How Unelected Local Officials Dole Out Wind and Solar Tax Breaks

As Schroder had hoped, this became a hurdle for the Alle-Catt Wind Project, which seeks to traverse three counties and generate enough energy to power more than 130,000 homes. It has reached so-called Payment in Lieu of Taxes (PILOT) agreements with two of those counties, but years later, it still wants one with Cattaraugus, where the wind and solar moratorium is scheduled to expire at the end of the year.

In the eyes of New York’s nascent renewable energy industry, property tax breaks are essential to the feasibility of wind and solar projects, giving IDAs — which offer and negotiate PILOT agreements — a critical role to play in the green transition. The state legislature and energy authority, too, have urged IDAs to boost renewables.

“The local tax burden … is a very significant element in determining whether a project is financially viable,” said Daniel Spitzer, an attorney who has represented both renewable developers and municipalities in tax negotiations. “These are projects that would not get built but for the IDAs, but for the PILOTs.”

Yet the state’s more than 100 IDAs have taken markedly different approaches to renewable energy. The unelected local economic development bodies wield “tremendous authority,” according to the state Senate, doling out more than $1 billion in tax breaks to a wide variety of industries each year. While a growing number have actively sought out renewable projects, others see little reason to provide tax breaks to wind and solar, which create few permanent jobs and are often fiercely opposed by vocal residents and the agriculture industry.

The state office overseeing IDAs has also questioned whether renewables should be in their purview. The Authorities Budget Office (ABO) found that in 2020, just a quarter of wind and energy projects supported by IDAs were expected to create any full-time jobs.

“It’s questionable whether [renewables] fall under the mission of an IDA because of the lack of job creation,” said Jeff Pearlman, the ABO’s director.

Amid the debate, New York is running out of time. In order to meet the goals the state outlined in its landmark climate law, it needs to build renewable energy infrastructure 10 times faster than it has in recent years.

The opt-outs and differing approaches of IDAs create a complex regime that poses a “primary risk” to a rapid wind and solar buildout, according to developers. In order to limit the variability, the Alliance for Clean Energy (ACE) New York in 2021 urged the state to adopt a standard appraisal methodology for property taxation of renewables.

The legislature did adopt a standard appraisal methodology, but most projects still negotiate PILOTs, according to Anne Reynolds, the executive director of ACE, which serves primarily as a lobbying group for renewable developers. The legislature also expanded IDAs’ legal mandate in 2021 to include promoting “the development of renewable energy projects to support the state’s renewable energy goals.”

This year, a report from the state comptroller on IDAs found that clean energy projects have “some of the highest net exemptions per project,” but “may benefit their respective communities in ways other than creating jobs, such as energy generation or helping achieve the State’s carbon reduction goals.”

Industrial development agencies remain “very instrumental in project development,” Reynolds said. “It’s a question of the level of the PILOT payment, but even before that it’s their willingness to work on the PILOT negotiation. Some IDAs have basically signaled, ‘We’re not in favor of wind and solar, so don’t come around asking for a PILOT agreement.’”

William Bacon, the director of the Livingston County IDA, has tried to find a middle ground.

“When I get a call from a company that’s outside of New York state that says, ‘Can you help me find 1,000 acres for solar development?’ my response is, I can’t do that,” Bacon said. “We still believe that agriculture is the number one industry. It’s not an anti-solar stance at all, it’s more of a, you need to do that legwork on your own.”

“Conversely, if Google wanted to come put a headquarters somewhere, I would probably help them find land,” Bacon added. “But that’s a little bit different. That’s got jobs associated with it.”

Other IDAs have taken a similar stance, such as in Wyoming County, where the agency notes in its governing document that it “will not take any action to promote or discourage any wind energy project” and will only issue PILOTs if wind developers have already secured local approval. In Fulton County, the IDA prohibits property tax exemptions for wind and solar altogether.

Beyond the actual subsidy, developers see PILOT agreements as preferable because they set a fixed payment schedule for the course of the agreement, rather than taxes subject to annual reassessment, and because they can help developers win community support.

For large projects, developers often negotiate direct payments to the towns. Rather than paying property taxes, which are split between the county, town, school district, and other entities, when developers negotiate PILOTs with the county they typically negotiate separate “host community agreements” with towns. The county-level tax exemption frees up money for these agreements, which can help foster goodwill with communities impacted by projects.

“While PILOT agreements are not required to move a project forward, PILOT agreements are a way to deliver more revenue to project host communities by putting millions of dollars directly in the hands of the taxing jurisdictions,” said Sean Perry, project developer for Alle-Catt Wind Farm.

While Invenergy, the company behind the Alle-Catt Wind Project, has not negotiated an agreement with Cattaraugus County, it has negotiated host community agreements with two towns in the county, Freedom and Farmersville, that would be impacted by the project — agreements that will only apply if Cattaraugus agrees to a PILOT. (Tax negotiations aren’t the only thing holding the farm up; the long-planned project is still seeking its final permits after making modifications to mitigate impacts on residents, bird life, and wetlands.)