How to make money from solar: PILOT


By Patsy Nicosia

Negotiating a PILOT for the NextEra Energy solar project may seem to contradict the original intent of the tax breaks: Spurring economic development while maximizing municipal revenues.
But there’s another reason to cut a deal for solar:
Without PILOTS, they’re tax-exempt.
“And that would mean zero tax dollars,” said Schoharie County Treasurer Bill Cherry, who’s leading negotiations for the proposed 50 megawatt East Point Energy Center in the Town of Sharon.
Mr. Cherry, Sharon Supervisor Sandy Manko, and Sharon Springs Central School Business Administrator Tony DiPace kicked off PILOT—payment in lieu of taxes—talks with NextEra reps last month.
Because of its size and the state’s solar initiatives, the project is subject to state—not local—review and approval. (See related story.)
Additionally, commercial solar projects are tax-exempt.
But under a section of state Real Property Tax Law, municipalities can require a PILOT if they’ve opted out of the tax-exempt piece—a step the Town of Sharon and other local municipalities took in 2015 with a local law—as long as they notify the project developer within 60 days—which they’ve all done.
“Our letter’s in the mail,” said Mr. DiPace.
“So is ours,” said Ms. Manko, “just so there’s no misunderstanding. We’re not sure when the 60 days starts and we are so afraid…of loopholes.”
State Real Property Tax Law limits solar PILOTS to no longer than 15 years and no more than what taxes would have been without any exemptions.
Still a PILOT for a project this size could be substantial, Mr. Cherry said.
For a project worth $80 million to $100 million, “It could be a game-changer,” he said.
Using a high-end of $100 million for the project’s taxable assessed value, Mr. Cherry said an annual tax bill for the project could be as high as $5 million with half going to SSCS, 30 percent to the county, and 20 percent to the town.
There are, however, a lot of unknowns, Mr. Cherry said.
NextEra Energy could spend less—it’s said East Point is a $60 million project—or more, and the $5 million figure doesn’t take into account depreciation of the solar panels as they begin to age.
“We’re still a long way from banking on a $5 million annual PILOT payment,” Mr. Cherry added. “I would expect us to probably ‘grow into’ the maximum PILOT amount, whatever that turns out to be.”
The theoretical $5 million figure is substantially more than the $1 million a year in taxes and PILOT Next Era Energy said in March it expects to pay,
It’s also more than the $24 million in total PILOT discussed at Next Era Energy’s September open houses, a figure based on other local PILOT agreements for solar.
And it’s more than the $1.7 million in total PILOT the project would pay using a NYSERDA—New York State Energy Research and Development—model—one already rejected by Mr. Cherry.
Once the ground rules are established, PILOT negotiations will take place behind closed doors in closed executive session.