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Funding Opportunities: Solar Arrays and Associated Energy Storage

Is your municipality ready to invest in a solar array and/or energy storage to meet its energy goals, build climate change resilience, and save money? Below are funding opportunities we've identified to support your efforts.

Consult program-specific guidance for additional information. Links to other websites offered in this document are provided to assist municipalities. The inclusion of a link does not imply endorsement or approval of the linked site or product.

Municipally Owned Array | Developer Owned Array | Resources

Municipally Owned Array

Cash Purchase

Direct ownership of a solar system can be financed with cash through the municipal budget, using local ARPA funds, or with a municipality’s reserve fund.

Direct Solar Loan

The municipality can borrow money from a traditional lender and make monthly payments. EnergySage compiled a comprehensive list of lenders that finance solar projects in Vermont. VLCT is aware of these in-state lenders and programs marketing loans for energy projects.

Vermont State Employees Credit Union (VSECU) Green Loan – This program can be paired with the Federal Investment Tax Credit, so borrower pays lower payments during an initial period. The payments then increase unless the tax credit is applied to the loan. Municipal terms and rates are higher than the residential rates published on the website.

Vermont Federal Credit Union (VFCU) Solar Loan - VFCU will amortize its loan for the Federal Investment Tax Credit. There are no pre-payment penalties. Municipal terms and rates vary.

Vermont Economic Development Authority (VEDA) Commercial Energy Loan Program - Municipalities are eligible for this program. It has variable rates and a low fixed rate option for five years.

Vermont Buildings and General Services Municipal Energy Loan Programs – The Vermont Legislature authorized a Municipal Energy Loan Program and a Municipal Energy Revolving Fund as part of Act 172 in 2022. Eligible activities are equipment replacement, studies, weatherization, construction of improvements affecting the use of energy resources the implementation of energy efficiency and conservation measures, and the use of renewable resources. Programs launch in mid- to late 2024.

Establish A Municipal Revolving Loan Fund - The City of Montpelier established its own Net Zero Revolving Loan Fund using $20,000 from the City’s Reserve Fund, which Efficiency Vermont matched with $10,000. The fund finances municipal energy efficiency and renewable energy investments. Annual energy savings from funded projects are paid back into the fund so it grows over time.

Grants and Rebates

These funding opportunities can be used by a municipality for energy generation and/or storage.

Vermont Arts Council Cultural Facilities Grant - Supports projects that enhance, create, or expand the capacity of an existing building to provide cultural activities for the public. Applicants must own a facility that is at least 10 years old, and it must be physically located in Vermont. This grant will fund improvements to libraries and town halls if they provide cultural activities for the public, including accessibility improvements, hazard mitigation efforts, and energy efficiency upgrades among other physical improvements. Energy efficiency projects, including renewable energy and battery storage, are eligible activities.

EBSCO Solar Grant Program – This annual grant funds solar installations at libraries with a goal of helping libraries offset their expenses by incorporating solar power. Optimal candidate libraries will have newer roofs that have a lifespan consistent with a new solar system or space for a ground installation. The library should be able to support an array large enough to offset a significant portion of the library’s electricity costs. The library must be a current EBSCO customer. A library in a small Vermont community has received an EBSCO grant.

Federal Investment Tax Credit - In the Inflation Reduction Act (IRA) of 2022, Congress authorized entities that don’t pay federal taxes, such as municipalities and municipal utilities, to use certain tax incentives. Based on their energy production capacity, most solar projects for municipal facilities will use the Investment Tax Credit. See VLCT’s Tax Incentives Municipalities Can Use to Further Their Energy Goals. For renewable energy generation and storage, municipalities can use the Energy Tax Credit (§ 48) for projects placed in service through December 31, 2024, and the Clean Electricity Investment Tax Credit (§ 48E) for projects placed in service beginning January 1, 2025.

The IRS released temporary regulations that provide initial information about how the Section 48 Energy Investment Tax Credit will be implemented. More guidance/regulations are forthcoming. Read the short version in Publication 5817-E, Elective Pay for State and Local Governments.

The tax credit is claimed through a process known as Elective Pay (a.k.a. Direct Pay). To receive a payment from the IRS, the municipality must complete a pre-filing registration for each eligible project and receive a project registration number. More information about this pre-filing registration process will be available by late 2023. Other requirements include satisfying all eligibility requirements for the tax credit, substantiating them with documentation, and filing Form 990-T by a specified due date. Form 990-T is the Exempt Organization Business Income Tax Return.

The IRS’s webpage for Inflation Reduction Act tax incentives includes information, publications, and frequently asked questions about Elective Pay and Transferability. Publication 5817-G, Clean Energy Tax Incentives: Elective Pay-Eligible Tax Credits highlights tax credits available to tax exempt entities.

