Commission Agenda Item Cover Sheet

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8P P tax Commission Agenda Item Cover Sheet 1/19/2017 TO: FROM: SUBJ: Chair Gopalpur and members of the Oregon Business Development Commission (OBDC) Art Fish, Business Incentives Coordinator

initially applied to Business Oregon for approval by the Commission of its proposed Montague (pronounced Montag ) wind farm facility as a standalone SIP project that may receive its own 15-year

In 2008, the OBDC had approved a SIP project for the Pebble Springs Wind Farm comprising three Iberdrola (now Avangrid) Renewables wind energy facilities in Gilliam County.

1 8P P tax Commission Agenda Item Cover Sheet 1/19/2017 TO: FROM: SUBJ: Chair Gopalpur and members of the Oregon Business Development Commission (OBDC) Art Fish, Business Incentives Coordinator Determination of Strategic Investment Program (SIP) Eligibility for Montague Wind Power Project Background On December 29, 2016, Montague Wind Power Facility, LLC, part of Avangrid Renewables, LLC initially applied to Business Oregon for approval by the Commission of its proposed Montague (pronounced Montag ) wind farm facility as a standalone SIP project that may receive its own 15-year period of SIP tax treatment. Submissions were completed in January In 2008, the OBDC had approved a SIP project for the Pebble Springs Wind Farm comprising three Iberdrola (now Avangrid) Renewables wind energy facilities in Gilliam County. The Pebble Springs and Leaning Juniper II (now IIa & IIb) facilities are currently in operation and in their th year out of 15 for receiving SIP tax treatment. Though fully permitted and designed, the third facility formerly Leaning Juniper III, now Montague never commenced construction. It would have accounted for more than half of the original, overall project s 700 megawatts (MW). SIP is a multilayered partial property tax exemption, currently used by several major investments across northern Oregon. Attached is a table that Business Oregon maintains online showing all current users, for which future iterations will also include two PGE natural gas plants and parts of Intel s 2014-approved $100 billion of investment. Key elements of SIP tax treatment are: 15-year period, beginning with the tax year after sufficient property is placed into service. Exemption on real market value of project property in excess of taxable portion, which grows 3% per year, starting from $25 million in rural areas ($100 million for urban). Community service fee lesser of 25% of tax savings or $500,000 (rural) annually, and That the requisite local-government agreement may contain additional conditions on the business firm, which typically involve other local payments. No employment criteria, although state statutes: o Require a first-source agreement by the business with publicly funded job training providers, like with lottery-benefitting projects and enterprise zones. o Exhort the employer to hire from within the surrounding region. Program Criteria and Tax Impact To receive the benefit of property tax assessment under SIP, a determination is required by the Commission upon finding that the project is eligible under the law. Gilliam County has fulfilled the necessary procedural requirements: Public hearing (December 21, 2016), Entering into a written agreement with Montague/Avangrid, and Voting to request OBDC approval (adopted resolution).

2 and Re: SIP Determination for Montague Wind Power Facility 1/19/2017 Moreover, the proposed project and business are in a traded-sector industry, in that Montague/Avangrid will sell electrical power competitively to utilities and similar customers in the Pacific Northwest and California, and the investment will exceed the $25-million minimum for such a rural project. As part of the application, in accordance with previously established OBDC criteria, Avangrid also affirmatively addressed the potential for changes or transfers within its overall Oregon employment, indicating that nothing as such is anticipated. Over 15 years, the local revenue on the taxable portion would approximate $6 million, with gross tax savings for Avangrid of around $57 million, out of which would be subtracted the following for a net benefit to the company of $11.4 million: Mandatory community service fee, which is estimated to be nearly $7.5 million (subject to distribution by separate agreement among the county and local taxing districts), and Agreed-to payments totaling about $38.4 million (based on full build out). Project & Company According to the submitted application: The wind farm will consist of two distinct phases (Montague I & II) for a total of 404 MW of nameplate electrical capacity. Beginning in August 2017, the $590-million project will take three years to construct and install a vast and varied set of improvements, equipment and systems. In addition to obligatory elements, the written agreement between Gilliam County and Montague will entail payment schedules: o Per megawatt of: $5,925/MW to the county (down from $8,927 in the original agreement) and $150/MW to Community Renewable Energy Association (CREA), and o Totaling $4 million to the county for local improvement (up from $3 million, and only that amount without phase II). When operational, only new full-time employees with average wages of $58,000 would be added to Avangrid s existing workforce in the Mid-Columbia region. Construction activities are reportedly planned to have minimal impact on public services and are expected to provide substantial economic benefits to local communities, with numerous temporary workers staying in area motels, eating at local restaurants and purchasing other amenities such as gas and groceries. Any further analysis of resulting economic impacts would also need to incorporate the expenditure of revenues received by local governments. Avangrid Renewables is a subsidiary of 31TUAvangrid, Inc.U31T part of the IBERDROLA Group. IBERDROLA, S.A. claims to have the largest renewable asset base of any company in the world, with more than 14,000 MW of renewable energy generation spread across a dozen countries, and employing more than 28,000 people in nearly 40 countries. Avangrid Renewables, LLC is headquartered in Portland, Oregon, with 390 employees in Oregon. It has more than $10 billion of operating assets totaling more than 6,000 MW of owned and controlled wind and solar generation in 19 U.S. states, evidently making it the second largest provider of renewable power in the U.S. (Avangrid Renewables, LLC recently changed its legal name from Iberdrola Renewables, LLC, and is in the process of implementing a rebranding effort) Business Oregon Page 2 of 3

