City officials in Everett are suing the Baker administration to overturn a 1999 agreement that gave a large tax break to a power plant along the Mystic River, across the street from the location of the new Wynn casino.
The tax break was intended to help spur the expansion of the Mystic Generating Station — at the time a $605 million project. But the plant’s owners invested significantly more in the project, $1.3 billion, by the time it was done in 2003.
The result, said Everett officials, is a much more valuable property, and a tax deal that shortchanged the city by as much as $400 million over time.
The plant has had a succession of owners, and is now owned by Exelon Corp. The 20-year tax deal stipulated that the plant’s owner would pay $17.9 million a year during the first decade, and $15 million a year over the following decade. But those payments were predicated on the plant being less valuable than it is now, and instead should reflect the full value of the new facility, city officials said.
The Mystic facility is the largest industrial taxpayer in Everett. The expansion involved two new gas turbines totaling some 1,600 megawatts of generating capacity, bringing the total potential output to roughly 2,000 megawatts — the largest power plant in the state.
Last year, Everett asked the state Economic Assistance Coordinating Council to decertify the tax deal, citing the doubling in cost for the plant upgrades as a “material’’ difference that should enable the city to void the agreement. Everett’s deal with Exelon runs out in 2020, but city officials want damages awarded equal to the amount of unpaid taxes.
The council denied Everett’s request last month, essentially saying that the power plant owner in 1999 made a good-faith estimate when the tax deal was negotiated. The council, in its decision, also notes that it will hold companies accountable if they don’t deliver on the employment or investment promises they make in securing tax deals. In this case, the power plant owner exceeded its initial pledge.
So now, Mayor Carlo DeMaria of Everett has turned to the courts to get the state decision overturned.
On the team of lawyers from Mintz Levin hired by Everett is former governor Bill Weld, a longtime mentor of current governor Charlie Baker.
Exelon spokesman Mark Rodgers said the Chicago-based company, also a defendant in Everett’s suit, remains confident that a judge will uphold the state’s decision. He said the Mystic plant has paid Everett about $300 million since the start of the agreement in 2000. “Exelon Generation has a good relationship with the City of Everett and we look forward to continuing to work together as a responsible business member of this community,’’ Rodgers said in a statement.
A spokeswoman for Massachusetts economic affairs secretary Jay Ash declined to comment. A spokesman for DeMaria also declined to comment, referring questions to Mintz Levin.
Brian Dunphy, one of the Mintz Levin attorneys on the case, declined to say why it took so long for the city to challenge the tax deal.
“The city’s position is that a variance or a deviation of 100 percent between the representation that’s in the agreement for the investment amount versus what turned out to be the actual investment number is material as a matter of law,’’ Dunphy said. “That warrants rescission of the agreement.’’
If DeMaria loses this court fight, he can take solace that another cash cow is coming online in Everett.
A spokesman for Wynn Resorts said the Wynn Boston Harbor casino will generate $25 million a year in taxes for the city of Everett after it opens in 2019.
Jon Chesto can be reached at jon.chesto@globe.com. Follow him on Twitter @jonchesto.
