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The city of Lackawanna and its school system stand to benefit financially from an agreement with the company that eventually will erect 18 more windmills on the former Bethlehem Steel site.

But peace and harmony hardly describe the way the city and school district worked together to get to this point.

The developer, in this case BQ Energy, must either pay taxes to municipalities and school districts or sign agreements to pay a sum in lieu of taxes, or negotiate separate payment schedules.

At issue is an earlier agreement between BQ Energy and the city that leaves the schools out of a 15-year payment plan. That still does not sit well with Paul Hashem, superintendent of schools at the time the deal was negotiated.

He felt, and still feels, the district was deliberately left out of negotiations when Lackawanna Mayor Norman Polanski signed the original Steel Winds deal.

The controversy began with the eight wind turbines occupying the grounds of the abandoned steel mill. Steel Winds I generates up to 20 megawatts of electric power and per the original agreement, signed Dec. 19, 2005, developer BQ Energy pays Lackawanna - the only benefactor of the agreement - $100,000 tax-free every year for 15 years.

A second, tentative agreement signed by BQ this past spring with the city - and this time including the Lackawanna City School District - could pay the city an additional $162,000 a year, once construction begins. The school will get $130,000 annually.

The second agreement will not change any provisions of the first Steel Winds deal, leaving the city as sole benefactor of that contract.

David Bradley chairs the engineering committee for Wind Action Group, an education and advocacy group geared toward maximizing wind energy in Erie County. Of Polanski's ability to negotiate wind deals for the city, Bradley said, "He did well for himself."

Hashem, who retired Feb. 5, said Polanski could have done a better job negotiating for the community had the schools been a party in the talks. Steel Winds I would have benefited the school district, Hashem maintains.

"We could have gotten into an agreement where funds could have helped us get a reading or math teacher," he said. "The problem was the school district had an interest in this, but was not made aware of the negotiations.

"I feel very strongly the city breached an ethical issue, not notifying all municipalities. The school district should have been made aware, to share in the agreement."

Of the original agreement, Hashem said, "The Steel Winds people said they expected the city and the school district to be included, and were disappointed both were not."

Paul Curran, managing director of BQ Energy, negotiated Steel Winds I and Steel Winds II payment agreements. He declined comment when asked to recall his or his company's reaction to the school district being excluded from the first voluntary payment agreement.

"We negotiated an agreement with the city, honored that agreement and are happy with it," he said.

Lackawanna mayor: 'Nobody wanted in'
"The district has to express an interest," said Polanski. "Our first deal with the eight windmills, nobody came and said they wanted in. So the deal I struck was for the city. Once construction started, the school and county were out of luck in demanding revenues."

"The mayor is not being forthright," said Hashem, when told of Polanski's comments. "When they did that first set of negotiations, the school district didn't know they were negotiating with Steel Winds. I believe they did that (to avoid sharing) money with the school district, and that was wrong. This was a really underhanded deal, a deliberate way of excluding one of the partners.
"My understanding when (then-district attorney Carl) Morgan looked at the real property law and researched it ... there wasn't anything we could do," Hashem said. "It was a done deal. We were screwed and that was it."

A call to interim school Superintendent Fred Wille was not returned.

According to Section 487 of the real property tax law, energy systems such as solar or wind are tax-exempt for 15 years. It also states local jurisdictions (such as school districts) may require solar or wind energy systems to enter a payment-in-lieu-of-taxes (PILOT) contract. When the district opted out of the exemption from taxation on Nov. 15, 2006, it legally secured its place in negotiations for Steel Winds II.



Read more: Wind turbine deal spins up controversy - Business First of Buffalo