ALBION — Signing a lease with a solar company may seem like an environmentally friendly act and a way to make some easy money, but landowners should think twice before signing on the dotted line.
That was the message conveyed to about 30 individuals at a meeting last week at the Orleans County Cornell Cooperative Extension, sponsored by the New York State Farm Bureau.
Amanda Krenning-Muoio, field representative for the Farm Bureau, said the meeting was arranged in response to concern by several farmers who had been approached by solar companies that want to lease portions of their land.
“We wanted to get the facts, especially the tax implications,” Krenning-Muoio said.
One of the speakers was Mike Saviola from the New York State Department of Agriculture and Markets, who has dealt with projects from Syracuse west, involving land use for wind farms, gas pipelines and solar energy projects.
“Do you receive an agricultural assessment on your property?” he asked landowners in the room.
Those who do were advised they could be charged a conversion penalty equal to five times the tax savings they may have received, if it were determined that leasing the land constituted taking it out of active agricultural production.
Also, if more than 2.5 acres of land in a state-certified agricultural district is taken out of production, the landowner must complete an environmental assessment form and notify his assessor within 90 days.
Solar energy systems are considered real property and, as such, are taxable, Saviola said. Towns may allow a 15-year exemption from real property taxes, but most leases with solar companies are for 20 years (and usually renewable up to 40 years), so what happens then?
The towns of Gaines and Yates have already opted out of the 15-year exemption, Saviola observed. So has the Town of Somerset.
From the Buffalo-based Lippes Mathias Wexler Friedman law firm, Dennis Vacco, partner, and Joseph Heins, senior associate, presented a list of important considerations for land owners.
“Keep in mind, the lease is created by lawyers who represent the solar company and have their interests at heart,” Vacco said.
The attorneys said land owners considering a solar deal should:
• Understand when and how much you will be paid;
• Make sure the contract specifically identifies the acres to be leased;
• Know how an existing mortgage on the property would be affected by a solar lease;
• Understand how property tax liability will be affected and who will pay for any increase;
• Check for land use conversion penalties;
• Make sure the contract defines maintenance, repair and solar panel cleaning responsibilities;
• Know what happens to equipment when the lease ends or if the solar company goes bankrupt;
• Think about how agriculture operations will be affected (reduced farm land, drainage issues, road and access issues and obstructions for farm equipment).
These issues are facing rural farmers due to Governor Andrew Cuomo’s mandate for one half of electrical generation to be from renewable sources by 2030. One energy company already has 8,000 to 9,000 acres under lease in the town of Yates, and to achieve the Governor’s goal, the state would need 1,400 of those projects, Vacco said.
Another concern is the state’s adoption of Article X of the Public Service Law, which authorizes the Public Service Commission to override local law when regulating major electrical generating facilities of 25 megawatts or more.
Dan Compitello, a representative of Cypress Creek Renewables, answered questions about his company’s due diligence process, in which landowners are paid a flat fee of $250 for committing their land for six months.
Vacco said the lease also specifies the six months can be extended up to two years. Several Somerset residents have already been contacted by Cypress Creek.
Compitello also responded to concerns of what would happen if the company went broke. He said it is bonded and solar panels are completely recyclable and valuable, so it would be in the company’s best interest to reclaim them.
Barry Flansburg of Albion, an assessor for four different towns in Orleans and Genesee counties, provided further information on the effect that solar installations could have on property assessments.
“It is the responsibility of each individual assessor to make the determination if a landowner is an actual farmer or rents land out for agricultural purposes,” Flansburg said. “If you rent the land out, that definitely is a conversion. But say you are a farmer and the first part of any energy produced goes to the operation of the farm, then it’s no conversion, and no penalty. It’s all in the terminology and how you negotiate it.”
Vacco reminded the audience any energy credits go to the developer, not the property owner.
He stressed another important consideration is how a lease might affect one’s estate, a trust or long-term care planning. Overall, he said, no one should sign a 30-page lease without the advice of an attorney.