Large commercial solar projects sprouting up around Long Island are relying on generous state and local tax breaks and locally arranged financing to help cut development costs, but the expected return to municipalities is comparatively small.
For example, American Capital Energy, the developer of one big project on Brookhaven Town land, will receive nearly $500,000 in tax breaks. The town will get an annual lease payment of $34,000 for 20 years.
Supporters of the solar projects — most of which are in eastern Suffolk County — tout the benefits they provide to the environment and the electric grid. Municipalities also defend the tax breaks as important for job creation.
“It’s a major investment in the community,” said Lisa Mulligan, chief executive of the Brookhaven IDA, noting the projects are important because of jobs — even if temporary — the revenue stream and generating environmentally friendly green energy.
But critics say the projects are lucrative without the additional tax breaks, which taxpayers and electric ratepayers ultimately bear. And there is concern that many of the developers are from out of state.
“It’s another form of state-sponsored corporate welfare,” said MaryAnn Johnston, president for the Affiliated Brookhaven Civic Organization (ABCO). “The entire risk for these projects is being borne by the ratepayer, and they have the gall to ask for no taxes?”
Most of the jobs from the projects are short term. One big project, sPower’s in Shoreham, has no long-term employment, while two smaller ones in Brookhaven by American Capital Energy will result in the hiring of one full-time worker each.
Court papers filed for the sPower solar farm on Route 25A in Shoreham note that the Salt Lake City-based company anticipated earning $39.9 million in net income — its profit after expenses — from the project over 20 years.
Filings with Brookhaven Town’s Industrial Development Agency, which is arranging the tax breaks for sPower, show the project is receiving $1.8 million in state and local sales tax exemptions.
The total development cost is $34.6 million. With construction already begun, the Shoreham project also will qualify for a 30 percent federal investment tax credit, valued at more than $10 million. The developers expect to spend $4.4 million in temporary labor and have already spent $7.64 million to buy the 60-acre DeLalio sod farm.
sPower paid a $159,108 IDA fee to apply for the tax exemptions. A spokeswoman for sPower didn’t return a call seeking comment. On its website, sPower says the project will pay around $260,000 in annual taxes to the Shoreham-Wading River School District.
The bulk of the profits comes from a long-term contract with LIPA, which is paying 22 cents a kilowatt hour for energy from the 9.5-megawatt array of solar panels, more than LIPA customers pay for retail energy at their meters.
Mike Bailis, vice president of SUNation, an Oakdale-based solar-energy installer, said his concern is less with the IDA funding, but the mechanism that allows out-of-state companies to funnel their profits off Long Island. The long-term contracts with LIPA guarantee the developers’ income at a set rate from LIPA that is considerably larger than LIPA’s typical wholesale energy costs.
“Some of the money to build the system stays here, some of that goes to local contractors. That’s short term,” Bailis said. “But the revenue that we spend for the power is exported.”
When companies and municipalities use an alternative net-metering process, they use all the energy they produce themselves, saving revenue that they can reinvest in their businesses, he said. “When you do a net meter, the local company gets the money, and they are keeping it in their business,” said Bailis. “Net metering keeps the money saved locally.”
Two other privately developed solar projects on Brookhaven Town property show similar benefits for the developer, but relatively smaller payback to the town.
A 1.5-megawatt solar array at the Holtsville Ecology Site has a total price tag of $6.7 million, according to IDA documents. Working with the IDA as conduit, developer American Capital Energy is applying for a low-interest loan that could save $92,615 in interest costs over 20 years. Mulligan emphasized that the IDA is acting only as a “conduit” to link the developers with finance companies to provide the loan, which is guaranteed by the developer, not the town or state.
Brookhaven is providing tax exemptions for the $6.7 million project. Because it’s town-owned land that didn’t previously levy property taxes, Brookhaven is not charging property tax for the project. The IDA also has waived expected state and local sales tax of $372,600 and a mortgage tax of $14,070. After an IDA fee of $69,561, American Capital Energy’s net benefit from the IDA is $438,079.
Brookhaven will receive an annual lease payment of $34,000 for the Holtsville project, said Frank Tassone, executive assistant for the town’s waste management division. American Capital Energy didn’t return calls seeking comment. IDA papers say the taxable financing arranged by the IDA amounts to $3.35 million, with $1.3 million in “other loans,” and $2 million in the company’s own equity contribution. The federal tax credit for a $6 million project would amount to around $2 million.
“This is the gift that keeps on taking,” said Johnston, of ABCO. “Tax relief to those who don’t qualify encourages campaign contributions.”
Tassone disagreed. “The benefit to the town is that it’s recurring revenue coming back to the town, for 20 years at least” in the form of lease payments.
Another $3.6 million IDA-backed project at the Paper Mill Road composting facility in Manorville will save the developer, American Capital Energy, $85,075 through an IDA-facilitated loan of $1.8 million, receive waivers of $207,000 of sales tax and $18,900 in mortgage tax, according to IDA documents. It paid an IDA fee of $48,172.
Brookhaven will receive $26,000 a year in lease payments from American Capital Energy for 20 years.
Bailis of SUNation estimated that after expenses, the 1.2-megawatt project could bring around $150,000 annually in profit for the developer.
Mulligan said IDA funding for solar projects is a relatively new phenomenon, but that the IDA is seeing “more and more of them.”
“We are actively looking at other sites” for solar, Tassone said.