Will your taxes go up if you install solar panels? In Ann Arbor, yes. | MLi... http://www.mlive.com/news/ann-arbor/index.ssf/2016/12/will_your_taxe...

Menu Michigan Subscribe

Search

ANN ARBOR NEWS

Will your taxes go up if you install solar panels?

In Ann Arbor, yes.
Updated Jan 9, 2017;
Posted Dec 21, 2016

338 1.2k
shares

By Ryan Stanton , ryanstanton@mlive.com

ANN ARBOR, MI - Greg McGuire and his wife, Emily, live in the Old West
Side historic district near downtown Ann Arbor.

A few years ago, they decided to add something new to their turn-of-
the-century home: rooftop solar panels.

Not only was the 4.3-kilowatt system going to help them do their part for
the environment by producing clean energy, it was going to be a
financially prudent investment. Or so they thought until their taxes went
up.

They found out the hard way that, at least in Ann Arbor, if you install
solar panels, the city will reassess your property, raising your taxes.

Not every city in Michigan does this, but Ann Arbor does, creating what

1 of 11 1/16/2018 5:41 PM
Will your taxes go up if you install solar panels? In Ann Arbor, yes. | MLi... http://www.mlive.com/news/ann-arbor/index.ssf/2016/12/will_your_taxe...

some say is a disincentive for going solar in a city that wants to promote
clean energy.

Ann Arbor's city assessor maintains the city's hands are tied by state
law and solar panels must be assessed. But not all communities across
Michigan are taking the same approach on taxing solar panels.

The assessed value of McGuire's property jumped more than $32,000

after the solar panels were added, and the taxable value went up roughly
$10,000.

That translated to a $458.91 increase in property taxes the next year,

which McGuire said essentially wiped out the energy cost savings he and
his wife factored into their financial calculations when deciding to go
solar.

"The initial offset was exactly 100 percent of the generation of the
panels," he said, adding he tried to fight the city on it with no luck.

"It was hugely frustrating to me," said McGuire, who says he probably
wouldn't install solar panels now if he had it to do over again, both
because of the taxes and now regulatory uncertainties around net
metering in Michigan.

"It feels like I have a very high chance of being heavily penalized for this,
rather than breaking even."

2 of 11 1/16/2018 5:41 PM
Will your taxes go up if you install solar panels? In Ann Arbor, yes. | MLi... http://www.mlive.com/news/ann-arbor/index.ssf/2016/12/will_your_taxe...

Members of Ann Arbor's Energy Commission, a citizen body appointed

by the City Council, say several Ann Arbor residents have seen their
taxes go up after installing solar panels and they're not happy about it.
They say it's a concern and an impediment to meeting the city's solar
energy goals, which are part of the city's broader Climate Action Plan
goals to reduce carbon emissions.

Commissioners Mark Clevey and John Mirsky gave an in-depth report on

the issue at the Energy Commission's last meeting.

It's something they're hoping can be addressed either by a change in

state tax law or Ann Arbor's own policies and practices.

"What we find is the net effect of the solar tax law is to raise the installed
cost of solar energy and increasing the payback period, and
subsequently dampening the market for local citizens and solar
businesses," said Clevey, founder of the Ann Arbor Solar Users Network.

Clevey acknowledges he's personally affected by this. He had solar

panels installed on his roof back in May, and he's expecting his
assessment to go up in March based on communications he has had
with the city assessor.

The city assessor has told him if he doesn't agree with the new
assessment when it comes out, he can appeal it to the city's Board of
Review.

Clevey said Ann Arbor is falling far short of its solar energy goals and a

3 of 11 1/16/2018 5:41 PM
Will your taxes go up if you install solar panels? In Ann Arbor, yes. | MLi... http://www.mlive.com/news/ann-arbor/index.ssf/2016/12/will_your_taxe...

dramatic increase in the rate of installations in the community is

needed.

"If this is going to happen and we're going to continue to spend taxpayer
dollars on promoting solar, then it seems crazy to promote it with one
hand and then discourage it with the other, and that's kind of where
we're at here," he said.

City Assessor David Petrak cites a section of Michigan law that states all
real and personal property that is not expressly exempt is subject to
taxation.

Since there is no exemption in state law for residential solar

installations, Petrak maintains the city is legally required to assess them.

The Michigan Department of Treasury agrees with that interpretation of

the law, said spokesman Ron Leix.

"The assessor has to assess residential solar panels because the state
law says all property must be assessed unless explicitly exempt," he
said.

However, that doesn't seem to be what's happening in some other cities

across Michigan.

