Principal Solar Institute

Russel Smith, Executive Director TREIARussel Smith is the co-founder and executive director of Texas Renewable Energy Industries Association (TREIA). His career spans more than three decades working with governmental, educational and non-profit boards, and on state committees promoting the development of solar wind, biomass, geothermal and hydro resources. Smith is also a founding member and former executive director of the educational non-profit Texas Solar Energy Society..

What Happened for Solar During the 2013 Texas Legislative Session?

83rd Legislature What We Expected?

Passing legislation considered doubtful Simply defending and retaining existing supportive laws would

be the measure of success Tea Party politics prominent Success exceeded expectations

The Usual Massive Undertaking

Several thousand bills filed TREIA targeted 106 bills to support, oppose, or monitor 50 initially (ultimately 46) garnered official TREIA support

– 5 passed– 4 passed committee, 1 passed full Senate + House committee – 12 heard in committee, left pending– 24 received no hearing

5 officially opposed – 5 defeated 55 monitored

– 9 passed, 46 failed

Bills Monitored and Passed

Of 9 monitored bills that passed, 4 of interest– HB 35 – HOA/POAs may not prohibit home owner’s use of adjacent lot

for residential purposes– HB 1223 – Tax refund on equipment purchase to manage/operate data

centers, includes electric and cooling – SB 700 – State agencies and institutions of higher ed. Must set % goals

for reducing elec. consumption and produce plan to do so– SB 902 – Certain water districts must study elec. consumption and

implement measures to reduce

Bills Opposed and Fixed

HB 1490 - Authorized solid waste disposal fees for use funding natural gas fueling stations, municipal solid waste renewable energy projects, or wastewater treatment facility biogas projects.

Successfully defended renewable energy definition

Bills Opposed and Defeated

HB 538 (Rep. Yvonne Davis) – Repeal Property Tax Exemption, Franchise Tax Exemption, Fuel Use Tax Exemption for renewables.

HB 605 (Rep. Lozano) – Made siting wind plants near airports more difficult. Extended reach of related zoning to extra-territorial jurisdictions and within a 25 mile radius of state or federal radar installation.

HB 2026 (Rep. Sanford) – Repeal of state’s Goal for Renewable Energy including renewable energy credits and CREZ project.

Bills Opposed and Defeated, cont’d

HB 2338 (Rep. Parker) – Amended existing HOA law to allow prohibiting solar installation 1) visible from street in front of property; 2) weighing more than roof can support; 3) covering more than 50% of roof; 4) if in yard not reasonably concealed from public view by privacy fence; 5) generates more electricity than necessary for residence; 5) impacts electric service of neighboring properties by creating voltage spikes.

HB 2695 (Rep. Yvonne Davis) – Allowing municipalities to regulate wind turbines in the extra-territorial jurisdiction of the municipality.

Bills Supported and Passed

SB 385 (Sen. Carona) – Property Assessed Clean Energy (PACE). Effective immediately.

HB 2500 (Rep. Bohac) – Appraisal of solar energy property for ad valorem tax purposes. Effective Jan. 1, 2014.

HB 3390 (Rep. Hilderbran) – Chapter 313 Texas Economic Development Act. Effective Jan. 1, 2014.

Bills Supported and Passed, cont’d

HB 2712 (Rep. Perez) – Ad valorem tax exemption of energy storage systems used for the control of air pollution in a nonattainment area. Effective Jan. 1, 2014.

HB 1864 (Rep. Bohac) – Consideration of Combined Heat &

Power systems for certain government facilities

Bills Supported, Didn’t Pass, Went Farthest

SB 1239 (Rodriguez) – Passed committee. Fair mkt. value for DRG surplus. Coops & Munis included

SB 1478 (Rodriguez) – Passed committee. El Paso Electric must purchase 50% of required RECs from their Tx. service territory

SB 1551 (Lucio) – Passed full Senate, passed House committee. DRG demonstration for Colonias in Rio Grande Valley

HB 385 – PACE

Key Definitions

“Qualified Improvements” - PACE funding under SB 385 is restricted to “qualified improvements,” defined as:– …[P]ermanent improvement[s] fixed to real property and intended to

decrease water or energy consumption or demand, including a product, device, or interacting group of products or devices on the customer’s side of the meter that uses energy technology to generate electricity, provide thermal energy, or regulate temperature.

