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A group of local counties has lost the first round in its lawsuit against the Hudson River-Black River Regulating District over the district's attempts to bill the counties millions of dollars for flood control provided by dams.

The regulating district billed Warren, Washington, Saratoga, Rensselaer and Albany counties $4.5 million in 2009 after it lost a federal lawsuit a year earlier that struck down its past practice of billing hydroelectric powerplant operators.

The district had not billed the counties in the past during its nearly 90-year history, but argued that the counties should pay its operating costs because of the flood control its dams provide on the Hudson River.

The counties refused to pay the bill, and filed a lawsuit last May in state Supreme Court in Saratoga County seeking to have the bills invalidated. They argued that the district didn't fully investigate who benefits from flood control, including the state, and failed to identify the pieces of real estate that benefited.

Justice Stephen Ferradino issued an eight-page ruling Friday, finding that the district acted legally when it billed the counties and its apportionment was "reasonable."

While it had not had to seek funding from the municipalities in the past because the hydropower companies were paying, the district was within its rights to seek money from them in light of the federal court ruling. The alternate approach suggested by the counties would be "unwieldy and would cause objectionable consequences," the judge wrote.

"The counties are ... properly subject to apportionment and the methodology employed to establish the apportionment was reasonable," Ferradino wrote.

The judge also opined that “it is time for the Legislature to examine the laws associated with this district” because of the “cumbersome and less than clear legislation” that has led to the funding issues.

Supervisors on the Warren County Finance Committee voted Wednesday to appeal the ruling and seek a stay.

County Attorney/Administrator Paul Dusek said he believes there is a “reasonable basis” for a succesful appeal.

“While I respect the judge’s decision, I’m very concerned that the court didn’t recognize our arguments,” Dusek said.

Washington County's attorney, Roger Wickes, said supervisors in his county will discuss an appeal next week, while Saratoga County's attorney said he will recommend an appeal as well.

"We think our lawyers raised excellent arguments and we have good grounds for appeal," Saratoga County Attorney Stephen Dorsey said.

Warren County supervisors also discussed an effort to convince local state legislators to have a bill taken up that would absolve the counties of the expense and have the district become a state-funded arm of the state.

They have also argued that municipalities along the Hudson River downstream of Albany also benefit from the district, so they should be required to pay as well.

Queensbury Supervisor Dan Stec, chairman of the Warren County Board of Supervisors, said more is at stake than just the district's 2009 bill. The district also has billed the counties for 2010, and will bill the counties each year if it is allowed to.

"Unfortunately, this is not a one-time shot and would become an annual thing," Stec said. "We're convinced our argument is on solid ground."

Saratoga County was hit with a bill for $961,675, Warren County one for $297,216 and Washington County one for $175,249 for 2009.

Michael Clark, acting executive director for the regulating district, said the district was pleased with Ferradino's ruling.

He said the district has been unable to pay taxes in the school districts where it owns land and had to let 12 employees go last year for lack of funds.

It has had to put off projects and operate under an austerity budget without the funding.

"We've exhausted our reserves," he said.

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