SALEM — The Massachusetts Legislature adopted a compromise proposal yesterday ensuring that Salem taxpayers won't have to reach into their own pockets to replace lost revenue due to the pending closure of the Salem Harbor Station power plant.
Under the so-called outside budget amendment, which still needs the governor's approval, the city would receive the difference between the $4.75 million that Dominion, the power plant owner, currently pays in taxes and fees and any future payments, which are expected to drop.
Dominion, a Virginia energy company, recently announced plans to close two of the four generating units at the Salem plant by December and the entire facility in June 2014.
This new "hold harmless" agreement would be in effect for five years, or to 2016. A Senate proposal to extend the agreement until 2021 was rejected.
"It's the ultimate protection for Salem taxpayers for the next five years," said an elated Mayor Kim Driscoll. "It's huge ... I'm doing my happy dance."
The measure was pushed through by Senate Majority Leader Fred Berry of Peabody, state Rep. John Keenan of Salem, who is chairman of the House Committee on Telecommunications, Utilities and Energy, and other legislators.
"This is great news for the city," said Keenan. "It's a solid compromise, a good compromise" between the House and Senate amendments.
"...I am very pleased that Salem's tax base will be protected for an additional five years," Berry said in a statement. "This measure ensures that the City and Dominion will continue negotiations even in the event of a full or partial decommissioning of the plant."
The measure protects communities that host power plants from lost tax revenues due to closings and the anticipated long delays in cleaning up and developing polluted sites.
The money going to Salem will come from a Regional Greenhouse Gas Initiative fund. In effect, it is payments made by power generators for polluting.
The fact communities are not being paid with taxpayer money made it easier to get support for this tax bailout, Keenan said.
"This will have a huge impact on the city," the mayor said. "It's vital for us to be able to maintain that tax revenue for a number of years ... I can't thank the Legislature enough ... It means a lot to our community because we're able to preserve services and not unfairly harm taxpayers because of a plant closure."
It also gives the city time to plan the future of the 62-acre waterfront site, the mayor said. The first public meeting with consultants who are trying to come up with "realistic options" for the property was held Thursday night.
Getting new tax revenue from that site will be a challenge, the mayor said. For starters, it is owned by Dominion, which has told city leaders it does not plan to redevelop the land.
Consultants estimate it will cost $20 million to clean up the property and tens of millions more to take down plant buildings and prepare the site.
Both Keenan and Driscoll defended the RGGI funding, arguing Salem has hosted an aging, dirty power plant and should not be penalized because it is closing.
"It has provided energy for the region for 60 years," said Keenan. "To say we have to completely bear that financial (loss) I think is unfair, and I think most folks would agree with that. As we transition to this 21st century of clean energy, we also have to make sure we take care of those communities that previously provided that energy."
More than a decade ago, Salem received about $9 million from the power plant, an amount that gradually declined over the years. At present, the city gets $3 million in taxes and a $1.75 million community host fee.
The city is currently negotiating a new tax agreement with Dominion. With two of the coal-burning units slated to close by the end of the year, triggering about 30 layoffs, payments from the plant are expected to drop.
"We're not letting Dominion off the hook," Driscoll said. "We're still going to actively negotiate..."
This action, however, does "provide some breathing room should this plant's value be diminished by the impending closure."
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