Elevating Solar Above Hawaiian Condos Lifts Tax Burdens
Jun 19, 2018
The Kalihi-Palama neighborhood around the Holiday Gardens condo complex just northwest of downtown Honolulu bustles with new growth. Part of a hard-working family community, the 46-unit property’s rooftops are awash in Hawaiian sunshine, making them ideal for solar.
It’s exactly the kind of project that energizes SDC Energy’s tax-conscious investors. Hawaii’s favorable renewable energy incentives provide even more benefits to ensure stable, high returns on solar investments.
Raising the Roof
Holiday Gardens’ two buildings posed some installation challenges, however. Because the utilities and infrastructure equipment for both of the three-story buildings are atop only the larger structure, solar for the entire complex would have to fit up there, too.
It was a difficult dilemma. How could a contractor squeeze 360 solar panels alongside the forest of existing equipment? As it turns out, there was no need to. Instead, the 122.4 KW array was installed on an unusual raised platform that allows easy access to maintain the existing infrastructure for the 1970s-era building.
“The project couldn’t go forward until we figured out how to work around the roof-mounted equipment,” explained Charles Schaffer, president of SDC Energy. “Working with our installation partners, we were able to overcome the logistical difficulties to create an excellent solution for everyone.”
Saving on Taxes
Early in 2017, two founders of a California-based venture capital firm sold a portfolio company. When they went looking for ways to minimize the tax bill from the sale, they zeroed in quickly on solar.
“For somebody with a big tax bill, I don’t know that there is anything else of the appropriate scale that could be used these days to offset taxes for the current year,” one partner said. “We needed to move fast to capture the tax benefits, so working with SDC Energy on something that was ready to go made perfect sense.”
Building to Scale
With its central location near both downtown Honolulu and the international airport, plus its solid community history, Holiday Gardens caught their eye quickly. The scale of the project fit well with their investing goals. They also were attracted to Hawaii’s unique utility situation: All fuel sources to generate power must be brought to the islands from elsewhere and, unlike California, Hawaii continues to offer rebates for solar installations.
By dividing the project in two and creating a separate limited liability company for each part, the partners could channel the tax benefits evenly between them. And because SDC Energy already had the plans and permits in place, the project could be completed and in service well before the end of the 2017 tax year – a key IRS requirement.
Despite a variety of construction delays pushing it from its expected August completion date, Holiday Gardens came online in October.
“Working with the team at SDC Energy was a great experience, " commented one of the partners. “They have a unique combination of solar engineering, construction, finance, and tax structure to ensure the success of the project for all parties envolved - the investor, building owner and contractor."
Raising the Roof