September 10, 2010
Editorials, Wyoming

Wind energy tax appeal puts counties in a bind

Star-Tribune Editorial Board, 10 September 2010

Converse County’s experience with Duke Energy and property taxes the company owes should serve as a cautionary tale for all Wyoming counties counting on wind energy development to improve their economy. It should also spur state lawmakers to re-examine tax exemptions they’ve approved to help bring more wind farms to Wyoming.

Converse County expected to receive $2.8 million in property taxes per year and $13 million over the next five years from Duke Energy. The figures matched the company’s own property tax estimates that it presented to the Wyoming Industrial Siting Council when it sought to build two wind farms in the county. The state’s tax assessment was almost identical to Duke’s numbers.

But the company has now filed appeals of the state’s property tax assessments for both of the Converse County wind projects and two more that it built in Laramie County. Now, Duke claims it only owes about half as much as it previously estimated. Converse County Commission Chairman Ed Werner said Duke “threw us a curve ball.” But it might also be a spitter, a deliberately deceptive pitch that, once detected, usually results in the pitcher being ejected from the game.

It’s up to the State Board of Equalization to determine if Duke’s action amounts to a broken promise. But it’s easy to understand Werner’s frustration when he posed this question to the company: “We’re saying, you told us that was your best estimate. Are you just stupid, or are you trying to mislead us?”

Duke officials defended their property tax appeal by noting their figures were only an estimate, and that the company disagrees with the methodology the state used to calculate the tax assessment. They contend the state failed to remove intangible costs, which can include long-term contracts for the delivery of power, and also didn’t recognize all forms of depreciation.

Duke could be correct, but it needs to be transparent about how it calculated its own estimates. Sen. John Schiffer, R-Kaycee, co-chairman of the Joint Revenue Interim Committee, has openly questioned whether Duke supplied false information under oath to the Industrial Siting Council. It’s a question that must be answered. Converse County is well within its rights if it decides to protest and ask the council to reopen its permits for the wind projects.

While the issue of what is the proper assessment is being reviewed, about half of the taxes the state maintains is owed by Duke Energy is being held in escrow. Those funds are not being used to pay for public services directly impacted by the construction and ongoing operation of the wind farms, so the counties have to pick up the tab.

Could other funds be tapped for impact assistance? To attract wind energy development, the state of Wyoming has exempted the industry’s sales and use taxes. But that exemption is set to expire in 2011, unless the Legislature extends it. Schiffer said his committee has found that a tax exemption may not make any difference to companies, which decide whether to build based on the quality of wind, not tax breaks.

If other wind energy companies are going to follow Duke’s lead and protest their tax assessments, the Legislature needs to explore ways to provide counties with the money they need up-front to deal with wind farm impacts. The creation of a state loan program in which counties could receive impact assistance payments based on estimated sales and use taxes, which the wind developers could pay back to the state over time, is another option being explored by the panel that has potential merit.

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