Agency drafts policy on community solar projects seeking tax incentives

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At least two developers of proposed community solar projects in Oneida County have warned that a proposed policy developed by the Oneida County Industrial Development Agency on how to tax such projects will make them less likely to go forward.

The policy is intended to guide decisions on solar projects of the kind that New York state has encouraged. Developers get payment for the power generated from the solar farms and put into the power grid, and residential and commercial participants get a discount on their power bills from the distribution company, such as National Grid.

The state energy agency says that full property taxes on the increased value of the property often makes such projects not financially feasible, and that developers often seek reductions or deals to make payments in lieu of taxes from localities.

Under state real estate tax law, such energy projects can get exemptions for 15 years on the value a new solar array adds to the property, though owners are still obligated to pay property taxes on the land for schools, municipalities and counties. Local governments, including school districts, can opt out and reach their own deals, or do nothing, in which case the state exemption takes effect.

The IDA’s policy is intended for projects where the owner or developer comes to the IDA rather than individual localities.

The Oneida County IDA draft policy sets several points of eligibility criteria and a uniform rate of payment in lieu of taxes based on how much power a project is designed to produce. It would also require a statement of support from each town, village, fire district and school district.

Other factors to be considered are the extent to which a project could benefit end users in Oneida County, how much energy it would save an existing or proposed new business or project in the county, and whether it’s on land considered hard to develop, such as landfills, gravel pits, designated former industrial sites known as brownfields, and is not harmful to farming operations.

Under the proposal, project operators would pay an annual fee for 15 years to be allocated by the IDA to each taxing jurisdiction in the same proportion as property taxes would be. The fee would start at $10,000 per megawatt, increasing 2 percent during the second through 10th years, and increasing 5 percent from year 11 through 15. After that, the operator would pay all the property taxes as usual.

In addition, the operator is to pay $2,000 annual rent to the IDA, and if there’s no agreement with the host community, pay the locality a fee equal to 5 percent of the annual payment in lieu of taxes amount.

Operators may also apply to receive an exemption of less than 1 percent on the tax on recording mortgages. No break on sales taxes on materials would be given, however.

Operators would provide to the IDA the annual generation report submitted to New York state and the base line of generation would be adjusted upward only each year. Operators would also have to submit decommissioning plans acceptable to the IDA and host communities, along with reserving funds for such shut-down work.

In March, the IDA board tabled a request for an agreement for a community solar project in Trenton brought by Source Renewables, which is working on or operating more than a dozen such projects across New York state. The proposal was a 3.2-megawatt array on Hulser Road.

Board members expressed concerns about whether community residents would actually benefit, and wanted information on how such requests are being handled elsewhere. During discussion of the policy, others on the board expressed concern that, unlike most industrial projects that get tax deals, solar farms usually do not create many if any jobs.

Developers registered objections.

Source Renewables founder Andrew Day panned the draft policy. The proposed rate of $10,000 per megawatt is twice what is typical in upstate New York, Day told the Daily Sentinel.

“It’s a terrible policy. It’s anti-solar. It’s way out of market, and very disappointing, really,” Day said.

Source Renewables, however, plans to go ahead with its Trenton project without a payments in lieu of taxes plan with the IDA, Day said. It can negotiate directly with jurisdictions, which in this case includes Whitesboro schools, the town of Trenton and Oneida County. If none pursues an agreement, the company can use the blanket state exemption, in which case none of the localities gets a payment beyond the taxes on the underlying land for 15 years.

Representatives of Omni-Navitas, a Boston company shepherding two other community solar projects in Oneida County, in Camden and Annsville, told the IDA board June 19 that five-megawatt projects likely will not go forward under the policy. Company counsel Kevin McCauliffe told the board that the company’s original application assumed a rate of $6,000 per megawatt, according to minutes of the June 19 meeting. The company is working on behalf of Connecticut-based Green Street Power Partners on five-megawatt projects in Camden and Annsville in the Rome school district. The applications were tabled by the IDA board.

The board picked the $10,000 rate after staff researched what other IDAs in New York have done and examined models of the New York State Energy and Research Development Authority. Rates elsewhere ranged from $3,000 to $12,000 per kilowatt-hour, IDA Executive Director Shawna Papale said.

The IDA scheduled a public hearing on the draft policy for 10 a.m. Aug. 10. It will be held via WebEx. To take part, call 1-408-418-9388, with the access code 132 541 7600. A copy of the proposed policy is available at the IDA office at Mohawk Valley Edge, 584 Phoenix Drive in Rome. Written comments may be sent to Shawna Papale at the IDA by 4 p.m. Aug. 10.

The IDA board plans to consider a vote on the policy Aug. 21.

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