Deschutes County commissioners delay decision on extending rural renewable energy enterprise zone

Deschutes County commissioners heard testimony and a technical briefing Wednesday on a proposal to extend the county's Rural Renewable Energy Development Zone and chose not to make a final decision, asking staff and EDCO to return with additional fiscal and valuation details.

The request to extend the zone, which was created by a 2014 county resolution and is set to expire June 30, 2026, would allow qualifying renewable-energy projects located outside urban growth boundaries to apply for a property-tax exemption for equipment placed on site. Patricia Lucas of EDCO presented the program mechanics and said the state would allow an extension that would move the zone's expiration to June 30, 2036 if the board approves.

County and EDCO officials told the board the program offers an initial 3-year property-tax exemption that can be extended by local agreement for up to 2 additional years (effectively a 3-to-5-year exemption for project improvements). Patricia Lucas said local governments with property-tax authority include the county, cities, school districts, hospitals, libraries and fire districts; the total market value of initial qualifying property in a zone cannot exceed $250,000,000 under state rules. Kelsey Lucas, EDCO senior director of business development, estimated that a utility-scale project of the sort proposed near Redmond could have an initial assessed value in the order of $1.25 billion, while noting the figure has many variables and that assessed value depreciates over time.

Commissioners pressed EDCO and county staff for more concrete numbers about assessed valuation, depreciation schedules, and what leverage the county could require from developers in the form of community-investment agreements or payments in lieu of taxes. Commissioner Alana Chang asked whether the county would lose negotiating leverage by pre-authorizing a zone and whether other counties had secured "gainshare" or strategic investment partnership (SIP) agreements. EDCO representatives described three distinct state or county pathways: the Rural Renewable Energy Development Zone (the "red zone"), the SIP program (used for larger projects and allowing longer abatements), and a county-managed pilot program created under a recent state statutory pilot (referenced by EDCO as Senate Bill 154). EDCO said projects must choose one incentive program and cannot stack incentives.

County staff and EDCO also said they will meet with the Department of Revenue to clarify how solar and other generation projects will be assessed and how quickly equipment values typically depreciate. The county's assessor has begun that outreach, staff said. EDCO said that in other rural counties projects have negotiated payments for community benefit in the fourth and fifth years of a five-year exemption; those agreements are set by local resolution and vary by project and jurisdiction.

No motion was made to adopt or deny the extension at Wednesday's meeting. Commissioners instructed staff to gather requested information, to consult impacted taxing districts, and to coordinate with EDCO about a potential public hearing on an extension. County staff said the board has several months before the current expiration date and may return when actuarial and Department of Revenue answers are on hand.

The discussion included references to two proposed large projects: a roughly 700-megawatt project south of Redmond and a project over 500 megawatts near La Pine; EDCO characterized the proposed scale as materially larger than earlier 50- to 75-megawatt projects used when the zone was first adopted. Commissioners and staff also flagged transmission capacity and interconnection constraints, potential battery-storage components, and the need to involve other taxing districts in any negotiation of community-investment payments.

Next steps identified by the board included: (1) county staff and EDCO to obtain Department of Revenue guidance on valuation and depreciation for utility-scale projects; (2) outreach to other counties with active agreements for examples of negotiated community benefits; and (3) preparation, if the board so directs at a later date, of a public hearing to solicit comment from affected taxing districts and the public.

Impact and context: The extension would leave existing statutory limits in place (including the $250 million initial market-value cap for a red zone) but could enable large-scale renewable generation to qualify for short-term property tax exemptions. Commissioners emphasized they wanted to preserve negotiating leverage and ensure taxing districts other than the county receive an opportunity to comment and to seek mitigation or benefit agreements.

Speakers quoted or summarized in this report were present at the Jan. 22 Deschutes County Board of Commissioners meeting and are listed below.