Frustrated that Burgess BioPower has not revealed plans to pay its property taxes to Berlin, the city is asking the U.S. Bankruptcy Court of Delaware to order the immediate payment of $1.39 million in overdue tax payments for the 75-megawatt biomass plant.
“After approximately six months of administration in these proceedings and numerous discussions regarding hopeful resolution, the city is still in the dark about how the debtors and lenders plan to pay for the City’s property taxes…” states the motion filed by the city on Aug. 6.
The city requests the court allow an administrative expense or priority claim for the unpaid property taxes and compel immediate payment. In a follow-up motion filed on Aug. 12, the city asks the court to set an Aug. 24 deadline for objections to its request.
The city said the proposed reorganization plan for the company does not provide specific information about how the taxes will be paid. It added that the “debtors’ failure to timely pay taxes places incredible strain on the City’s operating budget and its ability to meet its obligations. Additionally, the city grows concerned that the debtors do not have the financial capacity to pay their taxes.”
The city’s largest taxpayer, Burgess BioPower, filed for Chapter 11 bankruptcy on Feb. 9. At the time, the company said it hoped to reorganize and operate the biomass plant long-term. During the proceedings, the company simultaneously pursued both a sales process and a reorganization plan. No qualified bids were received and a hearing on a reorganization plan put forward by the debtors has been postponed indefinitely. In court documents Burgess BioPower said its debtors and senior lenders are working on a plan to exit Chapter 11 but need more time to finalize it.
The city said it is also frustrated that Burgess BioPower will not say whether it considers the payment-in-lieu-of-tax agreement it negotiated with the city back in 2001 still in effect. The city noted the purchase power agreement between Burgess BioPower and Eversource has been terminated by U.S. Bankruptcy Court of Delaware Justice Laurie Selber Silverstein. The city said it believes that action also terminates the PILOT agreement and the parties either have to negotiate a new PILOT or undergo assessment for taxes using the state’s normal ad valorem taxation method. Without a PILOT agreement, the city said its utility appraiser set a taxable valuation of $120 million for the biomass facility, which would result in a 2024 tax liability of $3.8 million.
The debtors have reserved their rights regarding whether the PILOT agreement was terminated.
The PILOT agreement calls for a June 2024 tax payment of $825,000 followed by a second payment of $850,000 in December. Consistent with that agreement, the city said it issued a June 2024 tax bill of $825,000 to Burgess BioPower and it is now overdue.
The city said while there were some initial negotiations between Burgess BioPower and the city after months of delay and almost complete silence from the debtors and lenders for weeks, there is still no agreement on property tax payments. The city estimated Burgess BioPower represents 16% of the city’s tax base.
The biomass plant continues to operate while in Chapter 11. The facility is the largest purchaser of low-grade wood in the state, purchasing about 800 tons of wood annually. Burgess BioPower estimates the plant generates over $70 million annually to the state’s economy and creates 240 direct and indirect jobs.
— BARBARA TETREAULT/BERLIN SUN
