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Assemblyman seeks renewable energy tax break

Posted: July 13, 2012 - 8:58am

A Kenai Peninsula Borough Assembly member has crafted an ordinance he hopes will encourage residents to produce their own renewable energy.

Hal Smalley, assembly member representing Kenai, introduced Ordinance 2012-27 at the assembly's July 3 meeting. The ordinance seeks to exempt residential renewable energy systems such as wind turbines and solar panels from being taxed as real property by the borough. The ordinance will be up for public hearing on Aug. 7.

"We are trying to encourage the use of these systems, we are trying to reduce the carbon footprint or the reliance on other fossil fuels and to reduce carbon dioxide into the air," Smalley said. "These are not cheap systems ... and probably as time goes on they will become more and more affordable and I think we will see more of them. But at this point in time there are not a lot of them on the Peninsula."

Smalley said the ordinance might be the first of its kind among other boroughs as no similar ordinances were found in the state when he and others researched the topic.

"I think Juneau was considering it and Mat-Su was thinking about it," he said. "It think they are probably waiting to see what happens down here, but that's rumors that I hear."

Specifically, the ordinance will "classify and exempt from taxation a residential renewable energy system that is used to develop means of energy production using energy sources other than fossil fuel," in a municipality. Residents would have to apply for the exemption with the borough assessor's office and prove the system is renewable.

The ordinance is possible because of provisions contained in 2010's Alaska Senate Bill 220, Smalley said.

The borough assembly considered a similar ordinance several years ago, but skipped it over because there were not any state statutes on the books that spoke to boroughs being able to take such actions at the time, he said.

However, the borough currently does not assess or tax those items because assessing staff doesn't have a mechanism to evaluate their actual value, Smalley said.

"Not that it couldn't be done -- they don't have to reinvent the wheel -- but we currently, as a practice, don't do that," he said. "So what I felt this ordinance would do would be to put into practice what is actually happening and that is that they have been exempted."

The ordinance also allows for the homeowner and the borough to determine the actual cost of the system and determine the type of equipment used, Smalley said, so residents can apply for other energy credits.

"It is not just, 'This is what I have,'" he said. "It has to be verified and I think that is even spelled out in the state statutes as well."

According to Homer Electric Association spokesman Joe Gallagher, there are 53 HEA members signed up for its net metering program. That program, which was the first of its kind in the state, encourages residents to use renewable energy by allowing them to reduce power purchased from HEA by interconnecting on-site member-owned or leased generation facilities to the grid. Member-generated power offsets the member's electric consumption.

There are currently 30 members using wind power for the program and 23 using solar power, Gallagher said.

Although Smalley said he hasn't heard directly from HEA on the ordinance, there has been other general support for the idea.

"I do know there are some wind turbines that are out there that are actually selling power back to HEA, the excess that they generate, and that's not a bad thing either," Smalley said. "Anything that we can do to provide energy that is cost efficient and can reduce carbon emission, I think that is a good thing and also extends the life of our other carbon heating sources."

If passed, the ordinance would automatically apply to all areas of the borough, save for the home-rule cities of Kenai and Seward. Those two cities may choose to adopt the program or leave it, Smalley said. Other cities -- Soldotna, Homer and Seldovia -- would need to ask to be exempt from the ordinance.

However, as the borough collects property tax for all areas then allocates funds back to the cities based on their individual mill rates, the ordinance would be "revenue neutral," considering those items aren't currently taxed, Smalley said.

Brian Smith can be reached at brian.smith@peninsulaclarion.com.

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