Mirsky said he contacted six assessors across the state, including in

Plymouth, Northville, East Lansing, Grand Rapids, Saginaw and Jackson,
and he found none of them are raising people's taxes for installing solar
panels.

4 of 11 1/16/2018 5:41 PM
Will your taxes go up if you install solar panels? In Ann Arbor, yes. | MLi... http://www.mlive.com/news/ann-arbor/index.ssf/2016/12/will_your_taxe...

"The answer from all six of them was that they're not taxing solar," he
said. "There was a little bit of a nuanced answer from East Lansing and
Jackson. They said, yeah, they could be different in the future or 'this is
a new thing' ... because solar is not real big yet in these communities.
But all of them said, at present, they are not taxing solar installations.
So, Ann Arbor's practice varies."

Assessors in a number of communities also told MLive they either aren't

assessing solar panels or the issue hasn't really come up yet.

Ypsilanti City Assessor Courtney Dugger said Ypsilanti does not assess
installed solar panels on residential properties.

"To our knowledge, we are not," Kalamazoo City Assessor Aaron Powers
responded via email when asked if Kalamazoo assesses solar panels.

"This issue has not risen in the city of Northville," said Karolynn Pargo,
the city assessor in Northville. "In other cities/townships where I have
worked, I have treated the solar panels as exempt with no increase in
assessment. However, there have been instances where there has been
an assessment increase if the panels were part of a building addition."

Jason Yoakam, Jackson's city assessor, said if the market is showing

solar panels contribute value to a property, then the assessment needs
to reflect that, and it might be that it does add value in a market like Ann
Arbor.

He said he was having a hard time thinking of any homes in Jackson with
solar panels that have been assessed, though.

5 of 11 1/16/2018 5:41 PM
Will your taxes go up if you install solar panels? In Ann Arbor, yes. | MLi... http://www.mlive.com/news/ann-arbor/index.ssf/2016/12/will_your_taxe...

Members of Ann Arbor's Energy Commission say there seems to be

inconsistency and lack of clarity on the issue across the state.

"Is there potentially a misunderstanding or misinterpretation of state

law? Is it that the other municipalities are doing the wrong thing?"
Mirsky said.

They're wondering if Ann Arbor can implement other policies or

practices to negate the impact of solar taxation on residents who want
to invest their own money in helping meet the community's solar energy
goals.

At the Energy Commission's last meeting, Mirsky and Clevey suggested

the City Council should form a task force to further study the issue.
Council Member Chip Smith, D-5th Ward, suggested they should first sit
down with the city's administration, and that appears to be the next
step.

If the city really is required to tax solar panels, Commission Chairman

Wayne Appleyard suggests the city could just buy the Solar Renewable
Energy Credits that come with installing solar from each property owner.

"And we could just set the SREC value at the value of the tax and thereby
give the money back without breaking the law," he said.

Clevey said the city also could look to reduce some of the soft costs
homeowners incur when installing solar panels.

"For example, in September, the city building department eliminated

6 of 11 1/16/2018 5:41 PM
Will your taxes go up if you install solar panels? In Ann Arbor, yes. | MLi... http://www.mlive.com/news/ann-arbor/index.ssf/2016/12/will_your_taxe...

solar permitting fees," he said. "There may be additional soft costs

related to zoning and inspections that could also be reviewed."

Appleyard said it seems the methods for assessing solar panels in Ann
Arbor have changed over time and the assessments used to be much
higher.

"It's been dropped by perhaps 50 percent from what it was before, so I'm
not sure that we're going to get any further reduction," he said.

He said there also is anecdotal evidence that a long time ago the
assessor was basing the assessments on the value of the electricity
produced each year, which actually resulted in a much lower assessment
at one time.

Now, the Ann Arbor assessor's office bases the assessment value on the
size of the solar installation, specifically the rated kilowatts of installed
capacity, and it works out to an increase in annual taxes of about $37
per kilowatt, though that can vary by geography and other factors,
according to information presented at the last Energy Commission
meeting.

Mirsky said that means the likely increase in annual taxes on a

3.12-kilowatt installation in Ann Arbor is about $115, negating about 31
percent of the expected $372 in energy cost savings. As a result, he said,
the payback period on such an installation increases to about 22 years.

"We are killing solar's financial justification," he said.

7 of 11 1/16/2018 5:41 PM
Will your taxes go up if you install solar panels? In Ann Arbor, yes. | MLi... http://www.mlive.com/news/ann-arbor/index.ssf/2016/12/will_your_taxe...

