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Dual Taxation in the Tribal Renewable Energy Economy 15 th Annual Indian Nations and Tribes Legislative Day January 19 2010 Phoenix, Arizona Michael Connolly Miskwish
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Dual Taxation in the Tribal Renewable Energy Economy 15 th Annual Indian Nations and Tribes Legislative Day January 19 2010 Phoenix, Arizona Michael Connolly Miskwish. - PowerPoint PPT Presentation
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Dual Taxation in the Tribal Renewable Energy Economy15th Annual Indian Nations and Tribes Legislative Day
January 19 2010Phoenix, Arizona
Michael Connolly Miskwish
“When it comes to creating jobs, closing the opportunity gap, and leaving something better for our future
generations, few areas hold as much promise as clean energy.”
President Obama – November 5, 2009 Remarks , Opening of the Tribal Nations Conference
• 160MW Wind Farm• Campo Reservation, 45 miles East of San
Diego • Campo Kumeyaay Nation Joint
Venture with SDG&E and Invenergy• Tribal Government + Economic
Development Corporation – Will benefit from work of local contractors
and crews, and purchase of critical equipment and services from the tribe
Kumeyaay Wind II
OverviewCampo Projects
Current Markets
MPR- California
Past busts in renewables
Transmission queues
Situational Analysis• Indian Country contains an estimated 10% of all energy resources in the United
States– Tribal energy resource development can support local economies and Tribal sovereignty– ARRA provides incentives for tribal development
• Traditional project finance model– Equipment supply/construction loans with term takeout by institutional tax equity investors
• Tax equity investment market has contracted • Lenders have exited or have limited funding• Flight to safety, intensive due diligence, stringent underwriting • Many tribes lack access to transmission• Solution to fill gap and drive industry growth
– New sources of capital– Government support– Tax credit flexibility
Reliance upon public-private partnership between government & business indicative of political structure
Tax system has been an effective vehicle to raise money for public use but also to entice behavior and growth
Oil & GasAffordable HousingRenewable Energy
• Private Sector – Tax Credits• Public Sector – Bonds• DOE Bonds
Public – Private Partnership
α drivers
Tribe α is not a formula
Strategic– Capacity Building– Independence– Diversification
• Revenue• Risk
Financial– Return on
Investment– Net Present Value
• ∞– Land Value– Depletion
• Profiting as investors– Loss of PTC & AD– Gain of Government revenues– Use of tribal grants/programs
• Profiting as governments– Negotiating revenue sharing– Build and lease back of
infrastructure– Legislation (State and/or
Federal)
Power of Many Faces
State Income and Sales Tax
Corporate Income Tax State Sales Tax
AZ 0.06968 0.056CA 0.0884 0.0825MN 0.098 0.06875MT 0.0675 0NV 0 0.0685NM 0.076 0.05375ND 0.065 0.05OK 0.06 0.045SD 0 0.04UT 0.05 0.0595
Scenario – Straight Royalty• 100 MW• PPA 75 MW-hr• Capacity Factor .35• Construction 260 MM• Royalty 6%• Sales Tax 5.6%• Property Tax .75%• Federal Corp Tax 33%• State Corp Tax 7%• Possessory Interest Tax .75%• Net present value consideration
Royalty-6%
Tax Investors 76%
Sales Tax 3%
Property Tax 3%
Federal Corp Tax 5%
State Corp Tax-1% Possessory
Interest-<1% Developer-5%
Sample Scenario$75/MW-hr
Campo Wind II
• 20 MW tribal ownership option– ITC grant– Bonds– BIA loans– New Market Tax Credits– Break even at year 12
• 20 year option to buy out project• Campo still holds 100 MW future
capacity
Creating Competitive Equity
• Transferability of PTC & AD• Preferences for transmission construction
and access• Negotiating revenue agreements with States• Change bond structure• Change federal law
