Town officials and UPC Wind, the developer behind a 16-tower wind farm in Sheffield, have negotiated a new agreement on what UPC will pay the town.
It’s a good deal for Sheffield, Board of Selectmen Chairman Max Aldrich said Friday. For one thing, it eliminates nearly all risk, he said.
For another, it should help with property taxes, although it won’t affect the education tax rate.
The new plan is partly an attempt to forestall the possibility of lower payments, if the state Legislature passes a law, as expected, that, among other things, would change how wind projects are taxed in Vermont.
Under the new agreement between UPC and Sheffield, signed Wednesday, UPC will pay the town $520,000 a year. Some of that will go directly to pay property taxes on the development. The rest will be paid into a fund set up by the town.
The money that goes into the fund is sort of a “mitigation payment,” Aldrich said. The town will vote annually on how it wants to spend it, he said.
Under the old agreement, established in June 2006, UPC would have paid the town a maximum of $550,000 and a minimum of $400,000 a year. The payment would have varied depending on the “accepted value” of the project, which would be agreed upon by the Vermont Tax Department, the town and UPC. The accepted value would have been plugged into a formula to determine the amount of the payments each year.
The old payment plan was complicated and might have been revisited anyway, said Sheffield’s attorney, Richard Saudek of Montpelier. Meanwhile, however, the state Legislature proposed that, instead of paying the usual education tax rate based on property value, wind energy should be taxed at a certain amount per kilowatt hour of what is generated.
The new tax system, if approved, would likely leave wind production facilities with a relatively low education tax rate, a plan aimed at encouraging renewable energy, Saudek said.
The bill says that a facility certified by the commissioner of public service “as a facility which produces electrical energy for resale, generated solely from wind power, which has an installed capacity of at least five megawatts, which was placed in service after Jan. 1, 2007, and which holds a valid certificate of public good … shall be assessed an alternative education property tax on its buildings and fixtures used directly and exclusively in the generation of electrical energy from wind power.”
“The pending legislation spurred us to look at the agreement,” Saudek said. “Rather than having this minimum and maximum, we’ll just go with $520,000, which is pretty close to the maximum.”
Within that, the amount of property taxes that UPC pays will fluctuate from year to year, but the total amount paid will remain the same.
The property taxes it pays to Sheffield will go entirely toward the municipal budget. “The likelihood is that this project will be roughly half the grand list,” Saudek said. “Therefore, about half the town budget will be paid for by this project.”
That does not mean, however, that property taxes will be cut in half. The lion’s share of any town’s expenses are related to education, and if the pending legislation passes, the education taxes that UPC pays will go directly to the state.
The town budget, the municipal portion, is around $260,000, Saudek said. Just to illustrate – if UPC’s property taxes paid half that, $390,000 would go into the mitigation fund. Voters could spend it, or build it up.
The legislation that Saudek and Sheffield officials referred to is S.209, also called the Vermont Energy Efficiency and Affordability Act. It says, “a goal of the state, by the year 2025, is to produce 25 percent of the energy consumed within the state through the use of renewable energy sources, particularly from Vermont’s farms and forests.”
Although the new agreement is not, on its face, beneficial to UPC, Sheffield Wind Project Manager Matt Kearns said the developer is happy to have it in place.
“As a rule, we don’t like uncertainty,” he said. “The town didn’t like it either. We like to know what the numbers are going to be. This allows them to plan and us to plan, so we’re really pleased. We think it’s a good compromise for both of us.”
The payments are to start once the wind farm is operational. It should be up and running by December, according to UPC’s current schedule.
The wind project, the first of its kind in the Northeast Kingdom, has met with stiff opposition. Ridge Protectors, an organized citizens’ group, who have fought it from the start, recently appealed the Vermont Public Service Board’s August 2007 conditional approval of the project.
The appeal, filed with the Vermont Supreme Court, focuses on the economic benefits, arguing that, in the absence of stable, long-term power contracts, it will not, in fact, be an economic benefit that outweighs its adverse affects. It also argues the decision on the basis of aesthetics and says that the project is in disagreement with the goals of the area’s regional plan.
A Supreme Court clerk said Friday that the appeal is moving forward, and the PSB has until March 19 to respond.
“We like to think of ourselves as forward looking people,” Aldrich said. “We’re doing our part to reduce dependence on fossil fuels, and hopefully someday everybody will realize that.”
By Tena Starr
11 February 2008
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