Cohocton Wind Watch: JCIDA crafts tax-exemption formula
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Tuesday, September 08, 2009

JCIDA crafts tax-exemption formula

The committee creating a uniform tax-exemption policy for wind power developments may have found the best of both worlds.

The formula discussed at the Jefferson County Industrial Development Agency's committee meeting Thursday morning would have a base payment of $8,500 per megawatt of rated capacity plus a supplemental payment based on energy prices, the source of revenue for wind projects. Those supplemental payments would kick in when energy prices top $60 per megawatt, which has happened three out of the last four years.

"As energy prices rise, if they rise, the developer gets a significant windfall," said Mark E. Quallen, consultant for JCIDA on developing a policy. "If that happens, we wanted the taxing jurisdictions to have the ability to profit by it."

Mr. Quallen said projections based on historical energy costs show only one of the next 15 years would have average energy prices below the $60 threshold.

At the last meeting, committee members asked for a guarantee that the payments would increase over the term of payments in lieu of taxes resulting from the policy. PILOTs are expected to last 15 years.

So Mr. Quallen introduced an escalator of 2.65 percent per year, based on the average consumer price index increase over the last five years.

JCIDA board member John Doldo Jr. asked how the payments would compare to full taxation on the projects.

Mr. Quallen said, "We're very close to 20 percent."

He said utilities are taxed on their full assessed values, while other manufacturing entities aren't taxed at full value.

The committee discussed how to handle the transmission line that will be created by the Galloo Island Wind Farm and will include multiple taxing jurisdictions in Jefferson and Oswego counties.

JCIDA CEO Donald C. Alexander said he visited Oswego County and that county's Industrial Development Agency would be willing to look at whatever proposal the JCIDA agreed on.

"In looking at the UTEP, we've got to look at the generation — the other projects don't have the transmission aspect," committee Chairman David J. Converse said. "If we put the whole thing together, it's going to be too much."

Attorney Justin S. Miller, Harris Beach PLLC, Albany, said many transmission facility PILOTs last 10 years. So a transmission PILOT could be developed on a parallel track and may or may not be included in the uniform policy.

Staff, consultants and a few committee members met with Galloo Island developer Upstate NY Power Corp. after the committee meeting.

"The developers are willing to bend substantially on the transmission piece," Mr. Alexander said after the meeting. "They understand it affects a greater number of taxing jurisdictions, so they have a willingness to negotiate."

But, he said, timing is getting tight. Upstate wants to tap into the U.S. Treasury Department grants for 30 percent of the cost of a wind farm through the stimulus bill. The program requires construction to begin by the end of 2010.

JCIDA will continue to work on the approach for transmission facilities.

James W. Wright, chief executive officer of the Development Authority of the North Country, attended the committee meeting and asked about guarantees in the policy for decommissioning, employment numbers and the state attorney general's Wind Industry Ethics Code.

Mr. Alexander said that because the policy will preclude a host community agreement, JCIDA is responsible for ensuring decommissioning bonds are in place and local employment guarantees are made and met.

"The skills are there in the community, so it needs an upfront commitment by the developer," Mr. Wright said.

On the ethics code, Mr. Alexander said the committee didn't think it was necessary because other forces are pushing the developers in the county toward signing the pact.

Since all of the county's developers signed on July 29, a new developer has arisen on the scene, proposing a wind farm in Henderson.

JCIDA member Urban C. Hirschey asked whether the policy would be appropriate across the board.

JCIDA attorney W. James Heary said, "It's just a template — a well-thought-out method that would give taxing jurisdictions the most money possible. ... Our position has been, 'We'll give you the tools and you guys figure out how to divide it.'"

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