Green Mountain Power (GMP) Rebates & Programs – GMP has incentive programs for energy storage for its customers.

VNRC Small Grants for Smart Growth – Supports advocacy for better land use, advancing transportation choice, supporting housing choice and affordability, promoting downtown or village center revitalization, conservation and natural resources, public outreach and engagement. Awards can be useful for project planning, as well as outreach and education activities around community revitalization efforts. Awards cannot be used for capital improvements. Awards range from $500 to $1,500.

These funding opportunities require wrapping the solar project into a larger project, developing arrays that serve low- and moderate-income communities, or selling power.

USDA Powering Affordable Clean Energy PACE Program – Supports renewable energy projects that use wind, solar, hydropower, geothermal, or biomass, as well as for renewable energy storage projects. Applicants must generate electricity for resale to residents.  Projects must be based on bankable power purchase agreements (PPAs) or through a financial guarantee that ensures the financial feasibility of the project. Energy must be sold for resale to eligible off-takers which can include both utility and non-utility customers. 

Both rural and nonrural areas are eligible; however, at least 50 percent of the population served by your proposed renewable energy project must live in communities with populations of 20,000 or fewer. This is a loan program, but it provides loan forgiveness (grant component) if minimum standards are met (20% forgiveness) or if the project in or serves 50% or more of the population of a designated energy community, disadvantaged community, or distressed community (40% forgiveness). Award range is $1 million to $100 million. Loan term is up to 35 years. Federal investment and production tax credits can be used with this program.

USDA Rural Development Community Facilities Direct Loan and Grant Program - Funds solar as part of an award for other qualified projects, such as municipal and emergency services buildings, water and wastewater, and other community services. Communities with 20,000 people or fewer are eligible for the program. Communities with 5,000 people or fewer receive top priority for the grants.

Funding awards range from 75% grant and/or 25% loan to 0% grant and/or 100% loan depending on the community’s population and Median Household Income. The program website provides grant eligibility by municipality. This information will be updated for 2020 Census information in summer 2023. If your community’s grant eligibility is 15% or less, it may be more beneficial to pursue a traditional loan. New federal requirements may raise project costs sufficiently to offset the benefits of the grant funds. It is advisable to discuss projects with USDA staff prior to initiating an application.

Northern Borders Regional Commission Catalyst – Supports projects that address transportation, telecommunications, energy, and basic public infrastructure; business and workforce development; health care, nutrition and food security, and other public services; resource conservation; tourism; recreation; and open space preservation consistent with economic development. New in 2023, the grant funds basic public infrastructure, including public meeting spaces. Incorporating a project’s relationship to economic activity will increase application competitiveness. Solar arrays that sell power will be more competitive.

Congressionally Directed Spending (CDS) Requests - Formerly known as Earmarks, CDS projects are selected by Members of Congress for funding through the appropriations bill. The Senate and House have different rules for these requests. Projects benefit from discussion with Congressional staff prior to seeking these funds. Projects are usually submitted in late February through mid-March annually. Information is available on websites of Senator Sanders, Senator Welch, and Representative Balint. CDS grant awards pass through a federal agency and have that agency’s associated grant terms and conditions. Funds may not be available for 1-4 years based on an agency’s capacity.

Other grant and funding programs may apply based on the specifics of your project. Email FFA@vlct.org to schedule a project-based discussion about funding options.

Developer Owned Array

Municipalities can finance solar arrays through developer-financed solar loans, solar leases, and power purchase agreements (PPAs).

Solar Lease

With a solar lease, the municipality agrees to pay a fixed monthly lease payment to the solar developer. Ex. $XX every month through the life of the loan. Some lease agreements allow purchase of the panels at the end of the lease so the municipality can continue using the solar.

Power Purchase Agreement

With a power purchase agreement, the municipality agrees to purchase the power it uses for a set price per kilowatt-hour. This means the municipality’s monthly bill will vary based on power used.

With solar leases and PPAs, the solar developer pays upfront costs and owns the system when it is placed in service. Therefore, the developer would own any tax credit.

Municipalities can request cost estimates from solar developers for municipally owned and developer owned arrays to understand how the tax credit affects municipal costs under both options.

Resources

US Department of Energy Solar and Storage Blueprint – This step-by-step guide includes a high-level overview of the process and benefits of two approaches to going solar – power purchase agreements (PPAs) and direct government ownership of projects. The Blueprint showcases important tools and online resources, such as a sample Request for Proposals - and outlines Key Activities to help guide entities to success. A Blueprint Summary PDF is available for download. The Blueprint, along with Blueprints for other energy activities, was developed for recipients of the Energy Efficiency and Conservation Block Grant (EECBG) formula program. Vermont’s municipalities have access to these Blueprints even if they haven’t been awarded an EECBG grant.

