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Iberdrola commits to current tax assessment regime, property protection
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Hello. I was on the Livingston County Board when it voted on the first wind farm application in our county. During the proceeding, we addressed the issue of Illinois taxes on wind farms. Illinois law currently sets a specific dollar value on each MW of installed capacity, which is then taxed according to the rates imposed by local governments. This formed the basis for all the revenue projections put forth by the applicant. I pointed out that the law expires December 31, 2011, which is when construction of the project was to be completed. It was my opinion that local government could not count on receiving the projected revenues, because just when we were supposed to start collecting real money, the law would expire and we would be back to square one as to how to tax wind farms. I also expressed concern that the state legislature might choose to exempt wind energy facilities from taxes, especially since such costs would be passed on to consumers.
In an apparent attempt to sway certain members of the board, Iberdrola Renewables offered the attached written commitment to abide by the current assessment scheme. This letter was waiting for us when we arrived for the meeting on the vote. To the best of my knowledge, most members of the board had no advance notice of this offer; I certainly did not. As I pointed out in the ensuing discussion, the letter only relates to assessed value, not to actual tax revenues paid, so that if the state decided to exempt the wind industry or make other changes to the law, the assessed value commitment would not guarantee actual payment. At a minimum, the letter did not clearly express the intent of Iberdrola in the event of such a policy change. In addition, none of the documents set a minimum number of turbines, so that was another variable that would affect tax revenues. Despite these issues, no changes were made.
The letter also addressed concerns about property values. During the hearings, the company’s expert witness testified that there was no evidence that the wind farm would adversely impact property values in the area. During the hearings and discussions of special conditions, the applicant had resisted providing any property value guarantee plan to protect local residents. The last minute letter included a commitment to institute a property sales program but it stated two conditions: (1) the County Board had to approve the second phase of the project, for which an application was pending, and (2) the board had to impose a property value plan as part of approval of the second phase. I commented that the commitment was vague as to what was being promised and to whom. I also argued that this protection of people’s investments shouldn’t be contingent on approval of the next project. Again, no changes were made.
The committee chair “attached” the letter to the special conditions that had been drafted, and that was enough to convince several board members to vote in favor of the application. That same evening of July 17, 2008, the application for the first phase of up to 155 turbines was approved with 17 voting for it, 3 abstaining and 4 (including me) voting against it.
The story doesn’t end there. It was announced at the next board meeting that the Iberdrola representative who signed the letter, project manager Jesper Michaelsen, was moving back to his native Denmark. In addition, it was reported that on December 30, 2008, Iberdrola withdrew its application for the second phase. As of now, the project appears to be on indefinite hold. Iberdrola’s decision not to pursue the second phase makes it impossible for the county to meet the conditions for establishment of a property sales plan for the landowners in the first phase.
A wind meeting attendee recently told me that speaker Joel Link of Invenergy stated that the wind industry hopes to change Illinois law to reduce the industry’s tax burden. Presumably such a change would decrease tax revenues to host communities who have approved applications that provided projections based on the current law.
A scan of the July 17, 2008, letter is attached for your reference (click here).