San Marcos Mercury | Local News from San Marcos and Hays County, Texas
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November 8th, 2010
City agrees to not annex property for solar plant

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The site of the Hays Energy, LP, where a solar farm is planned. Photo by Sean Batura.

By SEAN BATURA
News Reporter

San Marcos city councilmembers voted unanimously last week to hold off annexing about 137 acres in the city’s southern extra-territorial jurisdiction (ETJ). In exchange, Hays Energy, LP, has promised to begin constructing a $74 million solar power plant on the land.

According to the San Marcos city manager’s office, the solar farm project could generate $1.3 million in tax revenues for the city over 20 years. About $7 million of the solar plant would be located within the city limits. Due to the agreement to not annex the 137 acres, about $67 million of the solar plant would be located outside of the city limits and off the city tax rolls.

No new jobs would be created with the construction of the solar power plant because current staffing at HELP’s existing gas plant — the Hays Power Plant — could manage maintenance and operations of the proposed facility, according to the city manager’s office.

The annexation restriction could remain in effect as late as 2022, according to the terms of the Chapter 380 economic development agreement between the city and Hays Energy LP (HELP).

The solar plant is proposed to encompass two parcels of land located about three miles south of the Tanger and Prime outlet malls. About five percent of the solar array would be built on one parcel within the city limits. Most of the solar plant would be constructed on a 136.96-acre parcel within the city’s ETJ, but outside the city limits. Adjacent to the 136.96-acre parcel is a 100.885-acre tract (within the city limits), where HELP owns and operates a gas electric plant.

If the appraisal district asses all personal property on both parcels at $30 million or more in the last year of the agreement — 2019 — Hays Energy LP (HELP) can request a three-year extension of the annexation restriction.

The Hays Central Appraisal District values the gas plant at $227.6 million, which includes $6.7 million for personal property and $220.9 million for land and improvements.

According to the economic development agreement, construction of the solar plant constitutes “a significant investment in alternative energy production,” and “will create opportunities for economic development involving green industries and jobs while also advancing the City’s goal of supporting environmental protection.” According to the agreement, the annexation restriction and related provisions constitute “a public necessity.”

Said Amy Madison, President and CEO of the Greater San Marcos Economic Development Corporation, “If the company is able to move as they predict, the San Marcos-Hays Solar Project will be in operation by 2013, making it one of the largest solar plants in the state.”

HELP’s parent company is United Kingdom-based International Power. International Power operates in 21 countries and is one of the world’s leading power generation companies. For the year ending Dec. 31, 2009, International Power made £1.143 billion in profits after taxes, according to its online consolidated income statement.

“This agreement will assist International Power in its investment in a solar farm that will generate wholesale electricity using the latest technology,” said San Marcos Mayor Susan Narvaiz. “We are delighted to support advances that will contribute to the region’s clean power resources.”

The economic development agreement does not stipulate a project completion date for the solar farm. According to the city manager’s office, the solar farm project is “time sensitive” because the company must begin construction before Jan. 1, 2011 in order to receive a Renewable Energy Grant from the U.S. Department of Treasury. The grant is available through the federal American Recovery and Reinvestment Act.

The city manager may terminate the agreement immediately if HELP abandons the solar farm project.

“HELP shall begin construction of the project within 18 months after the effective date (Nov. 1) and thereafter pursue, with commercially reasonable diligence, completion of the project to be fully operational,” states the economic development agreement. “HELP shall provide notice to the city when it begins construction of the project.”

The term of the annexation restriction began Nov. 1 and will continue for a period of seven years from Jan. 1 of the first full calendar year following completion of the solar farm project.

The solar farm, a utility-scale “solar photovoltaic” project, would tie to existing Lower Colorado River Authority (LCRA) transmission lines and produce 20 megawatts of energy for resale, according to the city manager’s office. Twenty megawatts is roughly enough electricity to power 10,000 average homes under normal conditions in Texas, or about 4,000 homes during hot weather, when air conditioners are running for longer periods of time, according to the Electric Reliability Council of Texas, grid operator for most of the state. The City of San Marcos electric utility purchases its energy from LCRA at wholesale cost.

“The project is an all-win for the company, San Marcos and Hays County,” Narvaiz said. “It has no negative impact on the environment and it broadens our strong focus on green energy and sustainable development.”

According to city officials, the company considered building the solar farm in Victoria and Dallas before choosing San Marcos.

According to a city press release, HELP plans to begin construction “later this year.”

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12 thoughts on “City agrees to not annex property for solar plant

  1. I wouldn’t say all subsidies are created equal. For instance, would Carma really abandon its plans to build Paso Robles without a tax break? Would Target have abandoned San Marcos without a tax break?

    When there is real competition for a facility or development that promises to add lasting value to the community, the argument for some tax consideration is stronger. If this story is accurate, San Marcos was in the running for this solar plant with Victoria and Dallas. So perhaps there was a competitive reason to sweeten the pot.

    It does seem, though, that no one builds anything new these days without getting some kind of tax reprieve. Except, of course, for the lowly homeowner, whose efforts to improve his property and neighborhood are met with higher property taxes. As they say, no good deed goes unpunished.

  2. Not much of a subsidy actually, they will avoid paying city taxes for 12 years. Of course city taxes are not that much, so …. And they will get hit with rollback taxes for the SMICSD, which is going to be a chunk of change.

  3. Imagine ACC’s disappointment to be denied its pound of HELP’s flesh. Poor ACC. Gotta go float its debt somewhere else.

  4. I don’t recall being a subsidy hater. It would be great if there were some jobs created, but it is a far nicer feather in the cap then a golf course and I could see some significant long-term benefits. If anything, the unanimous vote and (thus far) lack of vocal opposition, serves to disprove those who claim that some of us are opposed to any growth or development.

  5. I’m all for this. I think it’s nothing short of highway robbery when a city gobbles up land in the ETJ the minute that it is developed (or development is announced). The City of San Marcos has a spotty record of doing annexations for no other reason then to build the tax base (remember the Willow Creek fiasco?) so I applaud their decision here.

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  7. Dream, we agree; it’s nothing like this. Here the business is asking to not be annex so as to not pay city taxes, and is not asking for any funds from the city. Paso Robles is begging to be annexed so that it can feed use tax dollars to pay for its infrastructure.

  8. I’d love to see rebates to residents who install solar panels at their homes, along the lines of what Austin did. It would tie together nicely with this project, and reinforce the message that we have a “strong focus on green energy and sustainable development.”

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