NORWICH – The Chenango Industrial Development Agency should review whether or not to terminate its tax-free deal with the New York Susquehanna & Western Railroad before March 1, the IDA’s attorney told the board earlier this week, saying the company hasn’t lived up to its end of the agreement for over a year.

Opponents of New York Regional Interconnect have called on the IDA to cancel the agreement since it was learned in March 2006 that the NYS&W sold land use rights to the power line in Chenango, Madison and Oneida counties.

One problem: Terminating the deal could halt an expensive environmental clean-up in the City of Norwich, IDA legal counsel James Downey added.

The railroad has been out of operation since June 2006 from Chenango Forks to Sherburne after flooding damaged that stretch of tracks.

The NYS&W has asked for, but is yet to receive, over $400,000 in public or private funding to fix and re-open the line. As of 2002, the company had already received $12 million in state money, according to the Department of Transportation, and $4 million specifically for the tracks running through Chenango County from Binghamton to Utica.

If it doesn’t get funding, the railroad says it will seek to abandon the line, leaving open any number of options for the property, including creating a scenic rail line or trail system.

In the meantime, Downey said the NYS&W is technically only eligible for the tax free status as long as it’s in operation.

“They’re not running a railroad,” said Downey Tuesday. “They’re not doing what they agreed to do for tax exemption.”

The railroad has been operating tax-free in Chenango County since 1982, saving the company around $200,000 annually in recent years. If the agreement is terminated before March 1 – the start of the tax year – it will not be listed as “exempt” for 2008. The IDA is likely to make a decision during one of its next three meetings.

Under the exemption – called a payment-in-lieu-of-taxes (PILOT) agreement – the IDA, a non-profit governmental body, holds nominal title of the tracks and qualifies the railroad to operate tax-free. The NYS&W, however, can buy back the tracks for $1 and break the deal at anytime.