MMA letter to House objecting to property tax provision in energy bill

The Honorable Brian Dempsey
Chairman, House Committee on Ways and Means
State House, Room 243
Boston, MA 02133

Dear Chairman Dempsey,

The Massachusetts Municipal Association appreciates the important work that the House Committee on Ways and Means is undertaking to advance renewable energy policy in Massachusetts through its consideration of S. 2214, An Act Relative to Competitively Priced Electricity in the Commonwealth. We are writing to express our strong opposition to elements of the bill that would make certain renewable energy systems exempt from the local property tax, and to offer our support for several provisions that would have a positive impact on cities and towns across the Commonwealth.

The Green Communities Act of 2008, which had the strong support of the MMA, has provided municipalities with a policy framework that includes critical tools and incentives to adopt sustainable and cost-effective approaches to meeting energy needs and environmental challenges at the local level. Our cities and towns are true partners with the Commonwealth in advancing the goals set forth in this commendable legislation. In fact, 334 of 351 municipalities in Massachusetts now host solar energy facilities, putting the state well on its way to meeting its goal of 250MW of solar energy installations by 2017. Over 20 municipalities have solar installations on capped landfills, with more than 40 permit applications for solar developments on capped landfills currently pending. Additionally, according to the Massachusetts Clean Energy Council, there are at least 4,600 renewable energy developments on private and municipal property statewide. The renewable energy industry is incentivized at the federal and state levels, and is clearly thriving in Massachusetts.

Under current law, renewable energy equipment that is behind the meter and serves as the primary or ancillary source of power for the property on which it is located is exempt from taxation. Larger renewable energy developments remain subject to taxation based on assessed value, or municipalities may negotiate at their discretion a payment-in-lieu-of-tax agreement (PILOT) with the renewable energy system developer.

However, Section 14 of S. 2214 would make a major change in tax law, by exempting larger-scale renewable energy equipment from the property tax, and instead inserting a PILOT of 5 percent of annual gross electricity sales from the developer to the municipality. This represents a dramatic and unnecessary policy shift that would have a harmful effect on cities and towns, removing both local tax authority and the ability of municipalities to negotiate a PILOT that is in their best interest.

The MMA has heard explicitly from local officials across Massachusetts, and none supports the exemption of renewable energy systems or the imposition of a fixed, non-negotiable PILOT. Many are taxing the renewable energy developments in their communities at their assessed values, and many have successfully negotiated PILOT agreements in amounts that significantly exceed the 5 percent annual gross electricity sales payment that would be required under this legislation. Others have reported favorable PILOT negotiations that enable them to enjoy significant cost savings for the purchase of electricity through Power Purchase Agreements (PPAs). There is no need to change the current law.

The MMA is drafting language to amend Sections 13, 14, and 15 of S. 2214 to preserve the taxable status of renewable energy equipment and the ability of municipalities to negotiate PILOT agreements. We look forward to working with you on this critically important issue for cities and towns.

We would also like to bring to your attention several sections of the bill as written that would be beneficial for municipalities, and express our support for these policy initiatives.

We support Section 7, expanding membership in the Energy Efficiency Advisory Council to include a representative from a municipality. Many communities have established local energy committees and have developed expertise and intimate knowledge of the most effective local programs. A municipal representative will be a welcome addition to the advisory board.

We support Section 33, raising the net metering cap for government entities and municipalities from 2 percent to 3 percent, enabling more cities and towns to qualify for net metering. However, in order for the state to meet its energy goals, and make additional solar projects feasible, the Department of Energy Resources may have to enlarge the Solar Carve Out program, which was an incentive for solar development.

We support Section 56, which directs the Department of Public Utilities to adopt its rules and regulations regarding the assurance of net metering eligibility by October 2012. In the past, communities have faced uncertainty in financing projects due to eligibility issues, and this will help greatly to remove that issue.

We support Section 57, which directs the Department of Public Utilities to develop a standard interconnection agreement by January 1, 2013.

The MMA appreciates your leadership and is committed to working with you and your colleagues to ensure passage of a strong bill that will enhance the Green Communities Act while protecting both municipalities and taxpayers. If you have any questions regarding this issue, please do not hesitate to have your staff contact John Robertson or Catherine Rollins of the MMA staff. We look forward to sharing the concerns of our member cities and towns.

Thank you very much.

Sincerely,

Geoffrey C. Beckwith
Executive Director, MMA

cc: The Honorable Robert A. DeLeo, Speaker of the House
The Honorable Jay R. Kaufman, House Chairman, Committee on Revenue
The Honorable John D. Keenan, House Chairman, Committee on Telecommunications, Utilities & Energy
The Honorable Stephen Kulik, Vice Chairman, House Committee on Ways and Means