“Real Property” - Within this definition, “real property” means:– …[P]rivately owned commercial or industrial real property or

residential real property with five or more dwelling units.

HB 385 – PACE, cont’d

Exclusions Some property and projects are specifically excluded from

eligibility under SB 385. This includes financing for:– undeveloped lots or lots undergoing development at the

time of the assessment; and – the purchase or installation of products or devices not

permanently fixed to real property.

HB 385 – PACE, cont’d

Eligibility for Financing Written contracts are required Can be provided by third party or local government If third party, local government must also contract with third

party financier the period of the property assessments may not exceed the

useful life of the qualified project The financing may include– the cost of materials and labor necessary for installation or

modification of a qualified improvement– a wide range of fees

HB 385 – PACE, cont’d

Financing Requirements

Mortgage lien holder consent. Local government must obtain written consent from holder of any mortgage lien on the property

Record keeping. Local governments are required to file written notice of each contractual assessment in the real property records of the county in which the property is located

Lien status. Assessments are considered a first and prior lien against the real property Collections. Local governments may contract with another taxing unit to perform duties

relating to collection of assessments Bonds. Local governments are authorized to issue bonds or notes to finance qualified

projects Prohibitions: Local governments may not make the issuance of a permit, license or other

authorization from the local government contingent on participation in a PACE financing program, or otherwise compel a property owner to use PACE financing for a qualified project

HB 385 – PACE, cont’d

Program EstablishmentLocal governments must: determine a program is “convenient and necessary;” designate a region or regions within the local government’s jurisdiction in

which the program will operate; prepare a detailed report describing the program; adopt a resolution of intent to establish a program, including

announcement of a public hearing and availability of the detailed report; hold a public hearing at which the public may comment on the proposed

program and required report; adopt a resolution establishing the program and its terms; and two or more local governments are authorized to administer a program

jointly.

HB 385 – PACE, cont’d

Project Review and Savings Verification

Each proposed project is required to provide a review by an independent third party of the water or energy baseline conditions and the projected water or energy savings expected. Once a project is completed, the local government must obtain verification that the project was properly completed and is operating as intended.

Project Ownership

Participating property owners may purchase directly the equipment and materials necessary for the qualified improvement, or may contract directly, including through lease, power purchase agreement, or other service contract, for the installation or modification of a qualified improvement.

HB 2500 – Solar Energy Property Tax Appraisal

Key Definitions

“Solar energy property” – “Sec. 23.26. SOLAR ENERGY PROPERTY. (a) In this section, “solar energy property” means a “solar energy device” as defined by Section 11.27(c)(1)that is used for a commercial purpose, including a commercial storage device, power conditioning equipment, transfer equipment, and necessary parts for the device and equipment”

HB 2500 – Solar Energy Property Tax Appraisal, cont’d

Purpose of the Law Removes ambiguity as to the assessment of ad valorem taxes

on solar energy property Enables appraisers to take into account rapidly occurring

technological changes in the solar industry Does not create a new incentive or abatement Does not affect any currently existing incentives or

abatements

HB 2500 – Solar Energy Property Tax Appraisal, cont’d

Requirements in the Law

In determining market value of a solar energy property an appraiser in an appraisal district must:– Use the cost method of appraisal – Use cost data obtained from generally accepted sources– Make an appropriate adjustment for physical, functional, or economic

obsolescence– Calculate the property’s depreciated value using a maximum useful life

of 10 years An appraiser may not:

– Determine the depreciated value to be less than 20 percent of the value determined using the above method

HB 3390 - Limitation On Appraised Value (CHAPTER 313)

Program Extended and Renewables Included

Chapter 313, Texas Tax Code (Texas Economic Development Act), was scheduled to expire on December 31, 2014

Several related bills filed Effort to eliminate the program failed Efforts to remove “renewable energy electric generation” as an eligible

property use option failed Elements of different bills included in HB 3390 which passed – effective

Jan. 1, 2014 Program extended for 8 years thru 2022

HB 3390 - Limitation On Appraised Value (CHAPTER 313), Cont’d

Time Elements Extended

Program extended for 8 years thru 2022 Term of limitation agreements lengthened from 8 years to 10

years Property owner’s “viable presence” requirement extended

from 3 years to 5 years

HB 3390 - Limitation On Appraised Value (CHAPTER 313), Cont’d

Comptroller Gains Greater Approval Authority

Legislative intent clause says keep ultimate control of economic development related property tax decisions at local level

