(Correction: An earlier version of this article incorrectly reported the size and scope of ECG's Utah Solar 1 project. A 300 megawatt project is planned.)
MSD board votes in favor of moving ahead as county poses likely obstacle to deal
Millard School District board of education members decided in a split 2-1 vote on April 13 to move forward with a plan to offer tax increment financing to support the development of a 300 megawatt solar project 10 miles north of Delta.
The $405 million solar array would be built on 1,729 acres of land leased from Utah School and Institutional Trust Lands Administration in an area designated a community development project area (CDA) by Millard County in 2016.
Dubbed the Utah Solar 1 Project, it is being proposed by EDF Renewables, itself a subsidiary of French state utility Électricité de France S.A. The company is involved in dozens and dozens of energy projects across the U.S., according to its website.
School board members voted to move forward after listening to a thorough presentation by a third-party consultant hired by the district to examine the project and the financing scheme proposed for it, which includes essentially a 50-percent property tax break over a 20- year period in order to finance construction.
D. Burke Jolley, the outside consultant, said he was in favor of moving ahead because it allowed the district to generate new, unrestricted revenue on land that is currently tax exempt—and empty.
“This project is kind of unique because it is on state trust land. The property itself has really no taxable value to the school district at present time,” he told the board.
Jolley said the project, without the tax break, would be more revenue neutral than represent new growth for the district. This is because the project, once completed, would be more akin to personal property as far as taxable value goes.
He used the example of a taxpayer buying a new car versus building a new home. A new home provides new growth to grow a school district’s revenue, while a new car expands taxable value within the district, but depreciates to the point where eventually it contributes nothing. “Overall it ends up being revenue neutral on personal property,” Jolley explained. “That’s really important because most of the improvements that they are going to do to this project are going to be considered personal property. So the school district really wouldn’t benefit as far as new growth is concerned.”
Also, Jolley said he believed the project would likely not even be built without the enormous tax break.
Overall, he said the district could expect to finance about 60 percent of the $35 million cost to construct the solar array and make it commercially operational. This because the school district collects about 60 percent of the area’s property taxes compared to the other taxing entities, such as the county, fire district, mosquito abatement and such.
“Which means you’re funding about 60 percent of this project. It’s a $35 million project, so approximately 60 percent of that will come from your tax base. Would this happen if you didn’t agree to go into tax increment financing? Probably not,” Jolley said. “This is a huge incentive.”
The 50/50 tax split would return about $10.5 million to the district over the 20- year term proposed, or about $524,000 annually on average.
He said those funds would be virtually unrestricted since they would be paid as mitigation payments from the county through its CDA—normally property taxes reach school districts through the state’s Minimum School Program, which features an array of restrictions on how such funds can be spent.
“That is manna from heaven,” Jolley exclaimed. “You, the local school board, dictate how that (TIF project payments) money is going to be spent.”
Jolley said at the end of 20 years, when the whole project goes on the tax rolls as new growth, depreciation will have reduced the benefit to the district to about $100,000 in annual tax payments.
He told board members the solar project developer has a 30-year lease on the SITLA land, with the option for two,10-year extensions.
When asked whether EDF has secured power sales contracts with end users—usually an indicator of a project’s viability—Jolley said he was sure things were set. However, Scott Barney, who has been performing consulting work for EDF on the Delta project, said as of March no power sales contracts have been finalized. He blamed the hold-up on the same entity that operates Intermountain Power, the Los Angeles Department of Water & Power—nearly every electron produced at Utah Solar 1 would head directly to Southern California, Jolley said.
Board member Sarah Richins was the only vote against moving forward with the TIF financing proposal. She raised concerns about housing—the company predicts needing 400 construction workers to build the project, set to come online as quickly as the fourth quarter of 2025—as well as whether it wouldn’t be more beneficial for local homeowners and businesses to expand the tax base with new industry and simply collect property taxes as normal.
Jolley said average taxpayers would see a slight benefit, as Richins said, because the project would represent a jump in taxable value due to new growth, which would lower tax rates for homeowners and existing businesses. But, he added, because the district is essentially revenue neutral, it would see little new actual revenue from such a scenario.
“The beauty of this, you are going to get that money. Taxpayers aren’t paying you any more. And you can do a lot with that money,” he said.
The prospect of earning $10.5 million—the bulk of it in the first five years, Barney told board members—is tantalizing given the $50 million building spree the district plans to embark upon sometime next year.
However, the enthusiasm some board members showed toward giving EDF a 50-percent tax break might soon encounter some insurmountable obstacles in the form of Millard County commissioners.
Asked Monday whether the company or school district had yet approached the county, Commission Chair Bill Wright said they had, but that county officials didn’t share the same enthusiasm for such a large tax incentive for the project.
Wright said commissioners were just now planning to discuss the item in public after the project previously went before members of the county’s economic development board.
Wright said he was leaning toward risking the overall project not coming to fruition without a tax break in hopes the company will develop the solar array anyway and the county’s existing taxpayers can catch a tax break of their own—private property owners in Millard County have watched their property tax bills skyrocket over the last few years as the Intermountain Power Project, the county’s largest taxpayer, reaches the end of its lifespan, depreciation of its assets shifting the local tax burden increasingly onto home and small business owners.
Besides, Wright said, he felt the company should have approached the county first with the details of its financing proposal before seeking school district approval. Strangely, though the district is the largest tax collector, the county’s management of the CDA makes it the dominant member in any TIF financing scheme.
“I thought what they presented the school district was inappropriate because we hadn’t even had a discussion and they say this is what the county is going to do,” the commissioner said.
According to Jolley’s report, the county would earn about $5 million over 20 years compared to the school district’s $10.5 million should it agree to the TIF financing proposal.
County Treasurer Sheri Dearden said Monday she had just begun the process of reviewing company financials in order to prepare for commission discussion on the subject. She also signaled rough waters ahead for the project since her office would require the company to prove that without incentives it couldn’t build the solar array.
Dearden said infrastructure improvement costs, lack of roads or water and sewer are the types of things that could prevent a company from opening a facility without having some sort of financial incentive in place to fund those needed improvements. However, in the area EDF would build Utah Solar 1, there is nothing lacking as far as infrastructure. Roads, water, power, even a railroad nearby are all already in place. The treasurer said she thinks this is akin to “corporate welfare,” a company reaching for any available cash simply because it can—solar projects are already receiving huge federal subsidies and tax breaks approaching 30 percent, she said.
“There is nothing preventing them from coming,” Dearden said, quickly adding that a thorough analysis will be needed to determine why the project must have an incentive in order to be developed.
As far as providing a 50-percent tax break, she said she’s concerned that it puts the county in the position of picking winners and losers among the business community, a sentiment Wright echoed.
“If we were to give 50 percent to IPP or to Graymont, all of our state (centrally assessed tax) appeals would go away…there are so many local businesses who don’t get that. How do you pick winners and losers?” she asked.
She also said that doing some quick math, the benefit to existing property owners of the solar array coming in without TIF financing is a property tax bill break of at least a few hundred dollars on the average home.
The commission did not have an agenda item about Utah Solar 1 listed for Tuesday’s regular meeting, but Dearden said the subject would likely be discussed during the “other business” portion of the meeting.
