Despite having just received more than $100,000 in taxes from Con Edison from the Panoche Valley Solar project, the San Benito County Board of Supervisors indicated it did not trust the company to pay additional taxes in a timely manner and decided to send a letter of intent that could eventually result in a cease-and-desist order against the project.

After a lengthy Aug. 22 discussion with Eric Cherniss, vice president of the project, which included Supervisor Mark Medina’s demand that Con Edison deposit additional monies into an escrow account by  Friday, Aug. 25, Supervisor Anthony Botelho made the motion for the letter of intent. 

“Come Friday, Con Edison will not put money into escrow. They won’t share the agreement, and they’re downsizing the project,” he said before making the motion.

Earlier, Cherniss came before the board to answer their concerns after they learned in July that there would be little, if any, sales tax revenue to the county, along with the fact that the project had been drastically downsized, and a large portion of it was being moved to the Imperial Valley in Southern California. The county promised possible legal action and cancellation of the entire project. 

Cherniss first gave updates on concerns that were brought up at the previous supervisor meeting — the first being sales taxes. He said there are two sales tax processes associated with the project: The first having to do with the construction contractor. It was his understanding that about 90 percent of this tax had been appropriately allocated to the county. The second tax is associated with the solar modules, which he said was done inappropriately when they were paid to San Francisco rather than San Benito County. Cherniss said the situation had been rectified and it was hoped statements would be filed before the end of the quarter, and that by Sept. 30, he would provide documentation to prove monies had been paid to the San Benito County.

When Supervisor Anthony Botelho questioned him further about tax percentages, Cherniss said he was trying to determine from where the remaining 10 percent might still come, but he said it was difficult because it involved sub-contractors and even their sub-contractors. Botelho wondered how much money was involved, including interest or penalties, and how it could be verified. Cherniss said numbers were being given to the county and were going through an audit process. Botelho responded that the county needed the numbers so, “we can watch you, too.”

Medina asked Cherniss for a specific date on which the county would be paid. Cherniss started to blame the California sales tax process when Medina interrupted him: “It’s the process that you guys failed in the beginning. If you would have actually had it earmarked for San Benito County from Day 1, we would have that in our coffers. You made a mistake. The money you owe us, we want to see that in an account by Friday.”

When Cherniss responded, “OK,” Supervisor Jaime De La Cruz asked, “Is that ‘OK, yes we can do it?’” Cherniss equivocated with, “That’s an, ‘OK, I’m hearing Supervisor Medina. I think what Panoche Valley Solar has been willing to communicate with the county, as we understand, this sales tax issue is our issue and not your issue. And we’ve been open to setting up an escrow account.’ The money is going through the process to alleviate any concerns of the county in a ‘trust-you situation’ we’d be willing to put certain monies into an escrow.”

“By this Friday?” Medina challenged.

“I hear the request for this Friday,” Cherniss came back diplomatically. “I think for an escrow to be set up will take a little bit of time for our attorneys and county counsel to work through the logistics. I’ll commit to make sure those meetings happen.”

Medina told him committing to meetings meant nothing and demanded again that the money that has been owed to the county for years must be paid by Friday. He also said there has to be a great deal of accrued interest. Cherniss admitted he did not know to what the company could commit, but he would propose a possible resolution within 24 hours. Supervisor Jerry Muenzer said it was his understanding that Cherniss had already committed to putting $2 million into the escrow account, but was now hedging that any amount would be deposited by Friday.

“In the end, you’re just blowing us off,” Muenzer accused. “That is getting to the boiling point for this board. We’re tired of it and we’re not seeing anything happening. When Fresno County threatened to shut you down over the road, they got something out of it. Are we being forced to go that route?”

Cherniss said the company did commit to paying the county and it was working with county counsel to determine documentation in order to proceed, which was still being discussed. Botelho said Con Edison has no credibility and the documents needed to be sent to the county assessor who could determine if the company is being honest. Botelho said the county wants to be paid sales taxes on the original design of 247 megawatts — which is a reduction from the original design of 399 megawatts, according to Cherniss — and not 125 megawatts.

“That’s not an ‘ask or request,’ it’s more of a demand,” Botelho said.

Without responding to Botelho, Cherniss moved to the issue of property taxation. He said this involved taxes on real property sitting on the land and a payment in-lieu of property tax, which he said is another revenue stream for the county that would be paid by the developer. He said solar equipment installed on the property is exempt from taxes, and that the developer had already paid it (the $100,000 mentioned earlier) to the county that morning.

Cherniss also discussed local job opportunities at the project site. He said there are between 100 and 200 workers at the site each day and that the project is a union job with an agreement includes preferential treatment for hiring local residents. He said the various unions were telling him that they were having difficulty sourcing county labor.

“There are people in San Benito County who are able to work, but they are not selecting this job over other jobs,” he said, adding that he is looking at different ways to attract locals to work at the site. Muenzer said he had heard county residents had, in fact, applied and were not hired. Cherniss promised to do whatever he could, but reminded the board all job hiring has to go through the unions.

Regarding the reduction in size of the project, Cherniss said it would also reduce sales taxes, as well as the payment of an in-lieu of property tax amount. Botelho shot back that he had an idea how to solve all their problems: the sales and property taxes would not be reduced, no matter the size of the project.

“We stay whole and you can build whatever you want,” he said. “What do you think?”

Not to be boxed into a corner, as it were, Cherniss said there are many creative ways to look at the situation and contemplated, “The county has initiated a violation or default process that puts us down a certain path that will most likely lead us to mediation or arbitration. There’s probably a settlement that works for both parties. We are open to a dialogue on how best to do that.”

Botelho responded that he would not consider arbitration and in order to get Con Edison’s attention he would recommend a stop-work order. He said the county had been left out of the discussions Con Edison had with environmentalists and the county would not receive taxes owed it. He insisted the taxes must be based on 247 megawatts.

“Whatever gets built out there, the appropriate sales tax will be paid to the county,” Cherniss said and, more or less, drifted back to his arbitration argument rather than Botelho’s demand.

Medina asked who pays property taxes on the 26,000 acres Con Edison had agreed to set aside for wildlife habitat. Cherniss said Con Edison is currently paying the taxes, but if the title is transferred to a nonprofit organization, it would not pay property taxes.

“So, we’re losing money there, also,” Medina said as he looked at Cherniss, who hesitated, then Medina encouraged him, “You can say ‘yes.’” Cherniss acquiesced, admitting it was the case. Medina told Cherniss he could make the county go away simply by making sure a payment based on 247 megawatts appears in the escrow account before close of business Friday.

Supervisor Medina told BenitoLink Aug. 27 that it was decided not to ask Con Edison to deposit money into an escrow, but instead to release all monies due the county to go into the General Fund. He said the supervisors will discuss the issue in closed session Aug. 29, and then vote on it during open session. 

"We're trying to work with them," he said. "I'm trying to build a bridge between the supervisors and Con Edison. One or both Jim Dixon, president and Chief Operating Officer of Con Edison or Mark Noyes, president (and Chief Executive Officer of the Con Edison Clean Energy Businesses), will be here Tuesday. It has sparked some interest if the COO is coming."