Vermont Department of Service Renewable Energy Resources – This website includes links to publications and websites about solar, biomass, hydroelectric, and wind energy.

Vermont Energy and Climate Action Network (VECAN) Community Solar Toolbox – VECAN walks you through getting started, siting, and other important issues. It provides models, approaches, resources, other guides, and success stories.

Publication Date
03/01/2024

State of Vermont ARPA Funding Opportunities

Member for

1 year 10 months
Submitted by Collin Haines on
arpa 2022 01 24 0

The State of Vermont has created a one-stop-shop for all State Fiscal Recovery Fund (State ARPA) programs that are available to municipalities as eligible applicants.  It can be found HERE. 

For each program this document provides the:

  • Name of the overseeing state agency, department, or division
  • Official program name
  • Succinct narrative summary
  • Point of contact name and email address
  • Link to the website to learn more

This is an excellent resource for towns, cities and villages interested in leveraging their local ARPA awards.

Taxation and Budgets: 2022 Municipal Action Paper

Introduction 

Vermont consistently ranks close to the top of the 50 states in terms of tax burden per capita, as shown in  2022 Fiscal Facts, published by the Vermont Legislative Joint Fiscal Office (LJFO). 

In 2020, Vermont ranked second in terms of total state tax burden per capita and fifth in terms of state and local property tax burden per capita. Thus, how we fund government at the state and local level, including paying for new legislative priorities, affects Vermonters in their pocketbooks every day.

Since its inception in 1967, the Vermont League of Cities and Towns, which represents all 247 cities and towns, has weighed in on the complex tax system in Vermont. The taxes and budgets that the state legislature passes and the priorities that are established therein result in significant consequences for local governments, some of them helpful, some of them unhelpful, and many of them unintended.

For most Vermont towns, the sole tax revenue source is the property tax. Nineteen towns have a local option sales tax; 23 have a local option meals, rooms, and alcohol tax; one (Elmore) has just a local option rooms tax; and Burlington and Rutland City have authority to adopt local option taxes through their city charters. No tax revenues from the new retail cannabis marketplace will accrue to cities or towns that do not have a local option sales tax. In order for municipalities to access any tax other than the municipal property tax, the legislature must specifically grant them permission to do so. To date, the legislature has declined to extend general authority to adopt local option taxes to municipal voters. 

Property taxes also fund two-thirds of the Education Fund, which pays for pre-K–12 education, to the tune of $1.2 billion in FY23. Schools are paid first, pursuant to statute. Thus, the capacity of the property tax to pay for necessary municipal services – road maintenance and plowing, public safety, wastewater, recreation, zoning – has always been strained. Inflation, stressed individual and municipal budgets, increasing education fund taxes, and skyrocketing property values combine to make it more and more difficult to fund municipal services and necessary projects with the municipal property tax. Thus, more cities and towns are looking more frequently to local option taxes to fund essential operations.  

This paper (the third of VLCT’s Municipal Action Papers for 2022) provides information on the budgeting and tax system in place in Vermont as well as the unique ways that the tax system – and Vermont’s education funding structure in particular – constrains the ability of local governments to deliver vital services. VLCT Advocacy staff welcomes any questions you have regarding the issues your communities face, and we thank you for working to help our municipalities serve us all better.  

State Budget Adoption – Expenses 

On May 12, 2022, the legislature passed Act 145, the budget for FY23. The bill includes $566 million in federal American Rescue Plan Act (ARPA) State Fiscal Recovery and ARPA Capital Projects funds. With all legislation accounted for, the total state budget for FY23 (the current budget year) is $8.3 billion, the largest budget ever passed in Vermont. By way of comparison, the total state budget in FY19 (before Coronavirus Relief Funds, ARPA, or ARPA Capital Projects funds were available) was $5.9 billion.

The process for recommending and developing the state budget has already begun in the administration as it has in your cities, towns, and villages. In October, agency secretaries and department heads provide preliminary budget requests for the next fiscal year and budget adjustment requests for the current fiscal year to the Agency of Administration. Those requests, following an internal vetting process, form the basis of the Governor’s budget recommendation to the legislature for a FY23 budget adjustment bill and FY24 full budget bill in January. From there, first the House and then the Senate appropriations committees take time during the session to hear from interested parties, including municipalities, and build a budget that implements priorities of the legislative committees of jurisdiction for specific policy areas. The appropriations bills represent the expenses side of the ledger.

The chart below shows where federal and state dollars are spent.

