Council Votes Unanimously to Give Shortened Tax Abatement to Solar Project

Tuesday, June 21, 2016, 10:22 pm
By: 
Alice Dreger

Above: image of the solar array plan for MSU from the abatement application

East Lansing’s City Council voted unanimously tonight to give a tax abatement to a company seeking to build a large solar array on MSU’s campus—but the abatement was not nearly as big as the company and two councilmembers were hoping. As ELi’s Casandra Eriksen reported yesterday, Inovateus Solar wants to use a series of MSU parking lots to install solar panels atop carports. The plan is to then sell the energy produced to MSU.

By reducing the time-span of the abatement from the proposed 25-years to only 10-years, Council also significantly reduced the amount of the abatement. If the project is built, East Lansing will now realize about $1.9 million more in tax revenue than under the original abatement proposal. Whether the project is now built remains to be seen.

Councilmember Shanna Draheim fears the project would not be built without the larger abatement. While she voted for the 10-year plan, she made clear she would have preferred supporting the original proposal.

Draheim told her colleagues that she “can’t think of something that is a bigger definition of ‘win-win.’” She noted the project would help move MSU away from coal-based energy, creating a cleaner environment for East Lansing, and would result in taxes that would not accrue to the City if the project were never built. [Editor's note/update: MSU stopped burning coal in April 2016.]

Councilmember Susan Woods echoed Draheim’s comments and added that providing the abatement would show that East Lansing is a partner with MSU. She said she thought “this would be a wonderful way to increase our partnership in a very productive and environmentally good project.”

Representing Inovateus Solar, Peter Rienks of South Bend, Indiana, came to the podium to tell Council that if they gave the company what it was asking, it would also build solar arrays atop various City-owned buildings, would assist in some fashion with the solar array planned for Burcham Park, and would host an annual solar conference in East Lansing.

But when Draheim tried to add these incentives to the abatement agreements, City Attorney Tom Yeadon warned against doing so. He said it could appear to be a quid-pro-quo that could cause legal problems given that East Lansing’s abatement would reduce the revenue going to other taxing entities, including Lansing Community College (LCC), East Lansing Public Schools (ELPS), Ingham County, the Lansing airport, and the East Lansing Public Library (ELPL).

Mayor Mark Meadows specifically named those other entities as part of his concern when he proposed knocking back the abatement from 25 years to only 10 years. He told Council “abatements do not just involve the city.” He said that if there were no abatement and the project went forward, the East Lansing school district would see $689,000 in tax revenue increases over the proposed abatement period, “a not inconsequential amount.”

Meadows suggested that MSU does not really pay its fair share of the costs East Lansing taxpayers must expend to provide City services to MSU’s people and property—including emergency services. He referred to “uncompensated costs associated with having a major university” within our City. He said the City taxing this project was a reasonable way for MSU to essentially help pay into East Lansing’s coffers.

Meadows said he wanted to make it clear that he supports reducing our environmental footprint and that, if that were the only issue, he would be completely in favor of the longer, more generous abatement. But, he said, East Lansing’s Council adopted a policy of limiting abatements of this kind to ten years, and he did not see a reason for making an exception here. He said he did not see a reason for the people of East Lansing to effectively commit to investing $1.9 million in this project.

Meadows agreed with Draheim’s description of the taxes as “found money” because it is money that would not accrue to the City without the project being built. He also noted that because it is on MSU property, no City staff time will be spent overseeing construction or maintenance issues. But, he said, he would not support the project unless the abatement was for only 10 years and not 25.

Mayor Pro Tem Ruth Beier said President Lou Anna Simon had met with her and Meadows and that “she recognized that East Lansing has a revenue problem.” Beier said Simon was “sympathetic” to the view that East Lansing cannot afford to give more developers more tax incentives. She said that the City was “making headway” in terms of staunching incentives to developers and she wanted the same to be true in this case.

Councilmember Erik Altmann said he thought that if the lowered abatement meant this project falls through, “there may be a better, more efficient project to come along” since MSU is committed to generating more power from renewable sources.

The way the abatement was structured for legal purposes gives 100% abatement for three of the parking lots at issue and 0% for the others, effectively coming to an 82.2% abatement for 10 years for the whole project. The agreements require the developer to build on all of the lots or else lose the abatement on those named in the abatement agreement.

Ultimately Council voted 5-0 in favor of the 10-year plan of an effective abatement of 82.2%.