On July 17, 2009, Ohio House Bill 1, the state budget bill, was signed into law. The legislation allows Ohio municipalities and townships to assist property owners within their communities in financing solar photovoltaic and solar thermal systems, including roof-top and ground-mounted solar arrays and solar water heaters. A special financing district called a “special improvement district” or “SID” must be created within each municipality or township to facilitate the financing. The authorization for solar energy projects contained in Ohio House Bill 1 takes effect on October 15, 2009.
Creating a Solar Energy SID
In order to implement a solar energy program, a municipality or township must create a solar energy SID to facilitate the financing. SIDs are special financing districts established under O.R.C. Chapter 1710 for the purpose of implementing locally-controlled improvement projects. Establishing a solar energy SID is a simple process:
- Get the Word Out. The municipality or township communicates the availability of this new solar energy program to the property owners within their community.
- Circulate SID Petition. Property owners that want to participate will need to sign a “petition.” The municipality or township will develop a simple “form” petition to be filled out by participating property owners.
- Property Owners Choose Solar Energy Projects. The petition contains an “initial plan” that outlines the solar energy projects the participating property owners want to install on their homes and property. The municipality or township may prequalify a list of solar energy manufacturers and installers.
- Determine Assessment Amount. The petition acts as a request that the municipality or township levy a special assessment on the participating property owners’ real property to pay the costs of their solar energy project. The municipality or township will need to determine how much each solar energy project will cost in order to set the assessment amounts in the petition. See “Project Financing” below.
- Approve Solar Energy SID. The municipality or township must, by ordinance or resolution, approve the SID petition and levy the assessment specified in the petition.
- What Else? The municipality or township will cooperate with the SID board of directors to carry out the solar energy program. The municipality or township may be involved in choosing solar energy manufacturers and installers and collecting the special assessment.
The entire process can be completed in as little as 60 days.
A solar energy SID is unlike a traditional SID in that the property included within the SID can be from different parts of a municipality or township and does not have to be contiguous. Also, unlike a traditional SID, a solar energy SID requires the consent of 100 percent of the property owners who will be assessed for the costs of their solar energy projects. A property owner who does not want to be involved in a solar energy program cannot be compelled to join a solar energy SID.
Financing a Solar Energy Project
Municipalities and townships have several options at their disposal to finance solar energy projects. A municipality or township, in cooperation with a solar energy SID, can levy a special assessment on participating property owners’ real property for up to 25 years. This method allows each participating property owner the ability to finance a new solar photovoltaic or solar thermal system in installments. Financing and administrative costs of the solar energy SID, if any, can be included within the assessment paid for by the participating property owners.
Assessment revenue may be used to pay the debt service on “special obligation” revenue bonds, the proceeds of which may be used to pay for solar energy projects and solar energy program costs. Alternatively, “general obligation” bonds may be available for financing solar energy projects.
Ohio House Bill 1 also enacted changes allowing Ohio municipalities to establish revolving loan programs for residential solar installations. Such loan programs may be funded with assessment revenues, bond proceeds or other sources, such as federal stimulus funding.
Federal Investment Tax Credits are Available for Solar Energy Projects
Participating property owners who own a special energy improvement project may be eligible for a federal investment tax credit equal to 30 percent of the eligible costs of their project. Alternatively, for projects placed in service in 2009 or 2010, participating property owners may elect a 30 percent grant equal to and in lieu of the investment tax credit.
For a credit or grant to apply, solar energy SIDs, municipalities and townships need to structure their solar energy programs so that each solar energy project is transferred to the participating property owner after a special assessment is levied but before the solar energy project is “placed in service.” The SID statute contains flexibility that allows solar energy programs to include federal investment tax credits and grants for participating property owners.
Solar Energy Programs May Be An Attractive Option for Municipalities and Townships
Solar energy programs carry significant, measurable environmental benefits and may be attractive to Ohio municipalities and townships wishing to attract green businesses or green development or to provide a diverse set of energy options within their communities. A solar energy SID can be created at little or no cost to a municipality or township, and community participants may see a significant decrease in their long-term overall energy costs. For a more detailed explanation of this new financing tool, please see Bricker & Eckler’s diagram outlining the statutory authorization for solar energy programs.