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best-fit ownership & financing models
Best-Fit Ownership and Financing Models
This section briefly describes three models that currently offer the best opportunities for community wind ownership in the Northwest. It is certainly possible that changes in incentives, available financing, law, or other factors will result in new, better models. Project coordinators are encouraged to explore all options during the initial phase of the project.
City, County, Nonprofit
Publicly owned projects cannot take advantage of the Production Tax Credit (PTC) or Accelerated Depreciation. However, more importantly, they may be able to access lower-cost public financing and the new Clean Renewable Energy Bonds. Public entities also may have lower financial return requirements. Municipalities may also have internal resources to manage many of the phases of a project, lowering costs and adding control.
Multiple Local Investors
In this model, local landowners and investors join to form a Partnership or LLC that owns and operates the project. Income, deductions, and gains and losses flow through to partners or members, who report these amounts on their individual tax returns. In this model, depending on the “tax credit appetite” of the individuals, some or all of the PTC and Accelerated Depreciation benefits can be realized. However, individuals would need other passive income (for example, from other Partnerships) and may run up against Alternative Minimum Tax constraints.
“Flip” Structure
A local investor (typically the owner of a windy site or a group of investors) without tax credit appetite brings in a tax-motivated corporate equity partner to own most of the project for the first ten years (i.e., the period of tax credits), and then “flip” project ownership to the local investor thereafter. This structure has been popularized in Minnesota (Bolinger et al., 2004).
