News

On April 3, 2021, Governor Andrew Cuomo signed into law the State Budget for Fiscal Year 2021 (the “Budget”).^[1]  The Budget includes two significant amendments to the provisions of the Real Property Tax Law (“RPTL”) governing taxation of solar, wind, or other renewable energy systems (“Energy Systems”), which primarily impact: (1) the substance of a developer’s pre-construction notice to taxing jurisdictions; (2) the taxing jurisdiction’s options with respect to providing a developer notice of a Payment In Lieu Of Taxes Agreement (“PILOT Agreement”);  and (3) the appraisal methodology taxing jurisdictions must use in valuing Energy Systems for assessment purposes. 

Changes to Pre-Construction Notice Requirements

Under RPTL § 487(8)(b), a developer is required to provide local taxing jurisdictions notice of its intent to construct an Energy System (a “Pre-Construction Notice”).^[2]  Prior to the amendments to RPTL § 487(9), if the taxing jurisdiction required a PILOT Agreement, the taxing jurisdiction must then notify the developer within 60 days of its receipt of such notification (a “PILOT Notice”).^[3]  In Laertes Solar, LLC v. Assessor of Town of Harford, the Appellate Division, Third Department held that a taxing jurisdiction’s failure to strictly adhere to the statutory procedures for a PILOT Notice was fatal, resulting in a windfall for the developer.^[4]

In light of Laertes, the Budget amendments to RPTL § 487 were designed to even the playing field for taxing jurisdictions. Under RPTL 487, as amended, the Pre-Construction Notice must now include certain references to RPTL §487(9), the effect of a taxing jurisdiction’s failure to respond within the required timeframe, and must be sent via hard copy letter to the highest ranking official of the taxing jurisdiction.

The amendment to RPTL § 487(9) also now provides an additional means of a PILOT Notice by permitting a taxing jurisdiction to adopt a local law or resolution announcing its ongoing intent to enter into PILOT Agreements for Energy Systems.^[5]  To be effective, such local law or resolution must be adopted prior to the end of a specified notification period.  Given the requirement under RPTL § 487(8)(a) that any “opt-out” law must be filed with the New York State Department of Tax and Finance (“DTF”) and the New York State Energy and Research Authority (“NYSERDA”), it would be prudent to file such local law or resolution with DTF and NYSERDA.

DTF/NYSERDA PILOT Calculator

The Budget also created a new Section 575-b of the RPTL governing the method of assessment for Energy Systems. Important to understanding this new section is RPTL § 487(9)(a), which provides that the amount of any payments made under a PILOT Agreement may not exceed the amount that would otherwise be payable in taxes absent the RPTL § 487 exemption. After years of inconsistent and wide-ranging PILOT payments, the State has sought to ameliorate these inconsistencies by requiring certain methods for assessing Energy Systems, and by extension, calculation of PILOT payments.  The Budget requires that the assessed value for Energy Systems equal to or greater than 1 MW^[6] be determined by a discounted cash flow approach. This approach must consider an appraisal model developed by DTF, in consultation with NYSERDA.^[7]  Additionally, DTF must annually publish a discount rate for Energy Systems, in order to keep assessments up to date with the market.^[8]  Finally, DTF is required to consult with the New York State Assessors Association in the development of the appraisal model and discount rate,^[9] and is authorized to request such information it “may reasonably require for the development and maintenance of [the] appraisal model and discount rate.”^[10]  Accordingly, Energy System developers may be required to furnish additional information to DTF relative to the appraisal model and discount rate as part of their annual reports required by RPTL § 575-a.

Currently, NYSERDA has provided an appraisal model on its website (the “NYSERDA Calculator”),^[11] together with guidance for taxing jurisdictions and developers regarding PILOT Agreements and amounts of PILOTS.^[12] NYSERDA’s guidance indicates that PILOT rates should be negotiable between 1% and 3% of the compensation solar developers receive for the electricity their projects generate.^[13] By way of example, the following table displays sample PILOT rates generated by the model for a 2-MW AC community solar project in each utility service territory. The “Low” and “High” rates represent 1% and 3% of the compensation solar developers receive for the electricity their projects generate. NYSERDA’s guidance suggests that such projects should be able to afford rates within this range.

Given this update, there is a significant possibility that NYSERA and DTF will further develop the NYSERDA Calculator into the appraisal model required under RPTL § 575-b.  In contemplation thereof, Energy System developers and taxing jurisdictions may want to use the calculator as the basis for any PILOT negotiations moving forward. 

Effect of PILOT Expiration

Under RPTL § 487(2), the term of the exemption is for 15 years and RPTL § 487(9)(c) provides for a maximum PILOT term of 15 years, which coincides with the length of the exemption.   However, the Budget includes a new RPTL § 487(10) which now permits taxing jurisdictions to adopt a local law or resolution making the RPTL § 487 exemption permanent.  Furthermore, under RPTL § 487(10), the owner of an Energy System shall not be required to enter into any PILOT Agreement if (1) the Energy System is installed on property owned or controlled by New York State or any of its, departments, agencies or state authorities (collectively, the “State”), or (2) the State enters into a written agreement with such owner to purchase the energy produced by such Energy System or the environmental credits or attributes created by virtue of such Energy System’s operation. This facet of RPTL will take on particular importance as the State rolls out its “Build-Ready” program to install large-scale renewable energy projects on property likely to be controlled by the State.^[14]

If you are a renewable energy business, municipality, or other taxing jurisdiction seeking assistance with renewable energy system financing, PILOT agreements, or related issues, please contact us at TBakner@woh.com or DHubbell@woh.com or call 518-487-7600 and ask for the Land Use and Environmental Practice Group.

[1] See Governor Cuomo Signs FY 2021 Budget, Press Release, Governor Andrew M. Cuomo, April 3, 2020, available at https://www.governor.ny.gov/news/governor-cuomo-signs-fy-2021-budget .
[2] RPTL § 487(8)(b).
[3] RPTL § 487(9)(a).
[4] See, e.g., Laertes Solar, LLC v. Assessor of Town of Harford, 182 A.D.3d 826, 829, lv. to appeal dismissed in part, denied in part sub nom. Laertes Solar, LLC v. Assessor of the Town of Harford, 35 N.Y.3d 1119, 158 N.E.3d 893 (2020).
[5] RPTL § 487(9)(b).
[6] The legislation specifies that it shall only apply to solar or wind energy systems with a “nameplate capacity equal to or greater than one megawatt.” RPTL § 575-B(3) (emphasis added).
[7] RPTL § 575-b(1)(a) requires DTF to adopt this model within 180 days of the law becoming effective, which is October 18, 2021.
[8] RPTL § 575-b(1)(b).  Under the law, parties may request notice of such publication and DTF is required to provide at least 60 days for public comment (and consider any comments so submitted) prior to publishing such final discount rates.
[9] RPTL § 575-b(1)(c).
[10] RPTL § 575-b(2).
[11] https://www.nyserda.ny.gov/-/media/Files/Programs/NYSun/PILOT-Calculator.xlsm.
[12] https://www.nyserda.ny.gov/SolarGuidebook.
[13] Id. at 131.
[14]https://www.nyserda.ny.gov/All-Programs/Programs/Clean-Energy-Standard/Landowners-and-Local-Governments/Build-Ready-Program/Build-Ready-Project-Sites.