The Bethlehem Steel tax settlement that brought sighs of relief to Lackawanna officials has a downside for the Erie County budget, and county lawyers intend to challenge it in court.

The settlement requires the county and one of its sewer districts to refund about $2.1 million in taxes paid for the property from 2001 to 2007, so the county’s lawyers will go to court Thursday seeking to intervene.

If State Supreme Court Justice Donna M. Siwek lets Erie County become a party to the lawsuit, the county will object to the stipulated settlement in an attempt to change the terms, said James L. Tuppen of the county attorney’s office. “Erie County would have some ideas of its own,” Tuppen said. “The alternative is that if you can’t agree on a stipulation, you go to trial.”

Lackawanna officials had struck this compromise: The property’s assessed value would fall from $40 million to zero for the years in question, but the city and the school system would not have to refund the taxes paid over those years by current owner Mittal Steel Co.

Erie County was not similarly spared. Under then-County Executive Joel A. Giambra, county lawyers never entered the case. As county attorney, Frederick A. Wolf had decided that tax challenges against local assessors were too numerous. Hundreds of such cases can be going on at any one time, and county government could not get involved in all of them, especially when budgets were tight and the county attorney’s staff had been cut.

Absent from the table, Erie County could not argue that it should be able to keep the $1.5 million in property taxes it collected for the site from 2001 to 2007, plus the $600,000 collected for Sewer District 6.

“Had the county administration been involved in this litigation and settlement, the negative impact to the county could have been reduced or possibly even avoided,” said County Comptroller Mark C. Poloncarz.

“While the settlement may be a good result for the City of Lackawanna,” Poloncarz said, “I am troubled by this unanticipated county expense, which would have a material negative effect on the 2008 budget.”

The $2.1 million would hurt the county but not throw it into a deficit. The government has been slowly building reserves and ended the first three months of the year better than budgeted.

mspina@buffnews.com

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