3 Re: SIP Determination for Montague Wind Power Facility 1/19/2017 Requested Action: Informational Only For Commission Input/Discussion For Commission action Determination that Avangrid s project is subject to tax treatment under ORS , by approving the resolution SIP 17 01, as attached here. It contains further details on the eligibility of the project and other findings, and in this case, it serves to amend OBDC resolution SIP 08 03, separating the Montague Wind Power Facility out from that 2008 resolution and project description for the Pebble Springs Wind Farm. Business Oregon Page 3 of 3

4 Oregon Strategic Investment Program (SIP) Projects based on 2016 Annual Employment Reports Intel Corporation SIP1999* Business Project name (In order of determination by the Oregon Business Development Commission, following county process) Microchip Technology, Inc. Microchip* Intel Corporation SIP2005 Georgia-Pacific Consumer Products LP Wauna Paper Mill-PM#7 Genentech USA, Inc. Hillsboro Fabrication Facility EDP Renewables NA/Telocaset Partners, LLCs Elkhorn Valley Iberdrola Renewables, LLC Klondike Wind Power III, LLC Portland General Electric Company Biglow Canyon Windfarm Invenergy, LLC Willow Creek Energy Iberdrola Renewables, LLC Hay Canyon & Star Point Wind Farms Iberdrola Renewables, LLC Pebble Spgs. & L. Juniper II A-B Wind Exelon Corporation Echo Windfarms Eurus Energy America Corporation Combine Hills II, LLC NEXTera Energy Resources, LLC Stateline 3 Wind Caithness Corporation Shepherds Flats Gilliam County Caithness Corporation Shepherds Flats Morrow County County Taxes paid on project property property taxes, 15-year exemption and Investment Costs Employment and average annual payroll in 2015 Taxes saved on exempt property Special SIP fees paid in 2015 Net revenue loss locally Year out of 15 Investment by end of 2013 Additional investment since 2013 Newly created jobs Retained jobs Wage or salary (all jobs) Compensation (with benefits, all jobs) State personal income tax revenue Multnomah $2,305,000 $17,707,000 $0 $14,697,000 15th $12,500,000,000 $0 (0) 0 $0 $0 $0 Multnomah $670,000 $719,000 $246,000 $351,000 13th $392,000,000 $91,280, $34,593 $61,359 $814,711 Washington $1,840,000 $158,218,000 $22,899,000 $108,422,000 5th $13,818,000,000 $7,070,030,000 4,073 7,246 $125,347 $154,137 $90,650,481 Clatsop $284,000 $2,027,000 $500,000 $1,182,000 7th $370,000,000 $45,560, $78,090 $90,584 $229,223 Washington $2,606,000 $2,801,000 $920,000 $1,405,000 5th $550,000,000 $79,050, $88,207 $101,095 $2,002,098 Union $270,000 $564,000 $188,000 $280,000 7th $154,000,000 $15,740, $68,221 $74,067 $54,748 Sherman $477,000 $4,561,000 $2,255,000 $1,531,000 7th $456,000,000 $1,860, $62,308 $84,115 $46,618 Sherman $477,000 $11,681,000 $6,411,000 $3,284,000 7th $962,000,000 $1,380, $65,494 $88,337 $92,802 Gilliam Morrow $380,000 $884,000 $228,000 $506,000 6th $130,000,000 $330, $66,311 $75,248 $19,047 Sherman $463,000 $2,358,000 $1,260,000 $697,000 6th $327,000,000 $1,190, $59,876 $80,833 $23,419 Gilliam $319,000 $3,232,000 $2,380,000 $303,000 6th $535,000,000 $160, $57,304 $77,351 $33,619 Morrow Umatilla $369,000 $295,000 $268,000 -$23,000 6th $108,000,000 $120, $54,016 $67,520 $21,457 Umatilla $267,000 $431,000 $266,000 $92,000 5th $137,000,000 $0 4 6 $42,500 $52,000 $19,906 Umatilla $371,000 $786,000 $477,000 $175,000 5th $188,000,000 $0 6 0 $83,739 $101,598 $26,207 Gilliam $284,000 $8,806,000 $4,898,000 $2,411,000 3rd $963,000,000 $ $63,983 $90,855 $102,694 Morrow $398,000 $3,725,000 $1,839,000 $1,253,000 3rd $278,000,000 $ $62,044 $88,102 $34,231 T O T A L A V E R A G E $12,000,000 $219,000,000 $45,000,000 $137,000,000 $31.9 billion $7.3 billion 5,050 7,456 $119,098 $147,071 $94,171,261 * Exemption began too long ago to be part of "gain-share" distributions to local governments under 2007 law, which is the purpose of these reports, rather than verification of a statutory hiring requirement. Latest property tax year ending on prior June 30; 15 year exemption is on project property in excess of taxable portion, which begins at $25 or $100 million and rises 3% per year; taxes paid are on taxable portion and possibly other associated property. Foregone taxes adjusted using standard factor of revenue loss versus approximately one-sixth (17%) that is shifted to other taxpayers under local levies, and reduced by special payments that consist of statutory community service fee and locally negotiated amounts. Newly created and retained jobs (full-time equivalent 2,080 hours/year) associated directly with project, excluding (indirect) jobs with or for construction, vendors, suppliers, tangential company operations, or even on-site contractors, other than a general project operator. State tax revenues based on wage data and latest average tax rates by income level from Department of Revenue statistics; does not include revenue associated with indirect employment or any induced/multiplier effect due to employee spending. Source: Business Oregon April 19, 2016

