information about the solar-tax proposals from holyoke mayor alex morse given to city councilors:

8/19/2019 Information about the solar-tax proposals from Holyoke Mayor Alex Morse given to city councilors:

1/9

hat

are

Solar

PILOT

Agreements• A PILOT is a Payment In Lieu Of Taxes

made to compensate the

tax

revenue

that

it

loses

or

cannot

obtain

because

of

the

natureownership or

use

of

a particular

piece

of

real

property.

• In the case of solar farms, a PILOT allows the City to receive addincome

on land which otherwise would provide less taxes.

Very low Tax Income Received Some PILOT Income Receive


2/9

here

are

Solar

PILOTs

optimal?• Where there is a significant chance that the land for the proposed project is unlikely

development in the years ahead due to market conditions, land form, contamination

undesirability of

new

development

or

other

factors.

• PILOTs in these cases present the best chance to increase income

on land that otherwremain unproductive for taxation purposes.

vs

Low Development Potential

(odd shape, neighborhood)

High Development Potenti

(Industrial corridor, good shape an


3/9

Real

property

v.

Personal

Property• Real property tax (land and any improvements) is paid by th

Property Owner

per

Paragraph

2 of

the

PILOT

Agreement.

• Personal property tax or the PILOT is paid by the system ow

•

Use

of

the

land

for

a

solar

project

is

classified

as

commerciaAssessors for real estate tax purposes.

• As a result of the City’s split tax rate, there may be an increa

estate taxes

received

by

the

City

if

the

property

was

formerclassified as residential or exempt. This would not be the ca

community that has a single tax rate.


4/9

hy

do

solar

farms

require

a

PILOT?• Onlyelect

(i.e.,

tax.

• A so

large

cost

proc

• The

proje

finan

• The

City strea

rece

in th

farm

it op

tax o


5/9

ow

does

the

Solar

PILOT

work?• By installed capacity

• NOT reflective

of

actual

production,

hence

stays

fixed

over

the

20

• Provides predictability to the process• Developers take accelerated depreciation of entire facility, under

rules, over

a roughly

5 to

6.5

yr

term,

hence

the

PILOT

allows

spre

fixed revenue stream over a longer time period (prior graph highlights this)

• Lower in Holyoke due to PPA (Power Purchase Agreement) compensation, l• Allows

for

wholesale

energy

pricing

at

or

below

alternative

energy

(i.e., f

• Avoids any cost premium for HG&E’s

ratepayers which higher retail typewould require if a higher PILOT was utilized


6/9

ho

is

involved

in

the

PILOT?• Company, HG&E, Assessor’s, Law Department, Planning, Ma

Council

•

Holyoke

City

Council

Meeting

4/15/14

Reports

of

Committe15D.

The Committee on Finance to whom was referred an order Ordered that the Arepresentatives of the Holyoke Gas and Electric meet with the City Council to discuproposed PILOT agreement for solar projects in the City to ensure that these agree

structured in

a manner

that

is

prudent

and

in

the

financial

best

interest of

the

taxpCity.

Recommend that the order has been complied with


7/9

hat

Solar

PILOTS

exist

in

Holyoke

toda• Constellation Energy –

Mueller Rd COD 11/27/11 (HG&E gas production fac

• 3496 kW

‐DC

size

‐

$17,480/yr from

PILOT

(Interdepartmental Agreement

9/17/12)

• Constellation Energy – Meadow St COD 1/3/12 (HG&E property, Springdale Ind• 1028 kW‐DC size ‐

$5,140/yr from PILOT (Interdepartmental Agreement 9/17/12)

• Citizens Energy

–

County Rd

COD 2/5/13 (Clear

Channel

property)

• 799.5 kW‐DC size ‐

$3,997.50/yr PILOT (City Council approval 11/15/11)

• CTEC/HPP –

Garfield St COD 10/8/15 (RICAR property, Springdale Industrial Park)• 997 kW‐DC size ‐

$4,985/yr PILOT (City Council approval 4/21/15)

All Holyoke solar PILOTs are based on $5,000 per MW ‐DC fixed for 20 yrs (equivalent to

DC)


8/9

hy

is

$5,000/MW‐

dc

fair

&

reasonable• Reflects market value over term

• PILOT represents around 0.5 cents per kWh produced from system

• Wholesale energy rates are currently around 4 cents per kWh, while 5 years ago tharound 6 cents per kWh

• Total system costs have declined by a factor of 2 over the past 5 yrs

•

SREC

incentives

designed

by

the

State,

however,

have

declined

over

time

to

maintaequilibrium on

the

overall

economics

of

solar

facilities

• Few developers are able or interested in selling output from solar facilities in Holyopays only 4 to 6 cents per kWh (wholesale); while most other locations are offsettinmetering at full retail rates in the 12 to 18 cents per kWh (retail) range (latter not sustaiincreasing cost subsidies/surcharges)

• Hence, if

Holyoke

can

receive

$5,000/MW

‐dc

under

PILOT,

it

allows

i) 3rd

parties to

obtain

va

estate, roofs, parking lots, etc., ii) HG&E a rate at or below wholesale market pricing, and iii) sufficient minimum funds to build & operate project.

• With any movement north on PILOT, there is insufficient revenues from the project to maintcomponents.


9/9

here

is a number different than Holyoke’s fair and reaso

• $0/MW‐dc ‐

in communities that have Net Metering Credit Purchase Agreemplace where all benefits go towards discount to retail

rate for City/Town

• $2,000‐5,000/MW‐dc – where wholesale

rates are required but the solar ovare higher due to land topography, roof condition, etc.

• $5,000‐10,000/MW‐dc – where wholesale

rates are required but the solar o

are lower

due

typically

to

property

being

leased

directly

from

City/Town

or

otherwise tax‐exempt properties

• $7,000‐23,000/MW‐dc – where retail

rates are required with purchaser beinprivate and/or municipal end‐user

• $100,000+/MW‐dc

‐

Full personal

property

tax

assessment

starting

point

th

declines over time based on current valuations – done when the Private Uticonstruct projects (Eversource, Ngrid, Unitil) as they just create a Net MeterSurcharge and charge their customers per DPU rules for the excess

information about the solar-tax proposals from holyoke mayor alex morse given to city councilors:

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