companies like Central Hudson, and they also fund many energy affordability programs. If we keep utility bills low enough so that more people are able to pay them, we would also see some savings.
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How much does Central Hudson pay in federal and state taxes?
Central Hudson reports that it paid $20,531,000 in Federal and State taxes in 2022. As a not-for-profit state corporation, the Hudson Valley Power Authority will be exempt from these taxes, which is a direct savings in costs that are passed to ratepayers.
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Won't paying to acquire Central Hudson increase the rates?
No. According to a precursory analysis from Tom Konrad, Ph.D., CFA, a net savings of $45 million is expected for an acquisition cost of $1.26 billion. When the Hudson Valley Power Authority finances debt to acquire Central Hudson, we estimate to see the following:
- Increase in interest payments for issued debt: $52 million
- Savings in taxes and shareholder dividends: $99 million
- Net Savings: $45 million
This includes the following liabilities:
- Refinance current public debt of $494 million at 5.26%
- Assume other liabilities, such as short term debt and accounts payable, at $652 million
A more in-depth study is currently being conducted, after which we will have more detailed information.
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