Abstract
California exempts most solar energy systems from paying property tax. Passed by the electorate in 1980, Proposition 7 excludes solar energy property improvements from the definition of new construction for property reassessment purposes. Under the umbrella of the Global Warming Solutions Act of 2006, in 2011 the legislature expanded California’s Renewable Portfolio Standard (RPS) to 33 percent of all retail electricity sales. The combination of the RPS, California’s rich solar resources, and decreasing development cost of solar photovoltaic (PV) technologiesapplies development pressure on local communities. Development approval for all sizes of solar PV systems rests in the hands of cities and counties, and at 8 to 10 acres of land per megawatt, counties are concerned that the RPS will displace valuable land resources. In response to solar PV development requests and the Proposition 7 new construction exclusion, some counties are imposing public fees on solar PV projects. County fees, which are intended to compensate counties for solar PV impacts, may slow investment in solar PV and the state’s RPS goal. How much property tax goes unrealized under Proposition 7? In this thesis, I estimate the 20 year present value ofthe amount of unrealized property tax revenue in Fresno County. Using a list of all assessor parcel numbers (APNs) proposed for solar PV development in Fresno County, I compare three taxing scenarios with the property taxes on the County’s 2010-2011 Tax Roll. The first scenario is a base scenario and assumes that because of the new construction exclusion for solar PV, solar PV improvements will not increase property taxes. The second scenario assumes that the new construction exclusion does not exist and that the county will tax solar PV improvements at the Proposition 13 rate of 1 percent. The third scenario assumes that the new construction exclusion does apply and that Fresno County applies a $450 per acre fee on solar PV improvements. In each scenario I use three discount factors, which are equivalent to the range of Fresno County’s cost of borrowing. Also, based on available development cost literature, in all of the scenarios I use a conservative capital investment estimate of $2 per watt for each project. In the first scenario I find that over 20 years, Fresno County will collect a present value amount of $1.5 million ofrevenue. In the second scenario I find that over the same period, Fresno County will collect $209.8 million of revenue. Lastly, in the third scenario I find that Fresno County will collect $29.4 million of revenue. These findings suggest that under Proposition 7, large amounts of solar PV capital will go untaxed, which is a disincentive for counties to facilitate the development of solar PV installations. To remedy the disincentive, I offer ways to connect current revenue streams that benefit large solar PV projects to county development processes. Using the fiscalization of land use as a framework, I present the idea of using revenues from the cap-and-trade market as well as Renewable Energy Credits (RECs) to promote local development processes that promote the de-carbonization of land use.