AGENDA ITEM #9
November 8, 2011
Action
MEMORANDUM
November 4, 2011
TO:
FROM:
SUBJECT:
County Council
Amanda Mihill, Legislative
Attorneyc;J~
Action: Expedited Bill 28-11, Property Tax Credit
Amendments
Renewable Energy
Government Operations and Fiscal Policy Committee recommendation (2-0): enact Bill 28-11.
Expedited Bill 28-11, Property Tax Credit Renewable Energy - Amendments, sponsored by
Council Vice President Berliner and Councilmembers Leventhal, Floreen, and Riemer, was
introduced on September 20, 2011. A public hearing was held on October 11 at which Michael
Heavener testified (see testimony and correspondence on ©8). A Government Operations and
Fiscal Policy Committee worksession was held on October 31.
Bill 28-11 would suspend the property
tax
credit program for solar and geothermal energy
devices as of September 20. New applications for the credit could only be granted after
September 20, 2011 if an individual enters into a contract for eligible costs on or before
September 20, 2011 and applies for the credit on or before September 20, 2012. Bill 28-11
would address the backlog of applications for the credit as described in an August 8
memorandum from Joseph Beach, Director of Finance (©4). Bill 28-11 would also clarify that a
property owner must
0\\-'I1
a solar or geothermal energy device or energy conservation device to
be eligible to receive a certain property tax credit (Le., leased devices would not be eligible for
the credit).
Issues/Committee Recommendation
1.
Effective Date.
As noted above,
~ill
28-11 would suspend the property tax credit program
for solar and geothermal energy devices as of September 20, 2011. New applications for the
credit could only be granted after September 20, 2011 if an individual enters into a contract for
eligible costs on or before September 20,2011 and applies for the credit on or before September
20, 2012. Mr. Heavener, President and owner of GeoSolar Energy urged the Council to change
the cut-off date to late November. At the public hearing, Councilmember Berliner stated that
while he understood the entrepreneurial spirit behind the request, he wanted to avoid a potential
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rush by consumers to contract thereby exacerbating the waitlist. The Committee recommended
(2-0, Council President Ervin temporarily absent) not to extend the deadline.
2. Projection ofenergy costs for new homes.
Mr. Heavener further urged the Council to enact a
program that would require certain homebuilders to provide a 20wyear projection of the energy
costs to potential homebuyers. Council staff notes that such legislation is outside the scope of
advertisement for Bill 28-11. If Councilmembers are interested in such a program, new
legislation would need to be drafted.
This packet contains:
Expedited Bill 28-11
Legislative Request Report
Memo fromMr. Beach
Fiscal Impact Statement
Testimony/correspondence
Circle
#
1
3
4
6
8
F:\LAW\BILLS\1128 Property Tax Credit-Renewable Energy\Action Memo.Doc
2
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Expedited Bill No.
28-11
Concerning: Property Tax Credit
­
Renewable Energy - Amendments
Revised:
9/17/2011
Draft No.
_1_
Introduced:
September 20. 2011
Expires:
March 20,2013
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _
~
_ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date:
_N~o!!.!n.!.!:e:...._
_ _ _ _ __
Ch. _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Council Vice President Berliner and Councilmembers Leventhal, Floreen, and Riemer
AN EXPEDITED ACT
to:
(1)
(2)
(3)
suspend the property tax credit for solar or geothermal energy devices;
clarify that a property owner must own a solar or geothermal energy device or
energy conservation device to be eligible to receive a property tax credit; and
generally amend County law related to the renewable energy property
tax
credit.
By amending
Montgomery County Code
Chapter 52, Taxation
Section 52-18R
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Added to existing law by original hill.
Deletedfrom existing law by original bill.
Added by amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unafficted by bill.
The County Council for Montgomery County, Maryland approves the following Act:
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ExPEDITED BILL
No.
28-11
1
Sec.
1.
Section 52-18R is amended as follows:
52-18R. Property tax credit ­
renewable energy.
2
3
*
(b)
Credit.
*
*'
4
5
6
7
As authorized by
§
9-203 of the Tax-Property Article, an
individual whoo\Vlls and occupies a single-family home that uses a
solar or geothermal energy device or an energy conservation device
may receive a credit against the County property tax.
An
individual
must only receive
~
credit for
~
device that the individual owns.
8
9
10
11
*
(g)
*
*
Applicability.
The credit authorized by this Section applies to any tax
year beginning after June 30, 2008. However, the Director must not
~ ~
credit
12
13
for
~
solar or geothermal energy device for any application
received after September 20,2011, unless an individual:
14
15
16
ill
ill
enters into
~
contract for eligible costs on or before September 20,
2011; and
applies for the credit on or before September 20,2012.
17
18
Sec. 2. Expedited Effective Date.
