GERRY- Gerry lost $2 million from its tax base thanks to a state reassessment of a natural gas pipeline in February.

The pipeline once owned by Norse Pipeline – now owned by Emkey Gathering after Norse Pipeline went bankrupt in October 2013- runs beneath the town of Gerry and several other towns in the county. In 2013, the state assessed the value of the pipeline at $2,616,444 for Gerry. In 2014, the amount lowered to $320,439, causing Gerry to lose $2,305,368 of its tax base.

“We’ll be talking to our accountants (about the tax revenue loss) when we begin our budget process,” said John Crossley, Gerry supervisor. Other towns echoed this strategy, while at the same time voicing concern for Gov. Andrew Cuomo’s 2 percent property tax cap law. According to Randy Holcomb, assessor, land values along the pipeline will not be affected.

According to Jim Caflisch, director of the Real Property Tax Services in Chautauqua County, Norse Pipeline in the past believed a large amount of natural gas would be moving through the pipe. It was why the company bought most of the pipeline from Columbia Natural Resources around 18 years ago. The intention was to move gas from Pennsylvania to New York and, at one time, connect to the Millennium Pipeline. The Millennium Pipeline – which never came to fruition – was designed to carry natural gas from Canada under Lake Erie, servicing the entire Southern Tier. The state, however, eventually discovered gas reservoirs in the Trenton Black River formation in the Elmira area and in the Marcellus Shale. Norse wanted to transport the natural gas to Western New York.

The state had other ideas, though. Because a moratorium on gas drilling and high volume hydraulic fracturing was imposed by former Gov. David Paterson and renewed by Gov. Andrew Cuomo, much of the conventional drilling in New York stopped.

“(Natural gas companies’) ability to do business in New York dropped (considerably), and the value of their pipeline dropped because of the inability to conduct business in New York state,” Caflisch said.

Despite the low amount of movement of natural gas in the pipeline, New York valued Norse Pipeline utility properties at nearly 90 percent over its true value. Towns – in an effort to get a 100 percent equalization rate to receive state reimbursement during a revaluation – used these numbers. In addition to Gerry, other towns and school districts across the county used state assessment numbers to value the Norse pipeline – whose assets are now owned by Emkey Gathering – causing Norse to file a type seven action lawsuit for a reduced value in 2011. Norse Pipeline filed similar lawsuits in the past.

“This has been in litigation for many, many years. There have been several different court orders,” Caflisch said. “… I do take issue with how New York state has placed a value on this pipeline in light of the court decision and the court action which took place on our settlement. So, I am hopeful the state would recognize this is brought on by (their moratorium), which has hindered the ability of Norse-Emkey to conduct business in New York state.”

This recent lawsuit settled in the Chautauqua County Supreme Court in Mayville. In addition to each town being required to correct the assessment value, Chautauqua County owes Emkey $45,000 to compromise all claims arising from this litigation. The agreement on the values going forward spans five years.

Currently, towns await to see if the court order will impact the tentative equalization rate of 100 percent, which has not taken into account the Emkey values. Towns and school districts also worry about the cut to their tax base. With a large cut in tax revenue, the remaining taxpayers will need to pickup the slack to help pay for town and school budgets. This poses a problem because municipalities and schools are required under state law to stay under a 2 percent tax cap. While towns can override the tax cap with a local law, the state offers incentives to stay under the cap.