MONTAGUE — After three years of disputes over the assessed value of FirstLight Hydro Generating Co.’s property in town, a 10-year payment in lieu of taxes (PILOT) agreement is now in effect.

In addition to settling payments for fiscal years 2022, 2023 and 2024, the agreement, reached between FirstLight and the Montague Selectboard, Montague Board of Assessors and the Turners Falls Fire District, will continue through 2035. While $1 million must be returned to FirstLight for overpayments it made during those three fiscal years, FirstLight agreed to pay the town $2.75 million in FY26, a sum that will increase by 0.75% each year that the agreement is in effect.

The hydropower company owns two major facilities in Montague: Cabot Station at 15 Cabot St. and Turners Falls Generating Station No. 1 at 26 Power St., along with other properties along the Connecticut River and power canal. The town’s valuation of the 15 Cabot St. and 26 Power St. properties differed by $84 million in FY22, $70 million in FY23 and $61 million in FY24 when compared to what FirstLight believed their value to be. Per the PILOT agreement, the agreed-upon valuation of FirstLight’s two parcels is $95.5 million for FY26.

“This [agreement] was developed out of mediation from a tax case that went before the Appellate Tax Board related to FirstLight,” Montague Town Administrator Walter Ramsey explained, noting that FirstLight is “one of the largest taxpayers in town.” According to Ramsey, the case was looking favorable for FirstLight, making mediation the best course of action for the town.

With an affirmation vote at Montague’s Annual Town Meeting on May 14, voters gave their approval to having town officials enter into negotiations for a PILOT agreement with FirstLight.

Under the PILOT agreement, the town and the Turners Falls Fire District will start by paying $1 million to FirstLight. Of that sum, Ramsey said, $800,000 will come from the town’s Overlay Account and $200,000 will come from the Fire District Overlay Account. As FirstLight operates on land that is covered by the Turners Falls Fire District, the company also pays taxes to the district, Ramsey clarified on Wednesday.

The next part is the 10-year PILOT agreement, through which FirstLight will pay the town $2.75 million in FY26, a number that will increase by 0.75% each fiscal year moving forward. Of this, $2.35 million will go to the town and $400,000 will go to the Turners Falls Fire District. The agreement will result in an “adverse financial impact” for the town, according to Ramsey, who noted the town had received $3.25 million from FirstLight annually during fiscal years 2022, 2023 and 2024.

For taxpayers in town, Ramsey explained that using “very, very rough numbers,” the loss of revenue would result in a $110 tax increase for the average single-family homeowner each year.

“That’s a conservative estimate. It’s entirely possible, however, that an increase in valuation as well as new growth could significantly reduce that figure,” Ramsey clarified.

The parties will meet again in 2034 to begin discussing plans for a new PILOT agreement before this one expires in 2035.

FirstLight Communications Manager Claire Belanger said the company is proud to have collaborated with the town to reach the PILOT agreement, which will “usher in the next decade of support and partnership.”

“This mutually beneficial agreement establishes a predictable revenue stream from FirstLight to Montague,” Belanger said in a statement. “We continue to support the town as the agreement clears the review process and awaits what we’re hopeful is final approval.”

Having been approved by the Selectboard and the Board of Assessors, and reviewed by legal counsel, the only other organization that still needs to review the agreement is the Turners Falls Fire District’s Prudential Committee. Ramsey said the town anticipates the Prudential Committee will vote to support the agreement during its July 8 meeting.

Ramsey said the PILOT agreement is expected to help shield the town from uncertainty, including future Appellate Tax Board cases, changes in the energy market and future litigation costs.

Resident Ariel Elan told the Selectboard during Monday’s meeting that she “really appreciates” the agreement and the attention the Selectboard has given to reaching it. She said she feels the adverse financial impact is an abstract concept, saying that yearly disputes over the assessed value can be as risky to the town as the loss of revenue.

“I’m just really glad we’re avoiding that scenario,” she said.

Erin-Leigh Hoffman can be reached at ehoffman@recorder.com or 413-930-4231.