The Council declares that this Act is necessary for the immediate protection of
the public interest. This Act takes effect on the date when it becomes law.
Approved:
19
20
21
Valerie Ervin, President, County Council
22
Approved:
Date
23
Isiah Leggett, County Executive
Date
o
f:\law\bills\1128 property tax credit-renewable energy\bill 1.doc
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LEGISLATIVE REQUEST REPORT
Expedited Bill 28-11
Property Tax Credit
-
Renewable Energy
-
Amendments
DESCRIPTION:
Expedited Bill 28-11 would clarify that a property owner must own a
solar or geothermal energy device or energy conservation device to
be eligible to receive the property tax credit; and suspend the
property
tax
credit for solar or geothermal energy devices.
There is currently an approximate 6 year backlog of applications for
the property tax credit for solar and geothermal energy devices.
Additionally, current law is ambiguous as to whether a person can
lease, or must own, a device to be eligible for the property tax credit.
To suspend the property tax program for renewable energy devices
and clarify existing law.
Department of Finance.
To be requested.
To be requested.
To be requested.
To be researched.
Amanda Mihill, Legislative Attorney, 240-777-7815
To be researched.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
N/A
F:\LAW\BILLS\1128 Property Tax Credit-Renewable Energy\Legislative Request Report.Doc
f:\law\bills\1128 property tax credit-renewable energy\legislative request n
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DEPARTMENT OF FINANCE
Isiah Leggett
('1111111.1' I';XI!Cllfil'l!
.I
oserh
1'.
Beach
Dirt/dar
MEMORANDUM
August 8, 2011
'•.:
:i
TO:
064342
.
:,:­
FROM:
SUBJECT:
Renewable Energy Credit backlog
As a result of strong demand by County residents for the Renewable Energy
Credit, which has an annual funding cap of $400,000, there is a current and significantly growing
backlog of applications for the credit. The purpose of this memorandum is to make the County
Council aware of this trend.
The Renewable Energy Credit program was introduced effective levy year 2008
(Fiscal Year 2009) with an initial annual funding cap of $250,000. This property tax credit is
provided for eligible geothermal and solar energy devices and is the lesser of$5,000 or 50% of
the cost of the system that provides heating or cooling, or generates electricity. The credit is the
lesser of $1,500 or 50% of the cost of the system for a solar or geothenna) hot water beater. In
2009, the County Council increased the annual funding to $400,000 (Bill 39-09), effective levy
year 2009. Although the increase in annual funding allowed more taxpayers to receive the credit
on
their property
tax bill,
the demand for the credit quickly exceeded the annual funding
cap.
Even though the program has been in existence for only three years, due to the
excess demand for the credit, the backlog
in
issuing credits by reducing the property
tax
bill for
applicants
has
doubled each year to 501 at the close of levy year 2010 (Fiscal Year 2011). To
illustrate the trend, the backlog after the first year (levy year 2008) was only 100, but grew to 245
(levy year 2009), and to 501 (levy year 20 10). Since the majority of applications qualify for the
$5,000 credit, that suggests a $2.5 million backlog. Assuming a $400,000 annual cap indicates
that some taxpayers that have been approved for the credit but are in the queue may have to wait
six years before they see the credit reflected on their property tax bill. Meanwhile, new
applications will be received making the backlog even longer over the coming years.
----------------------------------------------------------------~~-
Monroe Street.
15t~
Floor,
iR.uckvme,
1\-1
alJ""y~a!1ld
20850· (240) 777-886U • FAX (2';O)
6J
www.montgomerycountymd.gov
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Valerie Ervin, Council President
August 8, 2011
Page 2
'--_ _ _ _ _ _ _ _ _ _ _ _...:.R:.;;.;en=8w=able
energy
Tax CreditOata
New
Appll<:;atlons
Processed
Prior Year
Applications
Processed
Total
Applications
Processed
I
S
$
$
Amount
Proe.sed
Applications
Receiwd
155
204
317
Annual
BacklOg
100
I
i
~mulatile
Backlog
100
245
LY 2008
LV 2.009
LV 2010
55
59
61
0
44
55
103
118
250,000
400,000
400,000
57
l
145
256
501
!
Note:
Amounts basad on maJ(imum
$5,000
credit
\aIue
muttipUad
by
applications
Total Applications is sum of
new
and
prior
year applications processed
LV2008 is ftrst year of credit
The table above illustrates the trend of increasing applications, from
155
(2008) to
317 (2010), and shows that even though the number of taxpayers receiving the credit more than
doubled from 2008 to 2010 ( from
5S
to 1t8) - the amount of funding available was insufficient
to prevent the backlog from rising to
SOl
by the end of June 2011.
