New Haven wrestles with tax impact of power project
NEW HAVEN — Some residents and elected officials are looking for answers to some basic questions from Anbaric Transmission about the company’s proposal to build a converter station at the New Haven VELCO substation to connect a 400 megawatt power line to the New England electric power grid.
The need for answers is particularly acute in a town that, in the words of a resident at an informational meeting last week, increasingly feels “like a dumping ground” for energy projects.
One of the most important questions facing New Haven residents is, how would this project benefit the town’s tax base?
Wakefield, Mass.-based Anbaric Transmission, an independent company that specializes in high-voltage energy-transmission projects, is proposing to lay 60 miles of cable from upstate New York, under Lake Champlain, and into New Haven along existing roadways, all underground. The power line would come above ground at the proposed converter station, which would be roughly the size of a football field and sited on a 5-acre property just west of the VELCO substation.
Anbaric proposes to lay cable capable of carrying 800 MW, but to build a converter station to handle just 400 MW. On Aug. 24, at the first public meeting at which Anbaric made its proposal to New Haven residents, Anbaric said that to upgrade the converter station to transmit 800 MW would require a new permitting process at some future point.
Anbaric calls the project the Vermont Green Line (VGL). As currently proposed, VGL would deliver electricity to power customers in Massachusetts, Connecticut and Rhode Island. Anbaric has submitted a bid to those states but won’t know if its proposal is accepted until sometime in the spring or summer of 2016.
ANTICIPATED TAX BENEFIT
If the Anbaric project proceeds as planned, VGL would be built by 2020. Because there are many variables that could change by then, estimates of a tax benefit for New Haven are based on numbers as they exist this year.
Anbaric estimates the value of the converter station at $100 million–$150 million, so the following tax calculation uses an estimated value of $130 million for the converter station. The 2015 New Haven grand list is $262,641,050; and the 2015 New Haven town budget (education excluded) is $984,937.
At an estimated $130 million, the Anbaric Transmission converter station would have increased the 2015 grand list by approximately 50 percent.
Working from this year’s New Haven grand list and municipal budget, the Vermont Green Line project would likely have reduced this year’s municipal tax rate by a third from $0.3750 per $100 in assessed value to $0.2508. This change in tax rate on a home valued at $200,000 would have reduced New Haven municipal property taxes from $750 to $502.
While some kinds of energy-related properties — some hydropower stations, for example — can be assessed by revenue rather than by property value, electrical transmission and distribution properties tend to be assessed on the value of the property, which is then depreciated over time using a transparent methodology, according to Doug Lay of the Property Valuation and Review division of the Vermont Department of Taxes. Ron Behrns, director of the Finance and Economics Division of the Public Service Department, also confirmed that valuation of a power transmission project tends to be based on the value of the physical plant itself.
At present, there are no special programs or legislation at the state level that would change the way the state assesses VGL or similar projects, according to Behrns.
Further discussion with state tax experts also suggested that a new $130 million property would have little effect on a municipality’s overall state education tax rate because that new property would be added to the state grand list, not the local grand list.
BURNED BY SOLAR?
At Anbaric Transmission’s Aug. 24 public meeting, many New Haven residents expressed outrage that other energy projects had not delivered revenues to the town as expected. Solar projects, in particular, came into the line of fire. And this sense that energy-related projects promise more than they deliver and that ongoing changes at the state level leave municipalities unable to truly assess what they might be signing on for are a part of residents’ wariness in their evaluation of the VGL project.
State officials contacted by the Independent were careful to point out that a different set of regulations and concerns govern projects that generate renewable energy — such as solar arrays — than apply to projects that transmit energy, such as VGL.
But laws governing how solar projects are assessed for municipal property taxes did indeed change in 2015, said Lay. He explained that legislators worked in 2014 to modify earlier laws in ways that would help both solar energy generators and municipalities. The state wants to encourage solar energy generation to help meet new renewable energy goals; and municipalities want a dependable property tax base and an ability to assess new projects from an informed perspective. The changes legislated in 2014, Lay stressed, were to achieve greater certainty for both sides, as the original legislation left room for uncertainties that had potential impacts on both solar advocates and on municipalities.
Two changes that went into effect Jan. 1, 2015, seem most relevant to municipalities. Previously, a solar installation that supplied energy to a single home and generated less than 10 kilowatts (kW) was exempt from municipal property taxes. Starting in 2015, that limit was raised to installations that generated less than 50 kW. More significant were changes in the way that installations generating 50 kW and above were assessed. These changes tried to address both solar-generation and municipality concerns — at times an uneasy balance. Starting in 2015, solar installations that generate 50 kW or more were reappraised at 70 percent of previous value, but that appraisal is now locked into a town’s grand list for the next 25 years or for the life of the installation (solar installations are estimated to have a 25-year project life).
Towns across Vermont did indeed suddenly lose 30 percent of the previous value of those properties from their grand lists. But towns also gained the certainty of having the 2015 assessed value locked into their grand lists for the next 20-25 years (depending on the life of the project).
Solar installations greater than 50 kW pay municipal property taxes (unless a town votes to exempt them) and also pay what’s called a uniform capacity tax, or UCT, of $4 per kilowatt to the state of Vermont. The uniform capacity tax goes into the state education fund, said Lay.
Lay noted that the Tax Department’s Property Valuation and Review division uses a different methodology for the UCT than for municipal property taxes when assessing solar. The UCT is based on capacity (again, $4 per kilowatt); the municipal property tax is based on actual production, or how many kilowatt hours an installation makes or sells.
FEELING LIKE DAVID VS. GOLIATH
New Haven, a town with a population under 1,800, is evaluating what it stands to lose or gain in Anbaric’s VGL proposal. While Anbaric presented itself as a small company of around 10 employees at the Aug. 24 meeting in New Haven, it is backed by investor National Grid, a multinational corporation based in Great Britain. And, as confirmed by Andy Perchlik of the Public Service Department’s Clean Energy Fund, there’s no comparable project in Vermont currently completed and operating that New Haven can look to and find out how promised property tax benefits have finally shaken down and what kinds of negotiations a town used to derive the most benefits. Anbar competitor TDI New England has a similar project under way (called the New England Clean Power Link) that would bring power into the New England power grid at Ludlow, but it is still in the planning stages.
But two recent events demonstrate that towns and local organizations can successfully negotiate with larger energy-related entities.
This past summer, Anbaric competitor TDI reached an agreement with the Conservation Law Foundation that substantially increased payments TDI would make to Lake Champlain cleanup, from an originally proposed $162 million to $283.5 million over the life of the New England Clean Power Link project.
Also, in what’s been described as a “David and Goliath” standoff, the Windham County town of Rockingham just won its tax assessment case against TransCanada, which operates a hydro-electric dam in Bellows Falls. Rockingham and state assessors maintained that the dam was worth over $108 million; TransCanada put the value at $67 million. A Vermont superior court judge not only sided with the town but increased the dam’s assessed value by $385,000.
Reporter Gaen Murphree is at [email protected].
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