Municipal tax/fiscal arrangements to encourage district energy system development

[Len]

IDEA has received an inquiry from a local municipality that is interested in learning how other cities and municipalities have handled tax treatments and franchise arrangements as relates to development of new downtown district energy systems.  The city is looking for ways to support and encourage new system development and to determine reasonable treatments so as not to disadvantage development and operation of private district energy systems while balancing reasonable needs for city tax revenue from operations.
• Franchise fees – structure, applicability, timing and administration.  Have cities entered into franchise fees with DE system operators?  Is there a “holiday period” during construction and development so that payments are deferred until system revenue begins?  Have cities arranged for special purpose payments, (i.e. to urban tree fund so that payments are targeted at specific urban needs rather than amorphous general funds).
• PILOT – Payments in Lieu of Taxes – Have cities used negotiated, structured programs to define payment streams rather than rely on gross receipts tax policy?
• Since district energy systems are capital intensive and are generally limited to a defined geographic segment, customer scale is very different from a tax policy that might work for an electricity franchise, or a cable television franchise.  As a result, local taxes are recovered over a fairly limited population and must not create an unfair burden that creates an economic disincentive for the franchisee.  What are some effective tax or franchise policies that have worked for district energy providers in US and Canadian cities?
Thank you in advance for your comments and suggestions! You can post them here and/or email to Michelle Parks at IDEA (michel...@districtenergy.org).