5 RESOLUTION (SIP 17 01) OREGON BUSINESS DEVELOPMENT COMMISSION DETERMINATION OF APPROVAL FOR STRATEGIC INVESTMENT PROGRAM Montague Wind Power Facility WHEREAS, the State of Oregon Legislature created the Strategic Investment Program ( SIP ) under ORS 285C.600 to 285C.635 (2015), so that enormous capital investments in taxable property by traded-sector industries might be subject to more appropriate taxation, in order to foster economic growth and to improve employment opportunities in this state and in the areas where such a project is located. WHEREAS, the Oregon Business Development ( OBD ) Commission is charged by law with determining eligibility and establishing the description of the proposed project and the property constituting it for purposes of assessment and ad valorem taxation ( SIP exemption ) as provided in ORS WHEREAS, Montague Wind Power Facility, LLC ( Montague ), part of Avangrid Renewables, a renewable energy developer based in Portland, Oregon, proposes to construct a new wind farm in Gilliam County with a total investment cost of around $590 million in real and personal property at a location meeting the definition of a rural area under ORS 285C.600. WHEREAS, by resolution adopted on December 21, 2016 (# ), the County Court in and for Gilliam County has formally requested that the OBD Commission approve this project under SIP. WHEREAS, the proposed Montague wind farm corresponds to what was formerly known as the Leaning Juniper III facility and included with the Pebble Springs Wind Farm, a SIP project approved by determination of the OBD Commission in Resolution SIP 08 03, which would be amended here to formerly exclude Montague property from that partially developed and long-operating SIP project. WHEREAS, Montague has made application for its wind farm to Business Oregon (the Oregon Business Development Department), which has reviewed and found it to be complete and in order as described in OAR chapter 123, division 23. WHEREAS, the county and special taxing districts (comprising at least 75 percent of such districts taxing authority where the exempt property is located) shall agree on the distribution of the community service fee within three months, providing the department with a copy of the agreement; otherwise, the OBD Commission shall establish the distribution formula after such time.

6 RESOLUTION SIP STATE OF OREGON BUSINESS DEVELOPMENT COMMISSION WHEREAS, pursuant to documentation of the proposed project by department staff and to a public meeting, the OBD Commission also makes the following FINDINGS: 1. The project is an eligible project under ORS 285C.600 and 285C The project will directly benefit a traded sector industry under ORS 285B.280, in that the proposed property will generate electricity that is used for wholesale through interstate power markets or interchangeable with such electricity. 3. The project s total cost will exceed $25 million. 4. Property/property value that will constitute the project is not: a. Previously owned or leased by the applicant, b. Previously exempt under SIP the former Leaning Juniper III wind farm s development never began or under ORS 285C.175 (enterprise zones), or c. Part of any investment for which the applicant is authorized in an enterprise zone. 5. On December 21, 2016, the governing body of Gilliam County held a public hearing regarding the project. 6. The county government has entered into a written agreement with the applicant, consistent with the provisions of ORS 285C.609(4) and (5) including provisions for the payment of the community service fee while also concurrently amending and restating agreements pertaining to the Pebble Springs, Leaning Juniper IIa and Leaning Juniper IIb wind farm facilities, to clarify those agreements effect in isolation from the proposed Montague wind farm (formerly Leaning Juniper III facility) 7. By official action, the county s governing body has requested the OBD Commission s determination that the project shall receive the SIP exemption. 8. The applicant has executed a first-source hiring agreement with publicly funded job-training providers covering the term of the exemption through the State Employment Department office in The Dalles. 9. The applicant has made payment to the department under ORS 285C.612 for the required application fee and will pay the administrative fee of $10,000 in total as due with approval by the OBD Commission. 10. The applicant has committed to the following: a. To respond in a timely manner to the requests and needs of the county assessor for Gilliam County and the Oregon Department of Revenue in their administering the project s SIP exemption, including but not limited to OAR , and b. To ensure for any leased property constituting the project that the ultimate lessee is responsible for the payment of taxes on property as assessed and levied under ORS The OBD Commission has not imposed any additional condition on Montague related to this SIP project. Page 2 of 4

