In a discussion now months long, the City of Rushford Village is cautiously considering options related to a proposed solar array. The request for the $3.3 million, one megawatt array is being put forward by OneEnergy Renewables in partnership with MiEnergy. The council officially approved the permitting request January 27.
“Our membership has been demanding more renewables,” Kent Whitcomb, MiEnergy Director of Member Services. It was noted the savings produced by the array is not distributed to Rushford Village residents in the form of any credit. Instead, the wholesale purchasing cost savings are passed to all MiEnergy customers through wholesale purchase savings. However, the Village may be able to snag some revenue for its citizens through a proposed land lease deal.
The proposals are for either a ground-mount fixed array strictly on MiEnergy property adjacent to the Village Hall or for ground-mount tracking array to be placed on MiEnergy property and a Village parcel. At the January 21 meeting, the company had reduced the parcel size to 2.54 acres, but Whitcomb noted at the January 27 meeting that the company was able to secure permitting to allow them to seek up to three acres.
The most pressing questions have been whether or not the Village should approve a 25-year land lease for those three acres and what the cost of those acres should be. OneEnergy is currently proposing the 26-year lease, at $750 per acre, with an option to extend the lease an additional 10 years at $1,000 per acre. At that rate, the land lease payments, could produce $2,250 annually or $58,500. With the additional 10-year term, an extra $30,000 could be generated. At the end of the term, the Village would still retain ownership of the land and have the ability to seek other usage or to lease or sell the land to another party.
OneEnergy was previously asked to produce a proposal of purchase for the acreage for comparison of the options. At the time, Eric Udelhofen, OneEnergy Renewables Director of Project Development, suggested the value could be as much as $40,000. The actual proposal came in at $12,750 per acre or $38,250. According to Mayor Dennis Overland, because of this price discrepancy, Udelhofen offered to purchase property himself at the $40,000 rate. The council opted to nix this option.
The council voted on the permitting in December, but the result was a tie vote. “We need to take it to a vote, we’ve beat this enough,” said Councilor Mike Ebner. With an empty council seat, three votes were required for a quorum. Approval of the permitting passed unanimously. The council created a committee of Councilors Bob Hart and Roger Knutson to work with OneEnergy on deal negotiations. A recommendation will be brought to the council by the committee at the next meeting. In the meantime, OneEnergy will move ahead with boring sampling in early February.
“All terms are negotiable, but they seem firm on their offer,” noted City Attorney Joe O’Koren. “I don’t think you’re going to get anywhere on negotiating price term with them.” Should the city not reach an agreement with OneEnergy, the land lease portion of the project will not happen.
“For ag land, it’s fair rent but, for commercial land, I don’t think it’s fair,” said Hart. “Figures can vary a lot. A typical tenant would be willing to pay 20-25% of gross income. 20% is $5,000-6,000 as an income comparison, if it falls along with the value of commercial land. I have no problem with permitting, but I don’t feel the city is being compensated a fair amount for the project.”
While O’Koren noted it was a valid concern, he also questioned what the city would legitimately get for the land. Featherstone Farms previously rented the city acreage at a rate of $350 per acre annually. “We’ve all seen the letter [from Featherstone]. I think that land is worth more. I think we should be getting more rent than he’s been paying. At the time is was rented, it was a hardship case.”
Knuston questioned whether or not the Village would be under evaluating land rent values in 25 years by locking it in at just $750 per acre now. “I’d like to see us adjust the rate to go along with inflation. The rate might be great now, but in 25 years it might not be. I’d like some guarantee. For the last 10 years, it’s gonna be a bump, but will be enough to cover what land is renting for at that time,” he said. “It’s a gamble for the next years that it’s going to balance out. I’m not sure.”
The concept of a renewal lease after five years was also discussed, but it was noted OneEnergy would not likely favor this. The company needs the first 10 years to break even on costs. Talk then turned to some type of contracted tiered rate. The suggestion to review other OneEnergy project figures in the area was noted as a good measure of whether or not the city may be getting a fair shake on the land value.
“Lanesboro’s is on ag land. This is industrial that is ag,” said Zoning Administrator Jon Pettit. “There’s a big difference in value.” Ag land and commercial land have different zoning, ag land can be included in commercial and is taxed as commercial. Our site is so much better than Lanesboro. Putting in tracking units would tell you that our land is worth that much more,” pointed out Pettit. “We should be able to negotiate from a pretty good position of power. Either they’re going to have to negotiate or downsize for the project.”
As for taxes associated with the land lease, OneEnergy will need to pay personal property tax, as the land isn’t going to meet the exemption level. The tax bracket, commercial/industrial, will remain the same. The city is responsible for any property taxes associated with the land, even if it is leased.
“I am always concerned about the protection of the land value,” stressed Knutson. “I’d like to see us get as much as we can within reason.”
“I’m looking at it from the revenue standpoint,” added Ebner. “If we don’t do it, we don’t have anything. From the letter he [Featherstone] sent, I’m not sure we should go that route either.”
While there is no hard deadline for the project, it’s likely the topic, and a possible revised land lease agreement, will be back up for consideration at the next meeting. The next regularly scheduled meeting is Tuesday, February 4, at 70 p.m., at the Village Hall. The public is encouraged to attend.
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