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  • Writer's pictureCharlene Sims, Journal staff

Commission questions solar developer about payments in lieu of taxes

Updated: Feb 4

Clearway Energy Group released plans for it solar utility project last October. The areas shaded in brown are where the solar panels will be located. The dark area at the top of the map is La Cygne Lake with the power plant jutting into the lake at the upper center. The lower third of the project area will remain undeveloped. Although by state statute the county could not receive tax dollars for a decade, officials for the company said on Monday they couldn't discuss payments in lieu of taxes until changes to the zoning regulations were approved. (Clearway Energy Group)

By Charlene Sims,

MOUND CITY – Representatives from Clearway Energy Group, a developer of renewal energy installations, met with the Linn County Commission on Monday, Jan. 29, to talk about a proposed solar utility project south of the La Cygne power plant and discuss possible financial benefits for the county.

Their discussion on possible financial benefits led to frustration then hostility on the part of one commissioner. Another commissioner who has already pushed for banning solar utilities was decidedly hostile toward the company throughout the discussion.

Josh Framel, Clearway representative, explained who Clearway was. He said, “I thought this was important for people to know. We are an independent power producer, but we are owner-operators and I just think that’s important to note. That we study, we do site specific surveys for all our projects. Then, we manage the construction and then we own and operate, so we are solar operators. 

“So we know day to day what projects are like. We know what goes into construction You know there are different business models that pass it to somebody else. Our core business model is owning and operating, so I think it’s just something that distinguishes Clearway and wanted to point that out.” 

Framel told the commissioners this may not be what is exactly submitted on the application but it is indicative of the project area, layout, footprint and capacity numbers.

The presentation which was based on other projects that are similar to the proposed project in Linn County and based on what the probable size of the Linn County project being 322 megawatts. Based on other projects, Framel said, that the county would probably receive $1,300 a megawatt resulting in a payment in lieu of taxes (PILOT) amounting to $418,600 per year over the first 10 years or $4 million the first 10 years.

Because of Kansas exempting the first 10 years of property taxes from renewable companies law, the equipment of the proposed project will be tax exempt. Framel said that not knowing exactly what the mill levy rate would be in 10 years, he was not able to come up with an exact amount. However, the tax they calculated for the equipment starting in year 11 and onward would be $800,000. It would be a real property tax.

McCullough asked how much Clearway was going to make off of this project over the next 35 years. 

Framel said that information was proprietary.

McCullough pushed Framel for harder numbers.

“Let’s be real,” McCullough said. “Like, I mean you’re asking me for a lot. I’m going to ask you for a lot.”

After Thompson told McCullough that he couldn’t force the company officials to tell him that, McCullough said that because of the solar utility issue, his life had been made a living hell, ending friendships and relationships with people he has known his entire life.

He said he didn’t understand why he couldn’t ask what he wanted and negotiate for what the county would get out of the deal. In a previous meeting, McCullough said that he had not responded to any of Clearway's attempts to meet with him, opting instead to get his information from a group of anti-solar activists in the county.

Hightower asked what Clearway’s investment in the project was.

“So based on the size of that project, we’re estimating a $381 million investment in the county,” answered Framel. “That could be higher, it could be lower. Again it depends on the project size. It depends what equipment costs because this was again a snapshot in time. Equipment costs fluctuate and labor fluctuates,” he added. 

“Besides taxes, besides impact fees, besides the PILOT, we are again owner-operators,” he said. “This is a new business. We would have over 250 people that we would employ during construction. We would be setting up a permanent office with dedicated high-paying jobs for operations and maintenance of our project, including not only folks who would be in the field working but office staff and management. Then with those new jobs and with that sort of ripple effect from the project, we would be needing . . . .”

“We don’t have any houses, no hotels, and we have hardly anywhere to eat, so I don’t  know,” said McCullough.

Framel said there would be more demand for those things.

McCullough asked if they would build a hotel for the county. 

Framel said that Clearway wanted to be good neighbors, good new additions to the community.

He then talked about examples from existing projects in other communities where Clearway partners with schools on learning opportunities, community benefit funds, making donations to the community. 

Framel showed a slide from Evergy’s Integrated Resource Plan last June. He told the commissioners that as far as what Evergy is telling the public utility commission, they list their additions and retirements through 2032.