School district must request third party economic impact evaluation Comptroller determines what info. will be included in the evaluation Comptroller must determine that project will result in economic impact on

state within 25 yrs. sufficient to offset certain tax revenue lost to the school district

Comptroller must determine that receiving limitation is a determining factor in project locating in Texas

HB 3390 - Limitation On Appraised Value (CHAPTER 313), Cont’d

Comptroller Gains Greater Approval Authority, Cont’d

Comptroller determines whether issue a Certificate for Limitation on Appraised Value

Comptroller’s office may issue Certificate if requirements not met if it determines other benefits justify

A school district may choose not to approve an application regardless of Comptroller’s actions

A school district may not approve an application if Comptroller does not issue a Certificate

HB 3390 - Limitation On Appraised Value (CHAPTER 313), Cont’d

Job Creation Requirements – Tightened Here, Loosened There

“Qualifying Job” remains a permanent full-time job with certain benefits “Qualifying Job” must pay at least 110% of county manufacturing job

average weekly wage, not “county average weekly wage for all jobs” if property owner creates over 1,000 jobs, as before

Number of jobs that must be created remains 25 Provision allowing 20% to be “non-qualifying” jobs is eliminated Average weekly wage for non-qualifying jobs must now be greater than

the county’s average weekly wage

HB 3390 - Limitation On Appraised Value (CHAPTER 313), Cont’d

Supplemental Payments Modified

With the exception of certain special circumstances, supplemental payments by applicants for limitation on appraised value to school districts, and now any other entity on behalf of a district, is modified. Instead of the previous $100/student/year, the new law allows the greater of $100/student/year, or $50,000/year.

Minimum Qualified InvestmentThe required minimum qualified investment amounts remain as before. Penalties for failing to meet the minimum qualified investment also remain, however the Comptroller may now grant a waiver of penalties under certain circumstances.

Minimum Amount of Limitation

The minimum amount of tax limitation a school district may agree to is increased in school district categories II – V. Category V = $10 million; Category IV = $15 million; Category III = $20 million; Category II = $25 million; and Category I is unchanged at $30 million

HB 2712 - Ad Valorem Tax Exemption - Energy Storage Systems

Key Definitions

“Energy Storage System”: Sec. 11.315. ENERGY STORAGE SYSTEM IN NONATTAINMENT AREA. (a) In this section, "energy storage system" means a device capable of storing energy to be discharged at a later time, including a chemical, mechanical, or thermal storage device.

HB 2712 - Ad Valorem Tax Exemption - Energy Storage Systems, Cont’d

Eligibility Requirements A person is entitled to an exemption from taxation by a taxing unit of an

energy storage system owned by the person if:– it is to be used, constructed, acquired, or installed wholly or partly to

meet or exceed local, state, or federal rules for monitoring, control, or reduction of air pollution;

– it be located in an air non-attainment area of the Federal Clean Air Act;

– it also be located in a municipality with a population of at least 100,000 adjacent to a municipality with a population of more than two million;

– have a capacity of at least 10 megawatts; and– be installed on or after January 1, 2014.

HB 2712 - Ad Valorem Tax Exemption - Energy Storage Systems, Cont’d

The Granting Entity The tax exemption is an option controlled and granted by

– the county commissioners where the municipality is located, the corresponding appraisal district board and its chief appraiser, and/or,

– the local school district where the project is located and it’s governing board.

Compensation and Benefits to Grantee– School district to be fully reimbursed by the State of Texas for lost tax

revenue– Municipalities or counties recover tax abatement indirectly through

job creation and local spending, plus mitigation of cost of poorer air quality that would exist without the system.

HB 2712 - Ad Valorem Tax Exemption - Energy Storage Systems, Cont’d

Term of Exemption The act has no term limit for granting the tax exemption local taxing authority may revoke the exemption at any time

for the coming year The exemption, once granted, need not be reapplied for

annually

Principal Solar Institute

Russel E. Smith, 512-345-5446, rsmith@treia.orgScott Kornfeld, 612-716-9012, skornfeld@treia.org

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