A Bad Option: Opting Out of RPTL Section 487

By Don Hebbard

New York State Real Property Tax Law [RPTL] Section 487, adopted in 1977, provides a 15-year real property taxation exemption for solar, wind, and farm waste energy systems. These energy generating systems are considered to be capital improvements to the real property, and received this exemption from taxation to encourage their construction. The Franklin Town Board has passed Local Law 2-2016, opting out of Section 487. This allows all residential, municipal, and commercial systems to be added to the real property tax base.

This idea to remove the NYS tax exemption was first proposed to the Delaware County Board of Supervisors. Every municipal entity (county, town, village) and all school districts will have to make a decision to continue the NYS exemption, or choose to “opt out.” For forty years, NYS has been offering incentives for residences, small businesses, schools, and municipalities to install solar and wind systems to reduce their energy bills, and often as a personal action to reduce greenhouse gas creation from burning fossil fuels.

What changed?

New York State adopted the “Reforming the Energy Vision” [REV] Plan in 2015. You can look it up on the internet. This plan sets goals for increasing renewable energy production from sources such as wind, solar, hydro, geothermal, and biomass, rather than increasing energy generation from fossil fuels. It provides incentives to companies for a “distributed” energy grid composed of multiple smaller generating facilities, rather than mega coal, nuclear, or gas-fired generators.

Energy companies began approaching landowners about construction of small solar electric generation systems in Delaware County. These would be commercial systems up to 20 acres in size. The commercial nature of these systems is what triggered a greed reflex in the Delaware County Board of Supervisors. These systems are small when compared to a coal, oil, or natural gas fired mega system, but are commercial operations, so the Board of Supervisors thought that commercial operations should be taxed. However, a twenty-acre solar farm must be installed in a location where the sun exposure is correct and electricity produced can be connected to the national grid. There are very few areas in Delaware County, fewer still in Franklin, that have the proper exposure, an electrical substation, and the local power lines capable to transmit the generated power to the grid.

What about tax breaks?

Locally many land parcels receive a tax break with the agricultural exemption for farm land in production and farm buildings, as well as forestry programs. There are numerous subsidies provided to agriculture in the U.S. Farm Bill. Ethanol production from corn used in gasoline is probably the poster child for agricultural subsidies. In the 13775 zip code alone, sixty-five local farms received over $2.5 million in subsidies from 1995 to 2006. The fossil fuel energy industry in general enjoys a multitude of tax breaks and subsidies. These incentives are written into state and federal law, and funded by tax dollars, as part of public policy to encourage low cost food, maintain green spaces, and provide citizens with low cost energy options. These are commercial enterprises, providing food and fuel for a profit, and receiving tax breaks and subsidies.

Why is “Opt Out” a bad option?

By removing the tax exemption incentive, Franklin has driven any company planning to develop a solar farm in Franklin to look in other areas that allow the exemption. Thus Franklin has lost the tax generated from a high industrial assessment, like Amphenol in Sidney, versus a lower assessment like agricultural or vacant rural land. This has already happened with one potential solar site on Bissel Road in Franklin. Once informed about the Opt Out, the solar company was not interested, and will look at sites in other areas. Franklin has lost any tax dollars that would have been generated and the landowner has lost income.

The Opt Out law is moving in the opposite direction from state and national energy policy. It slows the adoption of renewable energies. This also effectively removes part of the incentives for residential and business owners to install private small net renewable systems. Is our Town Board more knowledgeable in energy policy than state or national politicians?

Opt Out will create inequalities and confusion between municipalities and school districts taxing real property. Some will tax, some won’t tax. Many properties lie in multiple taxing jurisdictions. It will also cause inequality in real estate taxation when taxing some commercial operations, but allowing tax exemptions on other commercial enterprises.

Why should some commercial enterprises be subsidized and given tax breaks in Franklin and not others? Why agriculture and fossil fuel energy, but not renewable energy? I do not have an answer to those questions, and perhaps governments are so mired in the mud of partisan politics there are no answers.

It has been stated by the Franklin Board that we can always “opt back in” by removing Local Law 2-2016. Now would be a good time to do that.