New York's Cooperative and Condominium Community
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Getting the biggest bang for your solar buck.
Georgetown Mews undertook an enormous solar energy project, but even more complex was financing it.
The difficulties faced by anyone planning for solar in the city are many. Countless roofs lack sunlight. Some panel manufacturers are fly-by-night operators from which purchasers must stay clear. Then there’s the matter of knowing how to take advantage of all the incentives offered by the applicable tax codes and knowing which current financing practices are available.
Veteran New York real estate lawyer James Samson, a partner at Samson Fink & Dubow, and longtime Georgetown Mews board president Mary Fisher have managed to arrange for a massive undertaking in her cooperative association’s 930-unit building complex in Kew Gardens, Queens. The property has an abundance of low-lying, southern-facing roof space – 550,000 square feet in all. (The eastern- and western-facing roof panels will generate only 20 percent less power than comparable south-facing panels. Only northern-facing panels are unlikely to make economic sense.)
Eventually, the project will provide 35 percent of the complex’s energy needs, and by even the most conservative projections, it will pay off its full cost in under two years (see “The Solarscaping of Georgetown Mews,” Habitat, July/August 2014). “In the end, the financial benefits of solar drive an opportunity like this,” says Project Development Director Stephen Owen of the turnkey contractor RGS Energy. “I always say, ‘Solar is the right thing to do, but people do it because it’s the smart thing to do.’” He adds: “Solar is an impact investment, as the business decision to implement the solar alternative delivers a compelling return on investment and provides a positive influence on the community and environment.”
The story behind the Georgetown Mews story is equally fascinating: how did it get funding? Read on, and learn how a project that runs to nearly $4 million in upfront construction expenses will actually cost residents less than half a million dollars upon completion and, arguably, as little as $88,000 before the project even comes online.
To achieve that, Fisher and Samson – aided by RGS’s Stephen Owen – had to learn the tax codes and then, armed with this knowledge, apply for a series of grants and credits. For the project to work financially, Georgetown Mews had to figure out how to take advantage of all the available incentives.
The first of these was a direct rebate, known as a Program Opportunity Notice, from the New York State Energy Research and Development Authority (NYSERDA). Founded in 1975 following the first energy crisis, NYSERDA, a public benefit corporation that frequently assists solar projects, was originally set up with a mandate to help state energy conservation. However, its duties and resources have grown tremendously in recent years, especially since 1998, when it began receiving assistance from a payment stream taken out of the sums collected by the state’s electric utilities.
Included now within its body of tasks is direct grant-making to help with solar projects. The amount of these disbursements varies, and it comes from a fund that depletes as awards are made during the course of each fiscal year. For Georgetown Mews, NYSERDA eventually made a crucial commitment of a little over $1 million. The property took advantage of a NYSERDA construction. The application for this grant must be filed with NYSERDA by a “qualified” partner. That’s a solar power contractor or engineer that NYSERDA has approved. If you’re not working with a qualified partner who has submitted an application on your behalf, you cannot get this grant. The state will also send inspectors at various stages in the process.
Reflecting on the complexities of the process, Dayle Zatlin, a spokeswoman for NYSERDA, says: “It’s difficult to provide some sort of general model for co-ops wishing to use solar. It depends on how they’re set up as corporations, what their guidelines are, and what kind of metering they have. It’s not one-size-fits-all.”
Tax Credits and Abatements
The City Solar Panel Tax Abatement is a tax deduction requested from the city’s Department of Buildings, not the Department of Finance. The request should be made when filing for building permits to do the construction for the solar panels. The application should only refer to the work related to the solar power project, and the request for work permits for this should be segregated from requests for any other construction work. This application is said to be highly technical, and it must be filled out correctly when filed. Says Samson: “You get one shot at this one. You have to be prepared.”
Fed Tax Credit
Even greater benefits can be found within the federal tax code. Samson recognized that the U.S. government offers 30 percent tax credits for solar power. He emphasizes that these credits are not to be confused with tax deductions. The federal government’s assistance of 30 percent of the total cost of solar projects comes straight out of the sum that a tax entity – in this case, the co-op – would otherwise pay.
This must be requested of the IRS immediately upon completion of the system and the beginning of its operation. If the co-op wishes to pass on the credit directly to its shareholders for their individual tax returns, the co-op must file promptly with the IRS. The credit will apply to the tax year in which the system is put in service. According to Samson, if the request is not made in that year, it is vacated. Relevant information on the tax credit must be sent to all of the co-op’s individual shareholders so they can add the credit to their April 15 tax return.
This credit was particularly appealing to Georgetown Mews since it owns roughly 100 of the apartments in its building complex, and the association has been profiting each year by selling off its apartment inventory. For its solar project, this will come to almost $1.2 million in reduced tax obligations. In rough terms, the tax credit works out to between $850 to $1,500 per resident.
The co-op then got a further boost from accelerated depreciation schedules. These will provide almost $1.36 million more in benefits.
Con Ed & Excess Energy
Of course, the last and – in the long run – the greatest of the financial attractions of the project doesn’t appear in any computation of expenses: the power the project will generate.
Samson calculates this will be worth something in the neighborhood of a quarter million dollars each year. The amount isn’t absolutely predictable, as weather patterns vary from season to season, and the rate that the complex will be paid by Con Edison for excess energy it feeds into the grid hasn’t yet been set.
Naturally, most of the energy generated will come around midday, when the sun is at its apex. Since this is also when energy demand is highest and rates charged to many customers are at their peak, the co-op association is arguing that it deserves a higher rate than that given to most companies and organizations supplying excess power.
But the planners of the Georgetown Mews solar project emphasize that the success of a plan like theirs isn’t simply about filling out grant applications or tabulating prices and working with a spreadsheet. It’s also, they’re quick to point out, about avoiding pitfalls associated with construction and purchasing.
The complex has had to see that its trees are kept well trimmed so that all the light intended reaches the rooftop panels. Then there’s the matter of the panels themselves. “A lot of solar panels that you’re offered come from warehouses which are full of product from China put out by manufacturers that are already out of business,” Samson says. “So, if you want a reliable warranty on the goods, you have to be very careful.”
Determined to make sure of this, Fisher, the board president, flew to St. Louis, Missouri, to visit the factory of the supplier the co-op had selected. Then Samson went over the contract sheets and negotiated each of the terms in excruciating detail. Through this haggling he managed to win underwritten warranties of 30 years on the panels and the best possible terms on the financing.
He further urges others to speak to multiple contractors before asking for bids and then find out who the subcontractors will be and learn their reputations.
Ultimately, Samson observes, if you include the more than $300,000 in upgrades to the complex’s electrical system – a necessary change, given that the system dates to 1952 – the real cost of the project will be about $88,000 on a job whose final bill will come to nearly $4 million. That’s after subtracting all the tax benefits and grants.
Then there’s all that energy arriving each day from the sun.
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