Since we recognize that some taxpayers have made the investment in this
technology expecting the credit within a reasonable timefrarne, and that this unintended delay in
receiving the credit may create financial hardship for some County residents, the Department of
Finance has placed a notice on our website to inform applicants of the delay in receiving the
credit Finance will also work with the Department of Environmental Protection (DEP) to obtain
a list of contractors that install the renewable energy devices and inform them of the time delay.
I also want to take this opportunity to inform the County, Council that Finance is
administering the credit in compliance with the County law, which requires issuing the credit on
a
first-come~first-serve
basis and with a maximum 'allowable credit amount 0[$400,000 for this
program in each fiscal year.
In
this case, however, the success of the credit program exceeds the
allowable funding creating an immediate customer service challenge and a long-term funding
liability
in
excess of what was anticipated at the onset.
JFB:cmc
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OFFICE OF MANAGEMENT AND BUDGET
Isiah Leggett
County Executive
Jennifer
A.
Hughes
.Director
MEMORANDUM
October 7, 2011
TO:
Valerie
Ervin~t,
County Council
Jennifer
A.
HUeJ~S~ ~~ector
Expedited Council Bill 28-11, Property Tax Credit - Renewable Euergy - Amendments
FROM:
SUBJECT:
The purpose ofthis memorandum is to transmit a fiscal and economic impact statement to
the Council on the subject legislation.
LEGISLATION SUMMARY
This
biU
would suspend the property
tax
credit program fOT solar and geotbermal energy devices as of
September 20,2011. New applications for the credit after September 20, 2011 could only be approved if
the applicant entered
into
a contract for applicable costs on or before September 20, 2011 and applied for
the credit before September 20, 2012. Bill 28-11 would also clarify that a property owner must own
(rather
than
lease) a solar or geothermal energy device or
energy
conservation device to
be
eligible to
receive the property tax credit.
This bill addresses the backlog of applications for this popular credit The number ofapplications that
can be funded
in
a given year is limited by the funds appropriated for this program - currently $400,000
each year. The maximum credit possible under the program is $5,000, and the Finance Department
reports that most applicants
qualify
for the maximum credit. Only about 80 - 100 applications can
be
approved per year under the amount currently budgeted. However, the number of applications received
has outstripped the funding available, leading to a significant backlog of applications remaining to be
processed. As ofthe end ofcalendar year 2010, this backlog had reached 501 applications.
If
one
assumes
that
aU ofthese applications are ultimately approved for the maximum $5,000 property tax credit
and that funding for the program continues at $400,000 per year, it will take over six years for the
applicants at the end ofthe queue to receive their credit. Such delays may create a fmancial hardship for
taxpayers who invested in renewable energy devices expecting to receive a timely tax credit. Meanwhile,
the number ofapplications and the backlog would continue to grow. Bill 28-11 would suspend the
program while the Department of Finance works through the backlog.
Office of the Director
101 Monroe Street, 14th Floor • Rockville, Maryland 20850 • 240-777-2800
vllv/w.montgomerycollutymd.gov
------------------------------------
montsomerycm.mltymd.gov/311
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Valerie Ervin, President, County Council
October 7, 2011
Page
2
FffiCAL AND ECONOMrrC SUMMARY
This bi1I should have no fiscal impact on County expenditures over the next six years, assuming that the
County continues to fund the renewable energy property tax credit program at
$400,000
per year.
Although the bill closes the program to new applicants as of September 20, 2011, the Department of
Finance expects to continue to process backlogged applications each year until the
$400,000
annual
budget
is
exhausted, as it has done for the last two years (since the budget was increased from
$250,000
to
$400,000).
Tfthe budget is increased
in
the future, the number of applications processed (and the
processing cost to the Department of Finance) would increase proportionately, and the backlog may be
eliminated
in
less than six years, at which point both the tax credit and processing costs to the County
would be eliminated (due
to
the closure of the program to new applicants under Bill 28-11).
This
bill
will have no economic impact while the backlog ofapplications is being processed (processing
of the backlog
is
currently estimated to require more than six years). The number ofproperty owners
receiving the property
tax
credit and the total amount ofcredits provided
are
expected
to
remain stable,
assuming that the program continues to be funded at
$400,000
per year.
The
following contributed to and concurred with this analysis: John Greiner, Office ofManagement and
Budget; Michael Coveyou, Department of Finance.
