Commercial grade solar fields could represent a major investment and tax boon for northeast Indiana.
So why would counties give a developer a free pass for a decade?
In a discussion before the Noble County Council last week, Noble County Economic Development Corp. Executive Director Gary Gatman informed council members that developers would likely seek a big tax abatement for a new solar development. Gatman said, typically, those developers would seek a 100% abatement for 10 years.
The abatement would lead to tax increases on real property (the increased value of the property itself), but not on the hundreds of millions involved in the installation of new equipment.
In researching the counties mentioned by the NCEDC who have reached solar deals for large scale commercial operations, only one of the three examples provided included a 100% abatement over 10 years.
Gatman’s assertion that the upfront economic development “gifts” from the solar companies range from $2 million to $6 million is also not backed up by the details of the agreements with the counties provided by the EDC. (The “gifts” are to offset the fact that solar installations are not large job creators and the “gifts” can be used for projects that benefit county residents.)
The NCEDC said the information on which they based the impact estimates and that fed Gatman’s comments about what other communities are doing has come from multiple sources over the past few months. “While we have not had specific conversations with any particular counties in Indiana, we have heard of a variety of incentives and economic development agreement structures that range all the way up to 100% 10-year abatements in those conversations. We have spoken to Tony Garrison at Nexus, Geenex, and other LEDOs along the way, not seeking specific examples, but to understand the range of considerations.”
Matt Getts, our reporter who has been following this issue closely, Thursday found these details in newspaper reports:
Gibson County — A five-year abatement was given at 100%, with a $1 million upfront donation to the local EDC.
Vigo County — A 10-year traditional, sliding scale abatement on $100 million of a $160 million project. No mention of any incentive gift.
Knox County — A 10-year, 100% abatement with a $2.5 million economic gift to the EDC over six years.
Tax abatements help businesses defray the front-loaded cost of establishing or expanding a business in Indiana. In exchange for making a large investment in a building or new machinery, in hiring new employees and paying them good wages, a local government agrees to give them a break on their taxes.
The thought process here is that, yes, the county/city/town loses out on some taxes, but comes out way ahead in the long run because of future taxes on that investment, as well as income taxes paid by workers and the benefit of having employment for local residents.
A solar field, while a large investment — estimated at as much as $300 million — isn’t going to be a huge job creator post-construction. Solar panels can do their work without requiring much human intervention beyond needed maintenance.
Unlike an industrial building that could reasonably exist on the tax rolls for decades, the stated lifespan of solar panels is 30 years. The value of that equipment will depreciate each and every year.
Unlike an industry, there seems to be little opportunity for periodic growth. Short of leasing more land and adding more solar panels, a solar field isn’t likely to add new equipment or new investment like a manufacturer might if their business grows and does well.
Gatman noted that in lieu of taxes, developers instead typically offer an upfront cash payment that can total in the millions to the county in exchange for the tax abatement.
But if a solar developer has finances to drop a few million upfront, it raises the question, why exactly couldn’t they just pay taxes instead? Why the quid pro quo?
That arrangement raises red flags. We must ensure that whatever deal is reached does not short change Noble County monetarily.
