SALISBURY — A recently signed agreement between local officials and the New York company that owns the Rabbit Road solar farm will net town coffers more than $1 million in payments in lieu of personal property taxes.
According to Town Manager Neil Harrington, the deal will ensure the town makes at least $50,500 a year on the utility for the next 19 years, which is the standard lifespan of solar energy generating plants.
For the first year, which includes new growth figures, the payment is $80,000. The result is $1,039,500 over the life of the agreement, Harrington said, and it precludes any challenge from the company or the town having to deal pay back any rebates.
That’s the minimum payment in lieu of taxes, Harrington said. The maximum would bring in about $200,000 more.
“After the first year, the town is entitled to 6 percent of the gross or at least $50,500 a year,” Harrington said. “At 6 percent of the gross, that comes to $1,243,900.”
The concept of prearranging how much a utility will pay a community for taxes is becoming more common. NextEra Energy Seabrook nuclear power plant has negotiated multi-year deals with Seabrook instead of bickering over — and sometimes going to court over — the valuation the town places on energy-producing facility.
But solar energy generating plants are new and unique, Harrington said, and taxing them is new territory. After a recent seminar hosted by the state Department of Revenue on the subject, state officials recommended communities with solar farms consider negotiating payment in lieu of taxes, through PILOT agreements with private solar plant owners, he said.
The agreement is only on the solar utility’s personal property, such as the solar panels and other energy generating equipment, It doesn’t include the 54.12 acres of land that the utility sits on, which will bring almost another $11,000 a year at its current assessed value of $913,200, according to the assessor’s office. The value of the land will be assessed annually.
But having the agreement on the personal property eliminates the possibility of the town and owner fighting over issues of depreciation of assets, life expectancy of equipment and fluctuations in the energy market, Harrington said.
“Everything is ever changing in the energy market,” Harrington said. “Costs and values could be different down the road. The agreement provides a guaranteed revenue stream for the town over the next 20 years, which is the life expectancy of the solar farm. And it’s in the best interest of the company that owns the facility, too, because it brings with it cost certainties as to their expenses.”
James Vaughn built the solar farm, then worked out agreements with the town of Salisbury, city of Newburyport and the Triton School District to sell all the energy it produces for a discount. In Salisbury’s case, its a 15 percent discount, Harrington said, which will save the town money on its energy costs.
Vaughn ultimately sold the utility after it became operational. The current owner is CD US Solar PO 1, LLC, a Delaware Limited Liability Company.