Legislature adopts PILOT schedule for solar projects

Thursday, October 27, 2016 - Updated: 10:23 AM


Recorder News Staff

FONDA -- After several months of discussion, the Montgomery County Legislature adopted a local law establishing a payment in lieu of taxes schedule for solar and wind energy systems.

The legislature unanimously passed the resolution Tuesday during its monthly meeting despite concerns expressed by several solar developers. The local law seeks to capture tax revenue from solar developments, rather than the county not acting on a state real property tax law that allows some alternative energy facilities to be exempt from general municipal and school district taxes for 15 years.

Solar developers said the PILOT schedule could inhibit solar facilities from setting up after the law goes into effect.

Joshua Katz with Onyx Renewable Partners said the PILOT could cause solar developers to lose income.

Katz gave the example of a 2.8 megawatt development on 12.5 acres. After 15 years, he said the company would make about $891,000 after an initial $5.5 million investment. However, under the legislation, there would be a $1.4 million tax obligation, meaning after 15 years, the company will have lost $524,000.

"That's negative 2 percent return. ... How much can we make in the first 15 years without killing the project?" Katz said.

While Katz said he supports PILOT schedules and ensuring solar developments are taxed, he suggested other routes to take that "won't effectively kill all solar development in the county" and prevent municipalities or school districts from receiving any benefit from the developments.

Patti Smith with Borrego Solar Systems said Borrego is currently negotiating a PILOT for a Washington County project that is based on payment per megawatt, rather than assessed value.

"Numbers came in and they are in the $3,000 to $5,000 per megawatt level, which is significantly lower than what we're seeing here," Smith said.

She said due to the high capital investment and low capital returns in the first year, a significant tax hike would make the county uncompetitive.

District 6 Legislator John Duchessi said he felt the concerns of investments and returns were more for the solar companies, rather than the county. He said his concern was that solar developments do not provide many local jobs.

Although the first three to six months is labor intensive, Katz said most jobs associated with solar developers are state-based employees, but added that the developments often go on farmland not likely to be utilized for commercial purposes that generate a small amount per year.

Duchessi and some of his fellow legislators also expressed concern that once the 15-year PILOT is complete, the technology may no longer be viable since the solar industry is still new and continues to change. Katz and Smith both said the technology would last for 30 years.

Duchessi also questioned sales tax generation from the commercial solar developments, to which Smith said in New York, only construction materials generate sales tax, which is about 60 percent of the cost of construction.

District 9 Legislator Robert Purtell said with solar developments, the county was putting at risk the value and possible reuse of large tracts of land that could be used to industry development.

"What I'm hearing from you is this, if we don't change the way we do this, our PILOT plan, as opposed to the megawatt system which seems to pay a lot less, that you're saying, well, you're not going to get anything," Purtell said.

District 7 Legislator Barbara Wheeler asked prior to the vote if there was any information brought up Tuesday that might be taken into account and would require the local law be rewritten, but Montgomery County Executive Matthew Ossenfort said he fully supported the legislation as written, even in light of comments made Tuesday.

"We've talked about this quite a bit back and forth and the best I can say is I am supportive of this resolution," Ossenfort said.

Variations of the local law have been before the legislature since March as county officials have decided how to best tax commercial solar projects to ensure they are treated equally to other commercially taxed projects.

According to the resolution, solar panels used on residential properties will be fully tax exempt, as will solar structures that produce energy for on-site buildings, except when energy is sold back to the grid.

The PILOT schedule lasts for 15 years. The project would begin at 50 percent "of the increase in the assessed value attributable to the improvement" on the land, or the solar development equipment, and decrease until it reaches full taxable value, according to the resolution.

Developers are required to give notification to the county executive's office of their intent to build a wind or solar energy system. The local law will take effect once filed with the Secretary of State.