PUGET RIDGE COHOUSING ASSOCIATION PV SOLAR

DEVELOPMENT

Department of Revenue Rulings

Stu Yarfitz 206-459-3090syarfitz@gmail.com

Puget Ridge Cohousing Association

PRCA is a cohousing community located in the Puget Ridge neighborhood of West Seattle. http://pugetridge.net/

It is a condominium association incorporated in Washington State.

PRCA was established in 1994 after a 6 year development process.

The community includes approximately 50 people aged 1 to 82 and their pets.

It is comprised of 23 units in 11 buildings plus a community building, the Common House, on 2.5 acres.

Participation in Solarize Seattle: Southwest

I got involved with NWSEED as a community volunteer for Solarize Seattle: SW last summer and was on the contractor selection committee.

A number of PRCA community members who were interested in installing solar PV attended a SSSW orientation workshop and signed up for an assessment with Artisan Electric in Aug 2014.

Since that time we have been working closely with Evan Leonard on system design and communication with Beth Mills at the DOR about eligibility for the Cost Recovery Incentive Program.

The Questions…

We wanted to be able to install PV on the roofs of the Common House and three other south facing buildings (C, H, J).

The primary issue that we needed to resolve was whether the condo association itself or groups of unit-owners should own the systems. How could credits and incentives be maximized?

The key issue for the DOR was unity of ownership between the property and the system.

The Outcome… We were successful on obtaining a ruling

that allows us to do the installations on the Common House and the three other buildings, as a group of individual owner investors.

Unity of ownership was determined to exist when there was partial ownership of the property and of the system.

Each unit owner is entitled to claim up to a maximum of $5,000/yr.

The Process…

Evan initially contacted Beth in early Sept 2014

Her initial response was that individual unit owners could place a system on the roof of their buildings, but could not put a system on the roof of a building they didn’t own.

She indicated that we request a ruling on whether the Common House should be treated as being owned by the individual condo owners and therefore eligible for production incentives.

The Problems…

The DOR had very limited experience dealing with condo associations for the production incentive program.

Apparently we were the first to make a request for either the association itself or a group of owners rather than an individual owner.

It was extremely difficult to convince them that all of the buildings, including the Common House, were owned by everyone in common.

Initial Request…

We first requested a ruling just on the Common House.

The request stated that each of the 23 unit owners has a specific real property interest in all Common Elements, which are defined as all portions of the condominium other than the units.

This would include the Common House and all of the roofs.

The request also stated that the individual members would own the system based on their percentage ownership in PRCA.

Then We Made a Mistake…

Before the ruling was issued we decided to ask to include other buildings. We wanted to be sure that the DOR was looking at these roofs as Common Elements as well.

In the process of making this request we erred in asserting that the association, by acting on as a “single-owner” on behalf of the unit owners, would purchase and own all of the systems.

The First Ruling…

The first ruling (PRCA DOR Ruling Association.pdf) issued Dec 4, 2014 was entirely unsatisfactory.

It limited the individual owners to the buildings in which their units were physically located. Disregarding that the buildings were owned in common

by all unit owners. It did not allow unit owners to receive incentive

payments for a system placed on the Common House.

It limited the association to $5,000/yr. for the system as a whole, including the Common House and other buildings.

Building J Installation…

While we were going back and forth with the DOR, 2014 was running out.

Artisan had ordered modules for us to do the Common House and the J Building, which has the best exposure.

We decided to go ahead and have the owners of the units located in J sign a Solarize contract with Artisan for the 2014 tax year.

This was completed in January 2015. Everyone is very happy with this installation.

Second Request…

We still wanted to do the other buildings. Rather than appeal the first ruling we

made a new request with two questions. Does partial ownership in the condo

property by association members entitle them to receive incentive payments of a system in which they are also partial owners?

Can each owner receive up to $5,000/yr.?

Attorney’s Letter

The request was accompanied by a letter from our attorney, Ken Harer, Condominium Law Group, PLLC.

This clarified: The association does not own any property. All unit owners collectively and directly own

100% of the land and buildings. Each homeowner owns a unit within the

property. The owners collectively own all of the property

which is not within a unit’s boundaries.

Second Ruling…

The second ruling (PRCA DOR Ruling Individual.pdf), was issued Feb 10, 2015.

The ruling was exactly what we were hoping for, and enabled us to install PV on all of our roofs, including the Common House, regardless of whether the system owners' units are located in the building on which the system is installed.

The unity of ownership criteria is met by partial ownership!

Each partial owner of a system is entitled to $5,000/yr.

Current Status…

We are going ahead and installing solar PV on the roofs of the Common House and buildings C and H.

Artisan will honor the Solarize price. Installation is scheduled for April 1, contracts will

be signed shortly. We have formed a group of interested unit

owners, named the Sunday Evening Solar Club, which is organizing and coordinating the project.

The SESC is composed of investors, lenders, and the owners of the units in buildings C, H, and J.

Tax credits, incentive payments, and net metering proceeds will be used to pay back the investors and lenders.

We have developed and will be signing memoranda of understanding that specify how the monies will be collected and distributed.

Once the system has been paid off ownership will be transferred to PRCA.

Future net metering proceeds will go to PRCA.

Lessons Learned..

The DOR is not the enemy – they do listen and want to help.

If you ask the right questions you get the right answers.

Talk to a knowledgeable attorney before sending a request to the DOR about something new or unusual.

Persistence pays off.