October 1, 2006

Municipalities disagree on how to tax operations

When it comes to taxing wind farms in Pennsylvania, two approaches have been used.

Somerset County assesses the 16 wind turbines at the Meyersdale Wind Farm for tax purposes. That method, which may or may not be what state law and court decisions require, assesses only the ground on which a wind turbine sits, not the turbine itself.

A method used by Wayne County in the northeastern corner of the state is to assess the 43 turbines at the Waymart Wind Farm. It places a value on some, but not all, of the turbines.

FPL Energy, a division of Florida Power & Light Co., owns both wind farms.

Wind turbines typically cost between $1.5 million and $3 million to build. The property tax bill for each one at the Meyersdale Wind Farm is about $1,286.31.

In Wayne County, it’s about $4,400 per turbine. FPL Energy settled on that amount with the county assessor’s office for 2004 and 2005, but it has filed another court challenge of its 2006 assessment.

“It’s Wayne County versus everybody else,” said Steve Stengel, a spokesman for FPL Energy. “They were taxing tangible personal property. You cannot do that under Pennsylvania law.”

John Nolan, the Wayne County tax assessor, declined to say much because of the pending litigation. He said FPL Energy’s current appeal has to do with what is and isn’t taxable.

Power plants in Pennsylvania, whether they use fossil fuels or nuclear energy, pay a lot of taxes, albeit less now than in past years because of favorable court decisions in assessment appeals. Typically, the taxes are high because the plants are surrounded by large, expensive buildings.

The tax was never on the nuclear reactor, for example, but on the building. The equipment inside a power plant was considered personal property, like furniture in a house.

Wind turbines, however, are virtually all equipment and no building, so they could largely escape taxation by local municipalities and school districts if FPL Energy’s interpretation of Pennsylvania law prevails.

Taxation of wind farms varies widely by state.

South Dakota, for example, formerly collected an average $21,478 in taxes annually on each wind turbine. It has since cut that to about $6,250 per megawatt to be more competitive with other states, according to Steve Wegman of the South Dakota Public Utilities Commission.

For a 1.2-megawatt windmill, that works out to $7,500 in taxes, while for a 1.5-megawatt unit it would be $9,375.

Minnesota collects no property tax on turbines but levies a production tax of about $293 annually.

All wind-power producers currently receive a federal production tax credit of 1.9 cents per kilowatt-hour for the first 10 years.

The credit brings down the cost of wind power, on average, by about 1 cent per kilowatt-hour over the 20- to 25-year life of a project, according to Christine Real de Azua, spokeswoman for the American Wind Energy Association.

The federal tax credit reduces the cost of wind power by about 15 percent, she said.

By David DeKok: 255-8173 or ddekok@patriot-news.com


URL to article:  https://www.wind-watch.org/news/2006/10/01/municipalities-disagree-on-how-to-tax-operations/