Editors Note: This article was originally published in the Sept. 20, 2023 issue of the Chronicle Progress. Some information may be outdated.
Superintendent says $10 million in 'unencumbered' funds to be used on capital projects
Millard School District board of education members narrowly passed a resolution last Thursday giving a 50-percent property tax break to a 300-megawatt solar energy project not yet under construction.
Utah Solar 1 secured the tax break from the school district after failing to get county commissioners on board in a similar effort to secure a tax subsidy.
The board of education vote occurred after a discussion period was sought by board member Adam Britt, who appeared initially to question the tax break before later helping pass it by a 3-2 vote.
Board member Jenni Finlinson made the motion to accept the resolution authorizing the 20-year tax break. Britt seconded it in order to hold the discussion—without a motion and a second, no discussion can be had on action items before the board.
“I know we’ve all had a lot of questions about this. The last couple of days, I’ve been getting it from both sides because of where I work and other things,” said Britt, who does GIS mapping and other duties for Millard County. “If this was not to pass here, would it be dead in the water or would it still be done?”
One rationale county officials voiced when voting to deny participating in a tax break for the county is that reduced taxes or not, the $415 million solar project was imminent regardless. And because county taxpayers have seen year-over-year explosive increases in their own property tax bills, county officials said they saw no real reason to offer such an incentive.
Scott Kuhlke, director of grid-scale power development for the project’s developer, EDF Renewables, said he didn’t know if failure to secure the tax break from the school district would kill the project.
“Here’s what I can say…The power industry is very competitive. By not passing or accepting the resolution it could imperil the project to allow us not to go forward. That’s the risk,” he told board of education members.
Britt said he continued to hear from constituents that the project was coming regardless. But, he also shared that he was concerned the timing of the tax break coincides with an effort by the school district to sway voters to approve a $47.5 million general obligation bond issuance to pay for upcoming building projects, including a massive renovation effort at Millard High School.
“If we pass this resolution and divert the taxes, the general population, we’re hurting them because of the property taxes. But yet, we’re going to come back to the public and say hey we want this general obligation bond passed,” he said.
Board member Sarah Richins, who voted against the tax break, said she was concerned if the district provided a tax break for Utah Solar 1, then it would open the door to tax breaks for multiple future projects. At least half a dozen similarly-sized projects are already planned for the area, most with commercially operational dates already set, all set to hook into IPP Renewed after the new plant’s construction is finished in 2025.
Board President David Lund responded to Richins’ concern by saying the district would simply take each request separately, contract for a feasibility study and decide on a case-by-case basis.
“As far as moving forward, this isn’t opening the door to anybody and everybody,” he said, adding the district has learned from past mistakes when it came to performing its due diligence.
Britt later asked what the difference to the district’s finances would be whether the tax break was granted or not. The district’s business administrator, Corey Holyoak, said the property tax revenue gained without granting a tax break compared to the funds the district would share if the tax break were granted were not that dissimilar.
Holyoak later clarified that the district would give up $10 million in property tax receipts in order to secure $10 million in unencumbered funds from the tax break—normal property tax revenue is distributed to the state, redistributed to school districts, where the state directs how the funds are to be spent, versus unencumbered funds, which can be spent on anything a district desires. In the case of Millard School District, Superintendent David Styler said the unencumbered funds would be specifically spent to support planned building projects.
Richins added that by denying the tax break, property owners would see some tax relief. She said she brought the issue to county officials to determine how much relief the project presented without a tax break. She said based on 2022 tax rates, the average homeowner would save about $263 on their property tax bill the first year and $12 during the 20th year. On average the total amount of property tax reduction on an average home would be $2,200 over 20 years.
Holyoak said the $10 million the district could expect to receive would be front-loaded, with bulk coming to the district within the first 5 to 7 years.
“For us, it’s a huge buffer,” Styler said of the $10 million, suggesting there was some possibility the cost of planned building projects could exceed what the district is seeking through its general obligation bond issuance.
Nathan Runyan, a partner with law firm Holland & Hart, explained how the tax break provides the district with the unencumbered funds, but said without the tax break the project was revenue neutral overall.
“You wouldn’t get anything extra,” he said, though taxpayers perhaps would see some relief.
Utah Solar 1 has been in the works for the better part of a decade, said Kuhlke. Situated on 1,700 acres of property north of IPP, the project would sit inside a county-designated community development area as well as on land owned by the Utah Trust Lands Administration.
Though the county did not approve giving its own tax break to the project, it will collect a 5 percent administrative fee to manage the CDA and act as a pass through for the property tax funds. Commission Chair Bill Wright confirmed the county would collect about $600,000 in fees over 20 years. The county also negotiated about $210,000 in scholarships from the project over a 20-year period.
Still, some county officials have called the school district’s tax break a back-door tax increase for local property owners and that the district is merely raising the funds without officially raising taxes and avoiding a politically risky truth in taxation case before the public—districts and other taxing entities are only allowed to collect revenues to match what was collected the previous fiscal year and any effort to increase spending outside that generally requires a tax rate increase and subsequent truth in taxation hearing.
For Utah Solar 1, the tax break is a chance to earn an additional $10 million toward financing construction of the project.
Richins asked at one point whether the project was also receiving federal subsidies as part of its development effort.
Kuhlke said the project qualified for an energy production tax credit as part of the federal Inflation Reduction Act passed by Congress last year. It also qualifies for the Investment Tax Credit, which can be as much as a 30-percent discount on federal tax payments if certain qualifications are met. The production tax credit is described by the federal Environmental Protection Agency as amounting to a tax discount of about 2.75 cents per kilowatt hour of renewable electricity produced for projects at least as large as 1 megawatt.
Utah Solar 1 is likely to employ a few hundred workers when peak construction work is taking place and between five and seven full-time workers once the project is complete.
After board members discussed the tax break, a 3-2 vote was held, with Richins and board member Tiffany Nelson voting against and Britt, Lund and Finlinson voting for.
Britt was the deciding vote. He said he was unsure until after the discussion whether he could support the tax break.
Utah Solar 1 officials said they remain in negotiations with the county’s other taxing entities to see if they would join the district in returning some property taxes to the project.