How is the Money Spent?

from LJFO presentation All Legislative Briefing Budget and Federal Funding of December 8, 2021

We are only three months into the new fiscal year. Despite predictions of a slowing economy due to inflation, revenues in the Education Fund are $6.9 million (5.9 percent) ahead of projections year to date and 7.9 percent ahead of revenues at this time last year. Revenues in the General Fund are $27 million (10 percent) ahead of projections. By a smaller percentage but still ahead of projections, the Transportation Fund is up $1.2 million (2.5 percent).

State Budget Adoption – Revenues and Taxes 

Two committees – House Ways and Means and Senate Finance – are responsible for raising the revenue required to meet the obligations established by policy committees and the appropriations committees. When large amounts of federal dollars are available, as they have been with CARES, ARPA, the Infrastructure Investment and Jobs Act (IIJA), and most recently the Inflation Reduction Act (IRA), priorities expand. By staying within the parameters established by federal legislation and rules, programs can be paid for with the federal dollars while the obligation to raise state revenues may be reduced. At the same time, the state general fund, transportation fund, and education fund will need to cover the bulk of costs related to Vermont’s many ongoing and long-term obligations. Altogether, crafting the state budget is a convoluted process!

Tax Structure Commission 

Fortunately, people with considerable expertise have thought about Vermont’s tax structure on several different occasions. In the 2018 special legislative session, the legislature established the Vermont Tax Structure Commission. That three-member commission spent two years to comprehensively analyze Vermont’s tax structure including the education fund and education property tax. The commission recommended improvements to simplify Vermont’s tax system; modernize and make it responsive to changes in the economy, technology, and environment; and to provide a long-term vision for Vermont’s tax structure. The final report was submitted in February 2021, at the same time that the Vermont legislature was grappling with the effects of COVID and seeking to implement the Pupil Weighting Factors Study, which had been submitted to the legislature in January 2020. 

This past legislative session, while the legislature did implement recommended new pupil weights, they left for 2023 the Herculean task of re-balancing and modernizing the state’s education tax system. The Income-Based Education Tax Study Committee, with three members from the House and three from the Senate, held its first meeting on September 28. Advocates for VLCT reminded the committee that local officials have supported moving to an income-based homestead education tax for some time. A report is due from the committee with assistance of the Department of Taxes, the Agency of Education, and the Joint Fiscal Office in January 2023. This new report needs to recommend ways to implement an income-based education tax system to replace the homestead property tax system. Recommendations should include restructuring the renter credit for paying into the education tax system, accurate modeling and transitioning to a new income-based system, and administration of the new system.

The Vermont League of Cities and Towns endorsed both the findings of the Tax Structure Commission as they pertained particularly to the Education Property Tax and local option taxes, and the Pupil Weighting Factors Study Report. In its letter to the Tax Structure Commission in January 2021, VLCT Advocacy staff wrote: “the education property tax is endlessly complicated due to the many equalizers that are applied to it. In the view of the taxpayer, the tax one pays bears no relation to the school budgets that are voted at the local level. … The issues of unaffordability, embedded weighting calculations that exacerbate inequities, and incomprehensibility on the education side, are significant issues for Vermonters that need to be remedied.”

Sustainably Funding Government in the Future 

Local governments have urged the legislature to grant general authority to cities and towns to adopt local option taxes and to grant a portion of retail cannabis sale revenues to local governments that are hosting these new establishments starting October 1, 2022. Both of these initiatives were passed by the Senate and have consistently stalled in the House. As a result, the vast majority of municipalities remain entirely reliant on property taxes for all tax revenue. At the same time, the list of obligations expands – climate adaptation being but one looming example. Understanding that many but not all municipalities would benefit from adoption of local option taxes, we  urge the legislature to consider a general revenue sharing program to help municipalities deliver the services and amenities that constituents expect from their local governments, from filling potholes to environmental resiliency to building vibrant and welcoming place-based economies. As we head into the next legislative biennium, local officials hope that the conversation may change and there might be space to discuss balanced revenue options for municipalities, both those that would benefit from local option taxes and those that would benefit from revenue sharing assistance from the state.

VLCT Legislative Policies for Taxation and Budgets 

VLCT supports 

  • authority for each municipality to adopt local option taxes through a vote of the local voters;
 

  • additional fiscal capacity, including consideration of a municipal revenue sharing program that provides sustainable and reliable annual funding to every municipality, to support the delivery of services, innovative programs, and maintenance of infrastructure for Vermonters;


  • legislation to reform Vermont’s tax system to ensure sustainability, affordability, equity, and balance;


  • a transparent education finance system that reduces the education homestead property tax and more closely links voters’ actions in approving budgets to the taxes they pay to fund their school districts;

  • in light of skyrocketing residential property values, taking measures to ensure the capacity of Vermonters to stay in their homes. 


Resources 

 

Publication Date
10/05/2022
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