BILL NUMBER: S5127

SPONSOR: PARKER
 
TITLE OF BILL:

An act to amend the general municipal law and the education law, in
relation to exempting payment in lieu of tax payments relating to energy
systems from school district and local government tax levies

 
PURPOSE:

This bill would amend the General Municipal Law and the Education Law,
in relation to exempting payment in lieu of taxes (PILOT) payments
received by energy system companies from the calculation of the NYS Tax
Levy Limit

 
SUMMARY OF PROVISIONS:

Section 1 of the bill would amend section 3-c of the General Municipal
Law in relation to exempting PILOT payments from the prior fiscal year
from energy systems, including solar, wind, farm waste, micro-hydro
energy, fuel cell electric generating, micro-combined heat and power
              

generating equipment, electric energy storage equipment, and electric
energy storage or fuel-flexible linear generator electric generating
systems, from the tax levy calculation.

Section 2 of the bill would amend section 2023-a of the Education Law in
relation to exempting PILOT payments from the prior fiscal year from
energy systems, including solar, wind, farm waste, micro-hydro energy,
fuel cell electric generating, micro-combined heat and power generating
equipment, electric energy storage equipment, and electric energy stor-
age or fuel-flexible linear generator electric generating systems, from
the tax levy calculation.

Section 3 of the bill would provide for the effective date of the bill.

 
EXISTING LAW:

GML § 3-c and EDU § 2023-a, establishes limits upon school district and
local government tax levies, established by Chapter 97 of the Laws of
2011.

The tax cap applies to all school districts and local governments coun-
ties, towns, villages and special districts) except for New York City,
the counties within New York City, and the Big Five school districts. It
is set at the rate of inflation or 2 percent, whichever is less. For
local governments, any property tax levy increase above the inflation
rate would be prohibited, unless endorsed both 2/3 of the local govern-
ing board. For schools, any property tax levy increase above the rate of
inflation would be prohibited, unless approved by 60% of the voters.
This vote is part of their regular budget voting process and for other
municipalities and special districts, a referendum is not required. The
cap applies directly to independent special districts and to town or
county component special districts as part of their parent munici-
palities' tax levies, with some exceptions.

 
STATEMENT IN SUPPORT:


New York State's mandated climate goals of achieving 70% renewable elec-
tricity by 2030 necessitates that renewable energy projects, such as
wind and solar, are being built and operational in the next 10 years.
Renewable energy companies may avail themselves of state-sponsored
incentives to facilitate project development, but they must first go
through the local jurisdictional processes for permitting and siting, as
well as property tax negotiations, which can be protracted and ambig-
uous.

Currently, RPTL § 487 exempts the value of a solar panel system from
local property taxes. It allows the taxing jurisdiction such as towns,
schools, etc. to opt-out of the tax exemption through adoption of local
law or resolution. If a jurisdiction does not opt-out, it can require a
solar developer to pay a "payment in lieu of taxes" (PILOT) fee as a
replacement for the taxes it would have collected.  The PILOT agreements
are negotiated with the local IDAs, which often delays the project
implementation and jeopardizes the economic certainty for outside inves-
tors.

This legislation would create a property tax exemption for renewable
energy projects under the General Municipal Law and Education Law. By
removing the PILOT amount from the tax base, Towns would benefit from
greater discretionary spending in their budgets, there would be more
economic certainty for project investment, and swifter completion of
projects.

The current tax cap legislation impacting all taxing jurisdictions
requires them to include anticipated PILOT revenue from all PILOTS
regardless of the type of project. In the context of renewable energy
projects, the tax cap has minimized or eliminated the perceived value of
renewable projects to the taxing jurisdictions. Every dollar that is
anticipated to be realized from a renewable PILOT, regardless of source
(IDA or Real Property Tax Law section 487), does nothing more than
reduce the amount which can be raised in taxes by the jurisdictions. It
is not additional revenue and at best could modestly lower the tax rate.
While in theory lowering the tax rate seems good, the problem is that as
soon as the PILOT expires and the assets are many years depreciated or
retired, the tax rate will have to be increased to replace the revenue
which was previously realized under the PILOT.

Prior to the tax cap creation, we could present a new project to a
community as one which increased the total revenues to a community; that
is not the case now. Since not all communities see the bigger picture of
combatting climate change and look only at the immediate local impacts
such as the use of farmland for energy production, they reach the
conclusion that renewable energy projects and their associated PILOTs
are at best neutral or simply provide no benefit to the community. If
these renewable energy PILOTs were excluded from the tax cap calcu-
lation, then there would be a discernable and real benefit to the commu-
nity. In addition, the fear of the requirement of increasing the tax
rate at the end of the PILOTs would also be eliminated.

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

None.

 
EFFECTIVE DATE:
This act shall take effect immediately.