7 RESOLUTION SIP STATE OF OREGON BUSINESS DEVELOPMENT COMMISSION 12. OBD Commission s consideration of the SIP application was included as part of the agenda for the public meeting scheduled on January 27, 2017 Oregon. NOW, THEREFORE, THE OREGON BUSINESS DEVELOPMENT COMMISSION DOES HEREBY RESOLVE THAT: A. The project that Montague Wind Power Facility, LLC proposes to own and operate is approved under ORS 285C.600 to 285C.635 for the SIP exemption, such that real and personal property of the company in Gilliam County, as used for this wind farm project, shall be assessed and taxed as provided under ORS B. This approved project is further defined by the project description prepared by the department and appended to this resolution. C. Resolution SIP is amended, including the project description appended to it, such that the determination approving the Pebble Springs Wind Farm on November 7, 2008, is modified for purposes of that SIP exemption: a. To exclude property comprising what was then known as the Leaning Juniper III facility or wind farm, so that the Pebble Springs Wind Farm is inclusive only of the Leaning Juniper IIa & IIb facilities, and b. To reduce the maximum aggregate nameplate generating capacity that defines the Pebble Springs Wind Farm (inclusive of the Leaning Juniper IIa & IIb facilities) from 700 to 300 megawatts of electricity. D. The Commission Chair may execute this resolution. E. The department shall furnish executed copies of this resolution to the applicant/montague, Gilliam County Judge, Gilliam County Assessor, and the Department of Revenue. ADOPTED BY OFFICIAL ACTION OF THE BUSINESS DEVELOPMENT COMMISSION FOR THE STATE OF OREGON, ON THE TWENTY-SEVENTH DAY OF JANUARY, TWO THOUSAND SEVENTEEN. Kanth Gopalpur, Chair, OBD Commission Attached Appendix Page 3 of 4

8 APPENDIX TO RESOLUTION SIP PROJECT DESCRIPTION The proposed project as approved shall comprise wind turbine generators installed or placed in service by Montague Wind Power Facility, LLC in phases or stages at the Montague Wind Power Facility project site area in Gilliam County beginning on or after January 17, The project further consists of associated property, as located at or developed in close association with the Montague site area, including without limitation, roads & civil construction work, underground & overhead electrical lines, wind turbine steel towers & foundations, high-voltage transmission lines & pole structures, transformers, communication systems, meteorological monitoring towers, FAA lighting equipment, operations & maintenance facilities, grid interconnection facilities, and one or more substations, as well as the land directly beneath these facilities and the associated supporting infrastructure, unless acquired by Montague Wind Power Facility, LLC, Avangrid Renewables, LLC, or any commonly controlled business firm before January 17, The applicant estimates total cost of project investments at $590 million, but it may in reality be more or less. The project is restricted to such property investments as described above, for which the aggregate nameplate generating capacity is not more than 404 megawatts (MW) of electricity. The project further includes repairs, replacements, re-powering, modernization, renovations and remodeling of such property made during the period of assessment and exemption under ORS Subject to its site certificate issued by the Oregon Energy Facility Siting Council (EFSC), Montague may add to or subtract from the property that constitutes the project (including but not limited to the aforementioned repairs, replacements, re-powering, modernization, renovations or remodeling) and shall notify Gilliam County of any such additional or subtracted property. Such changes allow affected project property neither to exceed the maximum of 404 MW nor to substitute later property for operating property already existing under this cap. For purposes here, property has the meaning assigned to that term in ORS through Page 4 of 4

FILED 11/29/2017 3:32 PM ARCHIVES DIVISION SECRETARY OF STATE

FILED 11/29/2017 3:32 PM ARCHIVES DIVISION SECRETARY OF STATE OFFICE OF THE SECRETARY OF STATE DENNIS RICHARDSON SECRETARY OF STATE LESLIE CUMMINGS DEPUTY SECRETARY OF STATE PERMANENT ADMINISTRATIVE ORDER OBDD 13-2017 CHAPTER 123 OREGON BUSINESS DEVELOPMENT DEPARTMENT