Framel said, “They (Evergy) are looking to procure new renewables. They are looking to procure natural gas and they’re looking to retire coal. So, maybe this gets pushed out, maybe it gets pushed in, but this is the publicly available information that Evergy has stated that their goals are. So, a part of again, our business model is to provide utility-scale electricity to a utility that is seeking.”

“There’s a couple of different revenue streams as we read the regulations and understand, and as you know in Kansas their law as far as taxes goes, it starts with the application fee,” Framel said. “The county regulations state that a fee in the amount established by resolution shall accompany an application for rezoning or a conditional use permit (CUP). I don’t know what that is. It’s something that would need to be determined.

“In other counties we have seen something like $1 or $2 a megawatt. Just assuming that you guys were at the upper end of that range – maybe it’s more, maybe it’s less –covers the cost of the county to review applications, to post public notices. And I’m sure for other CUPs it’s not $60,000, but because of the size of the project, because we see other counties, that’s sort of lay out as a starting point. So, an application fee to be submitted, a fee to be submitted once the CUP is approved and then an amount at the start of construction which is really when it is at the highest level of activity in the county. This is just one income stream just for the process.”

Framel continued, “The Kansas statute exempts renewable energy projects from property taxes on equipment for the first 10 years. It’s Clearway’s intent in everywhere that we work, we want show good citizenship, to show that we are a business coming to the county and we want to provide benefits. That’s where the PILOT comes in. It’s not required, it is something we are going to commit to. It is something that has been committed to in neighboring counties and is based on some of the numbers we’ve seen.”

Framel continued that Clearway wants to be a good neighbor and a good addition to the community. In other communities, Clearway has developed partnerships with the schools, community benefit foundations and donations to the communities.

Before the presentation was completed Commissioner Jim Johnson asked what if they did not finish the project all at once, would each addition add an extended tax exemption. 

Framel said that was something he would have to look into, but the plan was that the whole project would be completed because it would be inefficient to demobilize and remobilize the construction.

Johnson asked who keeps track of how the equipment is taxed.

County Clerk David Lamb said the state keeps track of that information.

Johnson asked if the federal government was subsidizing this project. 

“No, but there are productions tax credits that when you produce you can monetize those tax credits and sell them to whoever has a tax appetite,” answered Framel.

Clearway representative Barry Matchett clarified the question and answered, “I think underlying your questions is what are the federal subsidies on wind and solar in the United States.”

Matchett said that Clearway does not have large income tax exposure to be able to use those tax credits. 

Johnson asked again, “What are you going to get out of the project from the tax credits? You can’t figure it out in your business to know what that pays back to you?

Matchett again explains that yes they do receive subsidies but they are received by the amount of interest that the bank they borrow charges. It does not pay back directly to us but in the amount of the loan interest

McCullough asked what if he wanted Clearway to pay $4,000 a megawatt.

County Counselor Gary Thompson said that was when negotiation comes in.

Framel said that when an amount is too high, it forces businesses out. 

McCullough said it was important to have all the information for the public at the forum so they could know what the county was getting from putting in the solar project.

Commission Chair Jason Hightower pointed out that Clearway does not want to put in an application while the county has a moratorium and is possibly revising the regulations.

Matchett, who has been attending the ad hoc committee meetings, told the commissioners that there have been several things brought up for change at the ad hoc meetings that could potentially affect Clearway’s income on the project. 

One, which Clearway believes is necessary, is soil testing to ascertain the chemical content.

“As you guys know, this used to be a strip mine,” said Matchett who said he offered his opinion about this at the ad hoc meeting. “I think I heard the committee say pre-construction soil testing, during construction soil testing, and then regular testing on a term to be determined after the project is in operation.”

“That’s a big deal,” said Matchett. “That’s sort of an unknown cost to this project. Until we know things like that, we don’t know if that’s a million dollar cost over the course of the project or is that  $10,000 cost?”

Matchett said the second item discussed change was changing the setbacks to 500 feet from the property line and a 1,000 foot setback from any residence. He said if this is change is made, Clearway may lose 50 megawatts on the west side of the proposed project. 

He said that Clearway would love to come in with firm numbers, but because the regulatory process around siting is still ongoing, Clearway probably will not be able to build some of that project for which it had developed specifications.

Matchett explained, “We’re not trying to avoid the conversation about how much money would this project generate but if we just lost, you know, 50 megawatts worth of productions on this project, we have to rejigger our bid to the RFP that Evergy’s going to put out. Then we can come back to the county and say well this is how much money we actually have to be able to have the conversation about this pilot and that long term tax payment.”