Petrak did not respond to a request for information about how the solar
panel assessments are calculated now.

Tom Holevinski, who lives on Ann Arbor's west side, said he had solar
panels installed when he rebuilt his garage about five years ago.

He said he doesn't actually know if his taxes went up because of the

solar panels, but records show his taxes did go up $172 after the project.

They would have gone up $237 if the local tax rate stayed the same, but
it actually ticked down that year.

Holevinski said he didn't know adding solar panels could change his
property assessment, so it wasn't a consideration at the time. He said
he'd actually like to add more panels, but now that he knows it can
increase his taxes, and given regulatory uncertainties at the state level,
he's reluctant to do so.

Holevinski argues solar panels shouldn't be treated as if they're an

addition or permanent modification to a home. Rather, he said, they
have a finite lifetime like an appliance. In 20 years or so, he said, it will be
time to replace them, like a washing machine, furnace or the
compressor in his garage.

"When our panels eventually fail, if we remove them, will our taxes go
down? If we replace them, will they increase our taxes yet again?" he
asks.

Because the panels have a finite lifetime, he argues, their value is

8 of 11 1/16/2018 5:41 PM
Will your taxes go up if you install solar panels? In Ann Arbor, yes. | MLi... http://www.mlive.com/news/ann-arbor/index.ssf/2016/12/will_your_taxe...

shrinking each year, and he wonders if his taxes should shrink, too.

All that said, Holevinski said he didn't go solar for the money. He said he
believes in climate change and he's trying to do his part.

"I'm convinced that climate change is real and that this is the time to
encourage, not discourage, all renewable energy sources," he said.

Mirsky said there are roughly 140 solar installations citywide right now
and he suspects many of the early adopters of solar energy aren't in it
for financial reasons, but rather for environmental reasons.

"But if we're going to get 500 installations a year between now and 2025
... we think more and more of those people will be looking at the financial
payback of that," he said, arguing the taxes will be a real barrier for some
people.

"There's a disincentive for installing solar, which is the property tax,"

Mirsky said. "And whether it's impacting just Ann Arbor or whether it's
impacting the whole state, this disincentive applies potentially
statewide, so it really puts a damper on solar installations, certainly in
the city of Ann Arbor."

Shoshannah Lenski, an Energy Commission member who works for DTE

Energy, said she questions whether the tax increases are really stopping
many people from making the decision to go solar.

Regardless of what happens on the renewable energy front in Michigan,

she said DTE is going to continue to reduce its emissions as it retires

9 of 11 1/16/2018 5:41 PM
Will your taxes go up if you install solar panels? In Ann Arbor, yes. | MLi... http://www.mlive.com/news/ann-arbor/index.ssf/2016/12/will_your_taxe...

coal plants and transitions to cleaner energy such as wind, solar and
natural gas.

Lenski also argued there are many benefits from having centralized solar
energy provided by DTE Energy.

Mirsky noted 2.4 megawatts of solar installations are needed each year
for the next 10 years to meet the community's goals.

If that happens, there could be hundreds of thousands of dollars worth

of additional taxes paid by solar installation owners.

"We currently have less than 1 megawatt of solar installed," Mirsky said,
estimating that means people who've gone solar collectively are paying
less than $37,000 in annual taxes on panels if they are taxed at $37 per
kilowatt, though that's not necessarily the methodology that's always
been used.

Clevey said he's planning to appeal his assessment to the city's Board of
Review in March, and, if necessary, up to the Michigan Tax Tribunal in
hopes of at least getting some added clarity on the issue of solar
taxation.

"We're about to invest new money, taxpayer dollars, to launch a solar

program in Ann Arbor operated by the Clean Energy Coalition to
increase solar in Ann Arbor commensurate with the Climate Action
Plan," Clevey noted.

"At the same time, we're saying that the payback for your investment in

10 of 11 1/16/2018 5:41 PM
Will your taxes go up if you install solar panels? In Ann Arbor, yes. | MLi... http://www.mlive.com/news/ann-arbor/index.ssf/2016/12/will_your_taxe...

this program will be 22 years. We think these are two incompatible

things. So, one way or another, we need to remove this barrier."

Registration on or use of this site constitutes acceptance of our User Agreement and Privacy Policy

© 2018 MLive Media Group. All rights reserved (About Us).

The material on this site may not be reproduced, distributed, transmitted, cached or otherwise used, except with
the prior written permission of MLive Media Group.

Community Rules apply to all content you upload or otherwise submit to this site.

Ad Choices

11 of 11 1/16/2018 5:41 PM