JAH:jg
c: Kathleen Boucher, Assistant Chief Administrative Officer
Lisa Austin, Offices ofthe County Executive
Joseph F. Beach, Director, Department of Finance
Mike Coveyou, Department of Finance
Bob Hoyt, Director, Department ofEnvironmental Protection
John Greiner, Office of Management and Budget
Amy
Wilson, Office of Management and Budget
John Cuff, Office ofManagement and Budget
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)
GEOSOLAR ENERGY
Box 2171
Gaithersburg, Md. 20886
301 926·1891 xl
GeoSolarEnergy@Verizon.Net
October 11, 2011
Testimony of Michael G. Heavener before Montgomery County Council relative to
Bill 28-11
I am President and Owner of GeoSolar Energy which I believe is the oldest
renewable energy firm in the BaltimorelWashington area. We went into business in
1976 after I installed the first Geo System in my new home following the 1973 oil
embargo. We will use the term Geo for Geothermal, GeoSolar, Earth Coupled
Heat Pumps, etc. Also we will use the term we as the "Royal We" to represent our
firm which sells Geo equipment to dealers and installers who put our equipment in.
We have sold over 1,000 systems. We are the Maryland Distributor for Bosch Geo
equipment who is the large international firm. They bought an American firm in
Florida four years ago. FHP started making Geo equipment in the 60's.
As
interesting side story, this Geo equipment is exported to Germany and they are
sending us automobiles in return. NPR had a show on energy yesterday where they
have met the goal of using 20% of renewable energy - I believe we are at 1%.
The real estate tax credit for Geo has been very helpful in selling our systems and
we thank you. We have done many home and green shows to make the public
aware of our renewable technology including the one in Germantown last month.
EPA rates Geo as the best of the 3 technologies. Geo can supply almost all heating,
cooling and most hot water for homes and businesses.
It
works when cloudy, at
night or when the wind doesn't blow.
It
can be installed anywhere. All County
School built or remodeled in the last 5 years have Geo. We have three requests:
1. We request that you give us about a month or two before you suspend the tax,
credit so we can get all of our customer who expressed interest in our Geo Systems
bid and under contract. I don't understand why this is emergency legislation and is
retroactive to September 20?
2. Existing Homes - Our market segments into two different area. We have heard
the "Help" program might be restarted. This is the up to S2SK loan at 2% to 3%
over prime to be repaid on the tax bill over some 20 years. This could offset the loss
installations as a result of the suspension of this credit.
3. New Homes -
It
is
much easier more cost effective to install Geo in a new home.
The homeowner can include in the mortgage at about a
40/0
interest rate. We
request that you require the builders of new homes to give customers a cost estimate
:for tiht,e
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GEOSOLAR ENERGY
Box 2171
Gaithersburg, Md. 20886
301926-1891
xl
GeoSolarEnergy@Verizon.Net
October 22, 2011
Subject: Bill 28-11 and Renewable Energy for New Homes
Dear Montgomery County Council:
This letter is a follow-up to our testimony at the hearing on this bill on the
11th
of
this month. GeoSolar is the oldest renewable energy firm in Maryland having
started the business in 1976. We distribute Bosch GeoThermal Energy Systems.
We thank you for the existing renewable energy property tax credit. This has
helped us sell many systems and promote the technology at home and green shows.
Back dating the suspension of the credit to September 20 is very unusual and has
caused a number of our customers to cancel their installations and general market
confusion. We request that you set some future date such as the end of November to
suspend the program. We have told all of our customers that they will not get their
property tax credit for six years and they don't seem to mind.
We would like you to consider a replacement program that will encourage the
installation of renewable systems without costing the taxpayers any funds. We think
that this program would result in far more installations than the existing program.
For new homes, we would like to see builders who construct 10 or more homes a
year to prepare a one page 20 year projection of the conventional and renewable
energy costs available to the buyers for the house for sale. We have found that a
number of major county builders are installing propane which cost 4 times as much
to heat as our Geo system. Our market research indicates that these new home
purchasers have no idea the cost of propane which is the worst environmental fuel.
Under our plan the builder wouldn't be required to offer a renewable energy but we
think that they might in time offer renewable sources. All major appliances such as
refrigerators, dishwashers, dryers, etc. have a tag with operating cost. County
homes for resale have to have two years of energy records so it just make sense that
new homes should have a projection that includes one or more renewable energy
sources. We would be glad to work with you to draft legislation.
Sincerely,
Michael Heavener
Michael Heavener
Pr(Csjdent
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Page 1 of 1
Delgado, Annette
From:
gpar1016@aoLcom
Friday, September 23,201110:12 AM
Montgomery County Council
Sent:
To:
064808
Subject:
Solar Panel Tax Credit
I am strongly opposed to ending the solar energy tax credits. The reasons given on W AMU for
ending the program are ridiculous. A beneficial program being too successful? We, as a society,
need to reduce our dependence on carbon producing energy sources. I want to install solar panels
on my Silver Spring house. But, because of the $30,000 price tag, I need to save for a while before
I start. Removing this credit will make
it
more difficult for me to install panels. Considering the tax
credits given by government at all levels for businesses (especially the energy industry), these
credits must continue as a matter of social necessity and fairness.
Brian Parr
,
..
'
"
'-:, :
:"i
,,~
9/23/2011