McCullough said we have regulations in place. 

Thompson replied, “But we’ve told them those regulations might change.”

The county is in limbo, said McCullough.

Johnson asked “What is your minimum acres you guys would spend money for to build a solar farm if we decided to cut it back?”

Matchett said he did not know what the minimum acreage would be. Framel said it would depend on the utility and the contract with them. 

Johnson again and several times later in the meeting asked them what their minimum amount of acres would be.

McCullough said he did not understand why the county doesn’t have something in place right now per the regulations that were already passed.

Thompson attempted to clarify the question to Framel and Matchett saying, “Is it fact to say you are not prepared to submit an application until the review process and the moratorium are over, and that’s the point when hard numbers would be discussed?”

Framel answered, “I think we would be really shifting gears depending on a lot of factors. But at a minimum, it’s do we have a complete set of rules.” 

McCullough repeated that the regulations are in place, they are just being reviewed.

He once again asked, “I want to know what you guys can do for us?”

Let’s get a starting point, said McCullough.

Hightower replied, “We had one with our zoning regulations and then you voted for a moratorium.”

McCullough said, ”What can you do for our schools?”

Matchett said that was an interesting question because the state Legislature did this to the counties where they are not allowed to actually tax renewables. 

Matchett said that this led to counties discussing PILOT arrangements. He said he had heard this brought up at the planning and zoning meeting and from participants in the ad hoc solar meetings.

He said that Clearway was going to have a binding agreement with the county about these funds. How the county allocates those funds – be it to the schools, be it to the roads – is up to the county.

McCullough said, “I’m a give give type of guy. I give you, you give me. That’s the way I look at it. I feel like we are just in limbo right now.”

Johnson said based on what he had heard from the ad hoc chair, Richard Morrell, he wanted make a motion to postpone going over the regulations until after the public forum.

McCullough said, “You don’t think it is important to let people know what they can provide to us?”

“I don’t think so. We are just going to sit here and kick it back and forth,” said Johnson. 

Hightower said, ”My feeling is I’ve been clear on this from the start, and I’m going to continue to be clear on this. That questions were raised through our initial public forum and I want to make sure that those are addressed through our regulations, so I want them (ad hoc committee) to keep going over the regulations.”

“We have regulations in place, so I want to see something that is more hard numbers and what you guys can provide to us,” said McCullough.

“We’ve got to finish the process. You take off the moratorium, you go with our regulations that we have,” said Hightower. “

McCullough said he wanted to know how we could change the regulations when the commission doesn’t know what they are going to get – if we do or do not change them. 

“That’s why we could have taken our legal advice at the beginning and not put a moratorium on it,” said Hightower. “We could have been going through a conditional use permit now looking at actual concrete figures and determining if it was going to work for our community.”

McCullough said he still wanted them to put in an application today and Hightower explained that they were not going to because the regulations could change.

Thompson started to speak, “Danny, think about your business. A customer comes and says come make me a bid on it ……”

Johnson interrupted Thompson, “You know Gary, you shouldn’t even be talking about this, because this is right here, is us. You know you’re not an elected official, you’re there for legal advice to us.”

“Right, I stay in check,” said Thompson.

McCullough asked Thompson to continue speaking.

Thompson first asked the chairman if he could speak, then said, “I was just going to say that, if in your business, if somebody says come give us a bid on this, we want a bid on this project, however, the requirement of the project may change later. I mean, you’re going to say I got to know how they’re going to change before I get….”

McCullough interrupted, “ I would initially bid the job off of the description I have, which would in our case be the regulations. Everything else would be a change order.

“And they (Clearway) could operate that way, they’re saying it is more expensive,“ said Thompson.

“They’re worth $5 billion,” said McCullough.

The Linn County Zoning Regulations not only require just an application for a conditional use permit but the application also requires the applicant to submit a fee; a site plan (for them, done by a construction manager/engineer); construction management plan including traffic, fencing, lighting, transmission lines; schematic location of solar panels; proposed setbacks, underground pipelines; wildlife, flora and fauna in area; and much more including anything else the planning commission requests. 

It can turn out to be a very time consuming and expensive application to have rejected if the county changes their regulations.

McCullough continued to ask why Clearway could not give hard numbers.

Johnson continued to ask them how many acres they had to have to make it feasible. 

Hightower said, “All we had to do is keep our zoning regulations in place.”

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