| 47 | | - | SECTION 1. The legislature finds that Act 97, Session Laws of Hawaii 2015, requires electric utilities in the State to achieve a one hundred per cent renewable portfolio standard by December 31, 2045, with the intent to transition the State away from imported fossil fuels and toward renewable local resources that provide a secure source of affordable energy. The successful deployment of large-scale renewable energy projects is integral to the achievement of this goal. The legislature further finds that, in late 2021, the city and county of Honolulu real property assessment division unilaterally changed their tax treatment of some parcels of land on which renewable energy projects are sited from agriculture to industrial for tax purposes. This change resulted in a drastic increase in property taxes for affected projects, resulting in some renewable energy project operators receiving bills that were hundreds of times higher than their prior bills. An increase of this scale is not one that could have been reasonably anticipated and factored into contract negotiations or other business considerations when the affected projects were under development. The legislature additionally finds that increases in real property taxes for renewable energy projects would significantly impact the viability of existing and future renewable energy projects, and consequently the State's progress toward meeting its one hundred per cent renewable energy goal. Power purchase agreements that have already been executed would require renegotiations with the electric utility and renewed approvals by the public utilities commission, neither of which are guaranteed. Increased costs of renewable energy projects would likely be borne by ratepayers, with low- and middle-income residents bearing a substantial energy cost burden. In response to the tax increase, the Honolulu city council adopted Ordinance 21-32 in 2021 to create a partial exemption for renewable energy projects. While this newly enacted ordinance provides some relief, there is still a large increase in the tax burden for these projects. In addition, the change in tax treatment could have a chilling effect on the future development and financing of renewable energy in all counties in the State due to the increased uncertainty and perception of risk resulting from possible unanticipated tax increases. The legislature finds that, under section 8-10.27 of the Revised Ordinances of Honolulu, the city and county of Honolulu provides an exemption from real property taxes for real property that is owned or leased and actually used by a public service company. This means that energy projects owned by an electric utility both renewable energy and fossil fuel powered facilities are exempt from real property taxes, while independent power producers are not. The purpose of this Act is to provide more certainty for renewable energy developers and ratepayers, while mitigating any potential revenue loss to the counties, by allowing the counties to establish an opt-in program by ordinance that allows an annual payment in lieu of real property taxes on the land or improvements thereon that are actively used to produce or store renewable energy that is sold to an electric utility. SECTION 2. Chapter 46, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows: "§46- Renewable energy projects; in-lieu payment. A county may enact an ordinance, which it may amend from time to time, to establish an opt-in by the property or taxpayer program that allows an annual payment in lieu of real property taxes on land or improvements thereon that are actively used to produce or store renewable energy that is sold under a contract to an electric utility; provided that: (1) The ordinance also exempts renewable energy projects from one hundred per cent of real property taxes; (2) The payment may be determined by the county on a per megawatt nameplate AC capacity basis; and (3) Any renewable energy project that sells electricity to a not-for-profit utility shall be exempt from the payment." SECTION 3. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable. SECTION 4. New statutory material is underscored. SECTION 5. This Act shall take effect on July 1, 2100. |
|---|
| 47 | + | SECTION 1. The legislature finds that Act 97, Session Laws of Hawaii 2015, requires electric utilities in the State to achieve a one hundred per cent renewable portfolio standard by December 31, 2045, with the intent to transition the State away from imported fossil fuels and toward renewable local resources that provide a secure source of affordable energy. The successful deployment of large-scale renewable energy projects is integral to the achievement of this goal. The legislature further finds that, in late 2021, the city and county of Honolulu real property assessment division unilaterally changed their tax treatment of some parcels of land on which renewable energy projects are sited from agriculture to industrial for tax purposes. This change resulted in a drastic increase in property taxes for affected projects, resulting in some renewable energy project operators receiving bills that were hundreds of times higher than their prior bills. An increase of this scale is not one that could have been reasonably anticipated and factored into contract negotiations or other business considerations when the affected projects were under development. The legislature additionally finds that increases in real property taxes for renewable energy projects would significantly impact the viability of existing and future renewable energy projects and consequently the State's progress toward meeting its one hundred per cent renewable energy goal. Power purchase agreements that have already been executed would require renegotiations with the utility and renewed approvals by the public utilities commission, neither of which are guaranteed. Increased costs of renewable energy projects would likely be borne by ratepayers, with low- and middle-income residents bearing a substantial energy cost burden. In response to the tax increase, the Honolulu city council adopted Ordinance 21-32 in 2021 to create a partial exemption for renewable energy projects. While this newly enacted ordinance provides some relief, there is still a large increase in the tax burden for these projects. In addition, this action could have a chilling effect on the future development and financing of renewable energy in all counties in the State due to the increased uncertainty and perception of risk resulting from these events. The legislature finds that, under section 8-10.27 of the Revised Ordinances of Honolulu, the city and county of Honolulu provides an exemption from real property taxes for real property that is owned or leased and actually used by a public service company. This means that energy projects owned by the electric utility both renewable energy and fossil fuel powered facilities are exempt from real property taxes, while independent power producers are not. The purpose of this Act is to provide more certainty for renewable energy developers and ratepayers and ensure that these projects are allowed the same tax exemptions that are already provided to utility-owned energy projects under county law, while also mitigating any potential revenue loss for the county, by authorizing a county to impose an annual in-lieu fee on land or improvements on land that are actively used to produce or store renewable energy that is sold to an electric utility, under certain conditions. SECTION 2. Chapter 46, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows: "§46- Renewable energy projects; in-lieu fees. A county may impose an annual in-lieu fee on land or improvements on land that are actively used to produce or store renewable energy that is sold to an electric utility; provided that: (1) The county, by ordinance, exempts renewable energy projects from one hundred per cent of real property taxes; (2) The fee shall be determined by the county on a per megawatt nameplate AC capacity basis; (3) Any renewable energy project that sells electricity to a not-for-profit utility shall be exempt from the fee; and (4) The county shall not impose the fee or increase existing fees for a renewable energy project to which the county has previously granted an application for a real property tax exemption on the land underlying and improvements relating to the renewable energy project." SECTION 3. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable. SECTION 4. New statutory material is underscored. SECTION 5. This Act shall take effect on July 1, 2100. |
|---|