Smithville school board assesses financial impact of proposed $190M solar project

During its May 17 meeting, the Smithville school board assessed what the possible financial impacts to the district would be from approving or rejecting a Chapter 313 agreement, or tax breaks, for a proposed $190 million solar farm that is planned to be built just south of Rosanky along Jeddo Road.

The 1,700-acre solar project is being led by international renewable energy company RWE Renewables.

The company submitted the Chapter 313 application to the school board last year, seeking tax breaks allowed by the state tax code that would put a limit on the taxable property value for school district maintenance and operation tax purposes.

The meeting included a financial presentation from Kathy Mathias, a consultant with Moak, Casey & Associates — an Austin-based school finance consulting firm that is representing the Smithville school district in negotiations with RWE — that explained the financial impact of the solar project being built with and without the Chapter 313 agreement in place.

RWE is asking the school board to cap the taxable value of the proposed solar facility at $20 million for the first 10 years of the facility’s lifespan, starting in 2022. The $20 million value limitation was determined by the district’s tax base and rural status, and is set by a statute that is updated annually by the state comptroller.

According to Mathias’ presentation, if the project is built, the limitation agreement won’t affect the district’s maintenance and operation tax revenue over the next 10 years, but it will affect where that money comes from.

Should the project be built with the Chapter 13 agreement in place, Mathias said the Smithville district would collect about $7.1 million in state aid and about $9.9 million from RWE's project in maintenance and operation taxes over the next 10 years.

Should the project be built without the limitation agreement, Mathias said the Smithville district would collect about $5.5 million in state aid and about $11.5 million from RWE in maintenance and operation taxes over the next 10 years.

Whether the limitation agreement is in place or not, the district can expect to collect about $17 million in maintenance and operation revenue from the solar project over the next decade.

“Unless you get kid growth (in the district), or you get a bunch more taxes or the state increases yields over those 10 years, you’re going to have pretty much a flat revenue,” Mathias said. “It’s just a question of where does the money come from for you?”

Mathias said both with and without the limitation agreement, the solar project would be fully taxable for the district’s interest and sinking tax, but two key differentiating factors would be additional benefits and tax compression.

If the project is built with the agreement, RWE will be providing additional benefits to the Smithville district outside of the school finance system, including a $1 million revenue protection payment slated for 2022 — the first year of the proposed limitation agreement — and a supplemental payment of at least $2.4 million to the district over the life of the project.

This combined $3.4 million to the Smithville district would come independent of any taxes RWE would pay on the solar project and outside of any local or state money the district normally receives.

RWE, however, would not provide the $3.4 million to the Smithville district if the project is built without the agreement.

If the project is built with an approved Chapter 313 agreement, Mathias said it would have a “negligible effect” on the district’s Tier I tax compression in 2022. But if the project is built without the agreement, Mathias said the district’s Tier I maintenance and operation tax rate would be compressed because the full $190 million value of the project would be added to the tax roll.

While Mathias’ report gave the board a deeper dive into the impact of its decision, she also said a Chapter 313 agreement is usually needed for solar or renewable energy projects to be built.

In RWE’s Chapter 313 application, the company said that “without a Chapter 313 agreement, this project would probably not be built."

State financial analysis

The Texas Comptroller’s Office conducted a financial analysis of the impact of the solar project on the Smithville district with and without the limitation agreement.

After the state comptroller issued a completeness letter for RWE’s Chapter 313 application Dec. 10, the comptroller issued a certificate for the application March 5.

In doing so, the comptroller said the proposed project is “reasonably likely to generate tax revenue in an amount sufficient to offset the school district’s maintenance and operations ad valorem tax revenue lost as a result of the agreement” within 25 years after the start of the limitation agreement.

According to the comptroller’s economic impact analysis, if all taxes on the solar project are assessed from 2021 through 2036, the district would receive about $10.23 million less in maintenance and operation ad valorem tax revenue with the limitation in place.

But the analysis found the proposed solar project would generate about $11.45 million in tax revenue from 2021 to 2048 with the limitation in place, offsetting the lost maintenance and operation tax revenue.

The comptroller also determined the limitation agreement is a “determining factor” in RWE’s decision to build the solar project.

Clearing process underway in Rosanky

Erik McCowan, a leader of the Rosanky Rural Alliance, a grassroots group of residents that formed to oppose the solar project, spoke during the public comment portion of the May 17 school board meeting and urged board members to not get wrapped up in the “rosy numbers” presented to them.

“They love taking advantage of small-town school districts who do not know any better," McCowan said. “Do not be swayed by them.”

The Rosanky Rural Alliance’s website has detailed the ongoing cutting and clearing of trees, which began in March, on the site where an electrical substation will be located as part of the solar project.

To close the solar project discussion during the May 17 meeting, school board members said a public hearing and final vote on the Chapter 313 agreement will take place in early June, with proceedings to be completed by June 10.