by Anne Galloway, www.vtdigger.org, April 22, 2011 House Republicans say a proposed mechanism for financing the Clean Energy Development Fund will give a solar developer who contributed large sums to Gov. Peter Shumlin’s campaign an unfair advantage.
A new provision in the energy bill (which is expected to go before Senate Finance) makes developers who have been approved for tax credits now eligible for grants. Instead of receiving a tax credit over a five-year period, they will, instead, get a grant up front for 50 percent of the value of the tax credit in this tax year. The program would be modeled on a federal tax incentive program for solar power. The proposal could save the state about $2.7 million.
Solar developer David Blittersdorf, a former member of the Clean Energy Development Fund, suggested the proposal to Secretary of Administration Jeb Spaulding several weeks ago.
Shumlin has long been a proponent of renewable energy; he sees the subsidies as a vehicle for creating green jobs in Vermont and curbing greenhouse gas emissions.
Of the total available grant money ‘ $4.4 million ‘ Blittersdorf is eligible to receive $2.2 million.
A wind and solar manufacturer (CEO of AllEarth Renewables in Williston and founder of NRG Systems in Hinesburg, which is now run by his wife Jan), Blittersdorf was the largest donor to Governor Peter Shumlin’s campaign (he contributed $28,000 through a variety of business entities and a political entity called Green Mountain Future).
Rep. Oliver Olsen, R-Jamaica, and Rep. Carolyn Branagan, R-Georgia, both support subsidies for renewable energy, but they worry that the new grant program solidifies Blittersdorf’s advantage over other applicants who sought tax credits through the fund last year.
Since the beginning of the session, the House has struggled to find a replacement financing system for the fund. Until now, the fund has been financed through a tax on Entergy for dry cask storage of spent nuclear fuel rods at the Vermont Yankee nuclear facility. As of March 2012, when the plant is slated to close, Entergy will no longer be obliged to pay the tax. The Clean Energy Development fund total is $8.7 million; all of the money is encumbered for renewable energy tax credits.
Two weeks ago, the House dropped a controversial 55-cent charge on electric meters that would have generated the needed revenue for the fund. Hours before the energy bill was up for final passage on the floor, Shumlin announced he had an idea for making up the difference for fiscal year 2012. The House obligingly struck the 55-cent charge from the bill, and five days later, Shumlin revealed the cash-up-front plan for completed projects.
Olsen and Branagan say the grant system will reward developers who may not have been eligible to receive the full value of the tax credits. They argue that some of the developers who stand to receive thousands of dollars in grant money may not have had enough tax liability to offset 100 percent of the credit.
Olsen says 20 percent of the projects that have been awarded credits won’t come to fruition because the developments aren’t economically viable.
Olsen proposed ‘unencumbering’ 20 percent of the total $8.7 million, freeing up $1.7 million to meet the $2.7 million gap in 2012. The remaining $1 million would come from an unanticipated windfall from Entergy. The proposal would have alleviated the need to pay out $4.4 million, or 50 percent of the fund, up front to developers, Olsen says. The amendment failed in the House Ways in Means Committee on a 7-4 party-line vote. (Rep. Adam Greshin, I-Warren, voted with three Republican representatives for the amendment.)
‘It’s easy to see how a business could find $20,000 in tax liability to realize the full value of the tax credit,’ Olsen said. ‘It’s quite another when we’re talking about tax credits in the millions of dollars.’
Olsen said if the state gives out grants instead of credits, it will have no way of knowing whether a developer would have, in future, received the full value of the credit based on tax liability.
‘The only reason this would be attractive to businesses is if they don’t have the full tax liability,’ Olsen said.
Andrew Savage, communications director for Blittersdorf’s flagship company, AllEarth Renewables in Williston, said the grant program will give the business the financial certainty it needs to expand. ‘Money up front is always better than money later,’ Savage said. ‘It allows a company to keep growing. We’re a quick-growing business and we’re always looking for opportunities to expand, so the idea of taking a grant at a lower amount versus a tax credit is attractive.’
Savage said he fully expects the company will max out its tax liability on the projects, which are largely completed.
Proponents of the bill in the House say 98 percent of the state’s available solar tax credits were used by taxpayers in the most recent years. In 2008, 13 residents filed Vermont solar tax credits; in 2009, 15 Vermonters applied.
The 2010 tax year is the first time the Clean Energy Development Fund has issued credits for businesses. Sue Messner, a tax research economist with the Vermont Tax Department, said there is no way for the state to know whether developers under the new program would have enough tax liability to tap the maximum value of the credits in 2010.
If tax liability is a problem, developers can invite entities who need the tax credits to become partners in the projects, according to Sarah Hofmann, the deputy commissioner for the Department of Public Service.
‘There will be some people who don’t use the tax liability,’ Hofmann said, ‘but it’s going to be a minority.’
Grants would not be available to developers until after Sept. 1, and projects must be up and running in order for the tax credits to be issued, according to Hofmann.
The grants will only be issued to developers that have already been approved under the tax credit program. No one else can apply, according to Tom Evslin, a former member of the Douglas administration who sits on the Clean Energy Development Fund board. This is the first year that the state has capped the number of entities that can receive tax credits through the fund. The tax credits were given to developers on a first-come, first- serve basis rather than on the merits of the proposals, according to Evslin.
Blittersdorf and Robert Dostis, an executive with Green Mountain Power Corp., were both on the board at the time the system for approving applications was developed. The Legislature put a cap on the amount of tax credit funding the fund could issue and the program was quickly oversubscribed . Blittersdorf resigned shortly before the credits were awarded.
Dostis, who remained on the board, said he has recused himself from decisions regarding the tax credits. Green Mountain Power’s three projects were under construction before the cap was put in place, he said.
Blittersdorf received tax credits for about 60 of the 90 projects approved for tax credits. Most of these are lease-back projects to well-heeled homeowners.
Each solar system costs about $30,000 to install; the tax credits help to offset the expense, according to Savage.
Evslin said Shumlin’s proposal is ‘bad policy.’
‘I never liked the first-come, first-serve policy; we should have picked the best projects,’ Evslin said.
The following information is from the Vermont Tax Department.
In tax year 2008, 13 taxpayers claimed the VT solar credit, and only 6 percent was carried forward. The average value that year was about $20,000.
2 were under $500
10 were between $100 and $10,000
1 was between $100,000 and $500,000
In tax year 2009, 15 taxpayers claimed the VT solar credit, and only 1.5 percent was carried forward. The average value that year increased to $62,000.
None were under $1,000
8 were between $1,000 and $10,000
6 were between $10,000 and $100,000
1 was between $100,000 and $1 million
Anne Galloway is editor of vtdigger.org
Photo: Edgecomb in Warren.