By Andy Brack, editor and publisher | If you heard of the possibility of a billion-dollar investment in solar farms in South Carolina, you might think state leaders would be falling all over themselves to attract the capital.
But investors say those huge investments likely won’t happen until state lawmakers get off the dime and create a property tax climate more similar to Georgia and North Carolina, which saw a combined $1.9 billion in investment in solar power in 2015.
The state Senate voted 38-4 on Feb. 7 on a bill (S. 44) that would provide an 80 percent property tax exemption to commercial solar enterprises that invest in South Carolina. The measure would also exempt residential solar investment from property taxes. A similar bill died last year in the House. The new bill is now in a House committee where it will sit for a couple of weeks as the House debates the state budget.
Investors say without the tax break, it doesn’t make business sense to plow the money into solar farms. Too much capital is required on the front end, they say, without enough incentives to make the numbers work.
So for now, plans are on hold to build at least 91 commercial solar farms, an investment of $1.4 billion according to the industry.
What makes the projects particularly compelling, advocates say, is that solar farms generally are built on rural farmland, which generates little in property taxes. If companies can build solar farms soon, the land would generate thousands more in tax revenues in poor counties that struggle to get higher tax bases so individuals don’t have to pay so much in property taxes.
The S.C. Solar Business Alliance says the current property tax revenue generated by counties on land identified for the 91 projects totals $21,189.63. But if all of the solar farms were built, counties would reap 594 times more tax money – some $12.6 million dollars in tax revenue. And that’s with the 80 percent tax exemption.
Two examples: Two parcels of land in Bamberg County that net $281.60 to the county in property taxes now would provide $167,693.17 under the new bill, the Alliance said. Similarly, Darlington County would realize $1.95 million in tax revenues from solar farms, compared to $3,277.82 from 12 parcels of rural land.
“Our state bends over backwards to ensure we bring in big manufacturers,” said Bret Sowers, president of the alliance. “Are we going to look at the solar industry as its own industry and say what does it need to bring in this billion-dollar investment? And what can we do then over a timely manner – and not over 10 years but over a two- to three-year period?”
Sowers said the industry wants the statewide property tax exemption so it can move more quickly to get projects under way. Otherwise, it will have to negotiate individual deals with counties to get the projects going. That means 91 negotiations with 91 legal teams and 91 contracts, which will take time. And while those negotiations tend to result in better deals for the industry, such as not having to pay taxes for 30 years instead of the 10 years in the current Senate bill, having to do all of the deals will slow down investment.
The result for counties is pretty clear: “It’s 100 percent of nothing or 20 percent of something” if the bill passes, Sowers said.
Bill has opposition
While the S.C. Chamber of Commerce and Municipal Association of South Carolina are studying the bill and have no official position on it, the S.C. Association of Counties (SCAC) is opposed, according to Associate General Counsel Josh Rhodes.
“While SCAC supports the use of alternative energy, SCAC opposes legislation to create statewide property tax exemptions for alternative energy, as it impacts a county’s ability to offer local incentives to attract these projects,” he said in a statement.
Rhodes said the state will continue to attract new investments without crippling local property tax revenue.
“Local revenues will be very limited if this legislation passes because of the immediate exemption of 80 percent of property tax revenue for 10 years. These projects are not really job producers, besides the initial construction of the panels, so the bill exempts 80 percent of the only property tax revenue created.”
Rhodes said it would be better for the industry to negotiate individual deals – the paradigm that Sowers said the industry wanted to avoid so it could speed investment, not stymie it.
Rhodes noted, “We believe we can negotiate as good or better property tax incentives at the local level with mechanisms that are currently in place, e.g., fee in lieu of tax agreements. In short, solar energy is an industry that can be attracted at the local level with the best interests of the locality and its citizens being met by their local government, which is the essence of Home Rule. We do not believe that a statewide property tax exemption best meets the interests of every locality.”
With the House Ways and Means Committee set to start full committee discussions on the budget next week, bills like the one sought by the solar industry will be put on the back burner for a few weeks.
But chief Senate sponsor Greg Gregory, R-Lancaster, is hopeful the House will approve the measure this year, despite some folks who “take a dim view of alternative energy” and stalled the bill last year.
“This makes sense economically,” he said. “These businesses have to have guaranteed rate of return in order to do the deals.”
It also will be good for rural areas that often struggle to find big industrial investment to diversify their tax bases, Gregory said.
“Look at what is happening in North Carolina,” he said. “It ranks number 1 or 2 in solar farms. It’s been exponential there. We’ve been way behind the curve in attracting solar. This is something to further enhance our industry.”
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