$45M Substation Sale In A Bind As Town Assess Eversource’s Tax Motives

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Photo: The new electrical substation, not yet Eversources

The largest financial transaction in the Town of Belmont’s history is on tenterhooks as a last-minute dispute over a powerful regional utility’s attempt to limit its exposure to municipal taxes has town officials demanding changes to the already signed sales agreement.

With only four days left to complete the deal, the Belmont Light Board (made up of the Board of Selectmen) and the chair of the town’s Board of Assessors are seeking changes to or the elimination of a single paragraph in the sale of the town’s new substation and two land easements which would nearly zero-out the firm’s exposure to paying non-property taxes by binding Belmont to the utilities’ interpretation of those costs.

“We are at an impasse,” said Light Board Chair Mark Paolillo at the Board’s Monday afternoon meeting at Town Hall, Dec. 12.

“We as the town fathers would be failing to do our job to approve this agreement as it is right now,” said board member Sami Baghdady.

What’s not in dispute is the $45 million Eversource will pay Belmont for the newly-constructed 10,000 square-foot electrical substations off Brighton Street on Flanders Road on the Cambridge line and new 115 kV transmission lines using easements along the MBTA Commuter Rail tracks and on town property. The new substation was approved by a unanimous vote of Special Town Meeting in Feb. 2012.

Formerly known as Northeast Utilities, the Hartford- and Boston-based Eversource is a regional electrical and gas utility with more than 3.6 million customers in Connecticut, Massachusetts, and New Hampshire. It merged with NSTAR in 2012.

Belmont Town Treasurer Floyd Carman said the payment, which last week he called the largest financial transaction the town has committed to, will be used to pay off $28 million in short-term bonds which financed the construction.

Carman said the remaining $17 million would be set aside to pay the cost of decommissioning Belmont Light’s three former substations located at the Chenery Middle School, off Hittinger Street and at the old Light Department Headquarters adjacent the Police Station on Concord Avenue and other improvements.

Under a joint development agreement, Belmont’s electrical utility Belmont Light and Eversource agreed to close the deal and transfer the assets two weeks after final testings concluded which occurred on Dec. 2. The Light Board – which is the governing body of Belmont Light – and Eversource then worked to reach an agreement before Dec. 16.

It was during the reading of the purchase and sale agreement that Baghdady, a transactional attorney, spotted a line in the document concerning the assessment of non-property personal services, which is the value of the contractional work on the project.

“I could tell that [Eversource] appeared to be attempting to minimize their taxes to the town,” said Baghdady.

While the Light Board signed the sales agreement at an Emergency Meeting on Friday, Dec. 9, it did so with the caveat that more information on the fallout of Eversource’s motive to add the language to the deal. The board then asked the town’s Board of Assessors’ Chair Robert Reardon to lend his expertise to the matter.

Reardon, whose day job is the director of the Cambridge Assessing Department, concluded the current language would bind Belmont’s assessors to that went against its best interest and ran counter to state assessing law which allows municipalities to not just tax real property but the value of the personal services, in Belmont’s case when engineers installed the transformers, switchgear, and protective equipment.

In Reardon’s opinion under the existing agreement, Eversource could point to the sales document to prevent Belmont’s assessors from taxing the services rendered.

In his view, the annual assessed payment from the utility to the town would be reduced from approximately $350,000 to $3,500, saving the utility $346,500 annually to Belmont’s deficit.

“I trying to protect the town,” said Reardon as he declared his opposition to the deal.

Belmont Light’s counsel Walter Foskett said Eversource could be reluctant to make changes to a signed sales document, but Paolillo noted that Eversourse “showed their hand” on including and defending the particular paragraph to the agreement.

“Why care about the language if you are not going to use it … for a tax break,” he said.

In the view of Reardon and the Light Board, taking out the disputed language doesn’t prevent Eversource from appealing the judgment of Belmont’s assessors to the appellate court.

“This is important enough to meet again,” said Paolillo.

New Electrical Substation, Transmission On Line for Spring 2016 Launch

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After listening to Belmont Light General Manager James Palmer at public meeting Tuesday, Sept. 23, the best way to described the work to bring on line a new electrical substation and laying out a transmission route through town is “hunky-dory.”

Since being approved by Special Town Meeting in Feb. 2012, the town-owned electric utility proposal to meet the town’s increasing power requirements has been steaming along right on schedule, Palmer told a meeting of the joint meeting of the Belmont Light Board (made up of the Board of Selectmen) and its Advisory Board held at the Beech Street Center.

“Progress has been made, and we are hard at work to have this project up and running by the Spring of 2016,” said Palmer.

While the multimillion dollar project will effect everyone who turns on a switch in their home or business in Belmont, only a handful of rate paying residents showed up for the presentation which reviewed the steps taken so far by the utility and some of the challenges it could face in the future.

Since 2012, Belmont Light has moved on finding a location for the substation and obtaining the property, clearing regulatory hurdles and laying out the best route for the new electrical lines after securing easements and state approval.

“As you can see, we’ve made great progress in a short amount of time,” said Palmer.

The new Belmont Light substation. (credit: Belmont Light)

The new Belmont Light substation. (credit: Belmont Light)

Palmer said the project’s most noticeable accomplishment can be seen at the substation’s new home off Brighton Street on Flanders Road. The building that was once the home of Crate Escape, the dog day care business, has been demolished as the location is being readied for construction.

The town issued a Request for Proposal to build the $5 million, 10,000 sq.-ft. structure with bids due by Oct. 31 with a contract awarded soon afterwards.

“These are huge milestones,” said Palmer.

The new substation – which will house a new 115-kV single loop transmission line – is being built in partnership with the regional utility NSTAR. Rate payers will be on the line for $26.1 million in long-term bonding.

While out of sight, the transmission line bringing power from the substation to homes and businesses is also proceeding, although at a much slower rate. While Belmont Light will lay the line on the south side of the MBTA/Fitchburg commuter rail line, the utility will need to coordinate with the MBTA, which currently has a construction project at the site.

“This could impact our schedule,” said Palmer, saying it’s doubtful both projects could simultaneous work “side-by-side” at the same time.

As part of meeting the project’s regulatory requirements, Belmont Light made an initial presentation to ISO-New England, the independent, non-profit regional transmission organization that operates New England’s power grid and oversees the wholesale electricity market.

“If the project is deemed a benefit to the surrounding communities, which it is, then the cost of the transmission lines will be shared regionally,” said Palmer.

When asked by Slate Street’s Roger Wrubel if a positive ISO response to Belmont Light’s presentations would save either Belmont Light or NSTAR money, Palmer said both entities would benefit in the cost cut.

Moving forward this fall, Palmer said the town has issued a RFP for the transmission lines, and new major electrical equipment will be purchased along with the substation’s contractor named.

And while changing market conditions could increase the cost of construction, Palmer said he believes the contingency set aside in the budget will sufficiently meet any future “surprises,” said Palmer.