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Ohio Legislative Service Commission

 

 

Russ Keller

Fiscal Note & Local Impact Statement

Bill:

Sub. S.B. 232 of the 128th G.A.

Date:

May 18, 2010

Status:

As Reported by Senate Energy & Public Utilities

Sponsor:

Sen. Widener

Local Impact Statement Procedure RequiredYes

 

Contents:

To exempt qualifying renewable resource energy facilities from property taxation and to require payments in lieu of taxes on the basis of each megawatt of production capacity of such facilities

 


State Fiscal Highlights

·         No direct fiscal effect on the state.

Local Fiscal Highlights

LOCAL GOVERNMENT

FY 2010

FY 2011

FUTURE YEARS

Counties

Revenues

- 0 -

Potential loss up to several million dollars based on current applications to the Power Siting Board; loss would be permissive

Potential loss up to several million dollars based on current applications to the Power Siting Board; loss would be permissive

Expenditures

- 0 -

- 0 -

- 0 -

Other Local Governments

Revenues

- 0 -

Potential loss up to
several million dollars based on current applications to the
Power Siting Board

Potential loss up to
several million dollars based on current applications to the
Power Siting Board

Expenditures

- 0 -

- 0 -

- 0 -

Municipal Corporations

Revenues

Potential gain to fund alternative energy revolving loans

Expenditures

Potential increase to issue and administer alternative energy revolving loans

Special Improvement Districts

Revenues

Potential gain to fund special energy improvement projects

Expenditures

Potential increase to administer special energy improvement projects

Note:  For most local governments, the fiscal year is the calendar year.  The school district fiscal year is July 1 through June 30.

 

·         The bill would exempt a smaller renewable resource energy facility (250 kilowatts or less) from the public utility tangible personal property tax and real property tax if their construction or installation is completed on or after the bill's effective date.

·         "Qualified energy projects," which are larger than 250 kilowatts, may be exempt from the public utility tangible personal property tax and real property tax if they receive approval from the applicable siting authority before December 31, 2011.  Project construction must begin on or after January 1, 2009, and before January 1, 2012 in order to qualify, and several other requirements are necessary to maintain the property tax exemption. Only those qualified energy projects that were approved by the local board of county commissioners may be entitled to the property tax exemption.

·         At least six facilities with the potential to generate about 1,100 megawatts from renewable wind energy sources and with applications that were already approved or still pending before the Power Siting Board may establish facilities in Ohio.

·         A facility designated a "qualified energy project" must make a $7,000 service payment in lieu of taxes for each megawatt of name plate capacity.  The payment will be allocated to counties, school districts, and local governments in the same manner that revenue from public utility tangible personal property taxes is disbursed.  The service payment would offset part of the revenue loss incurred from the bill's tangible property and real property taxation exemption.

·         The bill authorizes the expansion of current municipal solar panel revolving loan programs to include other alternative energy and energy efficiency technologies.  Municipalities may incur additional costs to issue and administer loans under such programs, which may be partially or wholly offset by any additional revenues authorized by a municipality to fund the program.

·         The bill adds certain alternative energy and energy efficiency technologies to the list of eligible technologies that may be the subject of special energy improvement projects, and adds consulting and energy auditing to the list of eligible activities and costs for special improvement projects.  This may increase the costs of such districts to engage in such projects.  However, these costs may be partially or wholly offset by any new revenue the district collects to fund such expanded projects.

 


 

 

Detailed Fiscal Analysis

S.B. 232 provides an exemption from real and tangible personal property taxes and assessments for two types of renewable energy facilities.  Smaller renewable resource energy facilities with an aggregate nameplate capacity of 250 kilowatts (kW) or less are exempt if their construction or installation is completed on or after the effective date of the bill.  A facility larger than 250 kW is considered a "renewable energy company" and would be regarded as a public utility.  Renewable energy companies may undertake "qualified energy projects" that are renewable energy projects certified by the Department of Development.  These larger qualified energy projects qualify for real and tangible personal property tax exemptions only if the projects meet certain conditions specified by S.B. 232.

The bill defines a "renewable resource energy facility" as one or more interconnected wind turbines, solar panels, or other tangible personal property used to generate electricity from a renewable energy resource owned by the same person.  The definition includes all interconnection cables and equipment necessary to connect the generators to an electricity grid as well as all the buildings, structures, improvements, or fixtures necessary for the operation of the facility.

The larger renewable resource energy facilities may be considered qualified energy projects if they meet certain conditions, including:  (1) approval from the  Power Siting Board or the applicable local siting authority before December 31, 2011, (2) project construction begins on or after January 1, 2009, and before January 1, 2012, (3) the property on or around the project site was not previously used to supply electricity, and (4) approval for the property tax exemption by the local board of county commissioners.  The resolution adopted by the board of county commissioners may include a modification to the service payment stipulated in S.B. 232, and the resolution may specify additional requirements for the property tax exemption beyond what is required by state law.  Furthermore, the facility must be placed in service on or before December 31, 2012.

The Department of Development is responsible for certifying a renewable resource energy facility as a qualified energy project.  Applicants must meet several requirements to qualify for the designation.  A certificate of completion of the renewable resource energy facility's construction is required, and if applicable, the project owner must file a certificate of partial completion on or before March 1, 2013.  S.B. 232 requires the Development Director to certify that the construction and operation of the qualified energy project creates and maintains the number of jobs during construction and each year that the facility is in service that are projected by the Job and Economic Development Impact (JEDI) model defined in the bill.  A majority of the full-time equivalent employees must be domiciled in this state. 

