Brown Edwards Assists Local Government Boards with Evaluation of Financial Impact of Solar Farms
As solar farms and the use of solar energy gain popularity, the impacts of these farms on the future finances of local governments remains a mystery. Multiple rural localities within Virginia have been evaluating the impacts of these farms on their state educational funding. While there are tax benefits to the companies that own and operate the solar farms, what does this mean for state educational funding that is heavily reliant on the property tax valuations within the locality?
Brown Edwards Solution and Guidance
Virginia’s educational funding, allocated to local school systems, is based on a number factors including taxable retail sales, adjusted gross income, and real estate valuations. Changes in any one of these factors impacts the Local Composite Index, or “LCI”, of the locality, which is used to allocate available educational funding. An increase in any one factor drives the LCI up for the locality, which, in theory, indicates the locality should be able to generate additional local revenues for education. This in turn proportionately decreases the allocation of state educational funding. The local boards in question were faced with the following question, “If our LCI increases because of a valuable solar farm in our locality, what is the estimated decrease in our state educational funding, and how does that compare to the incremental increase of property tax revenues since state code significantly limits real estate taxes on solar farms?”
Brown Edwards was engaged to help with this project. Using a deep understanding of the very complex basis for the LCI calculation, we were able to provide the Boards with a very concise and real world analysis consisting of projections including:
- Recalculations of the LCI using various real estate valuation estimates.
- Projections of state educational revenue increases.
- Projections of local property tax revenue increases.
Presenting these results both through external consultants or directly to the governing body, and in some cases, citizens in attendance, provided the information necessary for the boards to understand one very important aspect of these projects that can involve investments of hundreds of millions of dollars in solar farm facilities.
After multiple months of deliberations, citizen commentary, and consultation based on projections of estimated net revenue increases, the local Boards decided to proceed with these projects.