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Once-vetoed solar taxation bills resurface with changes to build local support COURTESY OF AMERICAN PUBLIC POWER ASSOCIATION

Once-vetoed solar taxation bills resurface with changes to build local support

BY Thursday, August 04, 2022 09:29pm

Legislation similar to bills that Gov. Gretchen Whitmer vetoed in 2020 involving the taxation of commercial solar energy developments was reintroduced this summer with changes to gain broader support from local governments.

Senate Bills 1106 and 1107 — both introduced on June 30 by Republican state Sens. Kevin Daley and Curt VanderWall — would allow governments to opt into payments in lieu of taxes (PILOT) for commercial solar energy developments as an alternative to developers paying local property taxes. 

Backers of the concept say the bills would provide more financial certainty for both local governments and developers as they pursue a growing number of solar installations across Michigan.

“While it’s the same overall concept, the mechanisms of how it works are very different,” Michigan Energy Innovation Business Council President Laura Sherman recently said of the changes from the 2020 bills. “These bills make it very clear that local governments have complete discretion to approve or disapprove of a (PILOT) application.”

Whether local governments would be mandated to offer PILOT was a key sticking point two years ago for organizations like the Michigan Municipal League and the Michigan Townships Association. Whitmer and local governments also previously cited incomplete data involving best practices for taxing commercial-scale solar projects.

The proposed legislation would set a PILOT price per megawatt (MW) of capacity for solar projects greater than 2 MW in size. The recently introduced package is set at $7,000 per MW for 20 years in most cases, compared to $4,000 in the previous bills. The PILOT rate would be lower to incentivize developments in certain areas, such as brownfields.

To the MEIBC and its members, which include solar developers, a PILOT approach provides far more certainty than an ad valorem system that can vary over time.

Sherman says this certainty also benefits local governments with steady revenue.

“Both for local governments and developers and utilities, there’s huge benefits for doing this because of the long-term certainty,” Sherman said, noting that disputes often unfold between local governments and project owners involving the taxation of renewable energy projects.

“As a result, tax payments are held up over time, folks are stuck litigating instead of receiving money planned,” Sherman said.

Following Whitmer’s veto in 2020, the MEIBC went to work connecting with local government advocates to reach common ground. That included several months of work groups and meeting with local assessors who have been grappling with these projects, said Herasanna Richards, legislative associate for state and federal affairs at the Michigan Municipal League.

“We want to make sure we’re looking into the impact to revenue to local governments, and that it’s fair and inclusive to the needs of local governments,” Richards said.

Richards said while the MML doesn’t have a formal position on the bills, “we are much more confident with the foundation.”

That foundation provides a new starting point for the committee process and hopefully another round of legislative approval, advocates on both sides of the issue told MiBiz.

“There’s a whole lot of compromise in the legislation — I don’t think it’s exactly what anyone wanted,” Sherman said. “That gives me hope that we have achieved a balance and is something we hope the Legislature will take up and will view favorably.”

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