The certified qualified energy project is required to pay annual service payments in lieu of taxes to the treasurer of the county where the facility is located in an amount equal to $7,000[1] per megawatt of name plate capacity.  The bill also requires the facility to offer to sell power or renewable energy credits first to electric distribution utilities and electric service companies subject to the alternative energy portfolio requirements of current law before offering the power and credits to others.  Other requirements apply including restoring roads affected by facility construction, and providing training and equipment to fire and emergency responders where the facility is located. 

The bill clarifies the sales tax treatment of the newly defined renewable resource energy conversion equipment.  Specifically, the bill exempts this equipment from the sales tax, but the energy conversion equipment may already be exempt from the sales tax given that it is used by a public utility and the Revised Code exempts[2] tangible personal property that is used for the delivery of a public utility service.  Therefore this provision is expected to have no fiscal effect.

S.B. 232 requires the Public Utilities Commission of Ohio (PUCO) to conduct a study to review the condition of reactive power in the state.  The Commission is required to issue a report of its findings to the General Assembly within one year after the effective date of the bill.  According to PUCO, there will be no cost to the agency to complete this study because the Federal Energy Regulatory Commission preempts PUCO from doing such a study.

Fiscal effect

According to the sponsor testimony, which utilizes information from the Wind Energy Association, a 100 megawatt (MW) commercial wind facility could have a personal property tax liability of approximately $4 million and a real property tax of about $200,000.  If the proposed legislation is enacted, such a facility would make a $700,000 payment in lieu of the public utility tangible personal property and real property taxes, but counties and other local governments would forego future payments for the property taxes. 

Currently, Ohio does not have any large renewable energy facilities that would be eligible for the "qualified energy project" certification and the resulting property tax exemption.  However, six wind facilities (Table 1 below) have applications that were either approved or still pending before the Power Siting Board.  Assuming the three remaining applications are approved, these facilities may qualify for the tax exemption if they were put into service before January 31, 2012.  If all six wind facilities are put into service with the maximum estimated generating capacity, it would yield up to $7.7 million in annual revenue to the counties from payments in lieu of taxes, which would offset the $2.2 million loss (maximum possible amount) in real property tax revenue that the county treasurers might currently be collecting on those lands where wind facilities are proposed to be built.  But the bill's exemption from public utility tangible property taxes would eliminate millions in additional property tax revenue that would have been raised if those projects had been undertaken in the absence of the bill.[3] 

 

Table 1:  Wind Projects with Cases Approved or Still Pending
Before the Ohio Power Siting Board[4]

Case No.

Project
(County)

Company

Generating Capacity (Est.)

08-0666-EL-BGN

Buckeye Wind Project
(Champaign)

Buckeye Wind, LLC, a subsidiary of EverPower Wind Holdings, Inc.

125 to 175 MW

09-0277-EL-BGN

Hardin County North Wind Farm
(Hardin)

JW Great Lakes Wind, LLC, a subsidiary of juwi Wind GmbH

50 MW
(approx.)

09-0479-EL-BGN

Hardin Wind Farm
(Hardin)

Hardin Wind Energy, LLC, a subsidiary of Invenergy LLC

300 MW

09-0546-EL-BGN

Black Fork Wind Project
(Crawford and Richland)

Black Fork Wind LLC

201.6 MW

09-0980-EL-BGN

Timber Road Wind Farm
(Paulding)

Paulding Wind Farm, LLC, a subsidiary of Horizon Wind Energy

48.6 MW

09-1066-EL-BGN

Blue Creek Wind Farm Project
(Paulding and Van Wert)

Heartland Wind, LLC, a subsidiary of  Iberdrola Renewables

Up to 350 MW

 

Although the six projects are all wind facilities, wind projects are not the only renewable energy facilities that would qualify for the real and tangible personal property tax exemption authorized by S.B. 232.  The total number of projects that may qualify for the tax exemptions is potentially larger than the six facilities mentioned above, including nonwind renewable energy facilities.  The net fiscal effect on local governments may vary from the example above based on the type of facilities and the tangible personal and real property taxes in the counties where those projects may be located.  

Municipal alternative energy revolving loans

Current law allows the legislative authority of a municipal corporation to establish a low cost solar panel revolving loan program to assist residents in installing solar panels on their residences.  The bill amends current law to expand the existing authority for solar panel loans into a broader alternative energy revolving loan program.  Eligible alternative energy technologies under the bill are solar photovoltaic energy, solar thermal energy, wind energy, geothermal energy, or other energy efficiency technologies, products, and activities that reduce energy consumption or support clean and renewable energy production.  If a municipality chooses to create such a program, it must establish an alternative energy revolving loan fund in the municipal treasury with a dedicated funding source. 

Special energy improvement projects

Current law allows the board of directors of a special improvement district within a municipality, township, or any combination thereof to adopt plans for special energy improvement projects, including solar photovoltaic and solar thermal energy projects.  The bill adds wind energy, geothermal energy, biomass energy, and gasification projects, as well as energy efficiency improvements, to the list of eligible special energy improvement projects.  The bill also adds consulting and energy auditing to the list of eligible activities and eligible costs under special improvement project plans.  These provisions may increase the costs to special improvement districts, depending on the size of the alternative energy and energy efficiency projects engaged in by special improvement districts under the bill, and the extent to which existing or new revenues authorized by the districts cover such costs.

 

 

 

SB0232SR / lb



[1] However, the $7,000 service payment is subject to modification by the county board of commissioners per section 5727.75(C) of the bill.

[2] R.C. 5739.01(B)(3)(b).

[3] Property tax estimate made using examples provided in the sponsor testimony, which utilitized information from participating companies and trade associations.

[4] Source:  http://www.opsb.ohio.gov.