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County officials propose creating trust fund for wind developments to pay if personal property tax is eliminated, altered

BAD AXE – County officials on Tuesday pitched a concept of working in concert with wind developers to eliminate uncertainty the Michigan Legislature has created by proposing legislation to eliminate the personal property tax, which is the only tax revenue wind companies pay for wind farms.

Officials outlined the progress of wind development in the local area throughout the years, culminating to the present day, where officials say the county stands to see 700 or more turbines erected in the area, while the tax revenue accompanying those structures is in jeopardy.

“This is going to be a major change for our landscape in light of the fact we could end up with 700 turbines in our county in the very near future,” said Huron County Corporation Counsel Stephen J. Allen. “ … This is a very real threat to us. … We could end up with 700 turbines and then the only thing we have out of it is 700 wind turbines.”

Regarding jobs, Huron County Economic Development Corporation (EDC) Executive Director Carl Osentoski said the local impact was pretty substantial during the construction of the area’s two wind farms.

“Restaurants, hotels, ready mix companies, gravel pits, trucking companies are always very, very active and are fully engaged in the construction activities,” he said. “However, when it comes to the actual construction assembly of the turbines, those are done by specialty companies that we simply don’t have in the area.”

Osentoski said the wind farms have not created the number of long-term jobs initially discussed or anticipated.

He said the wind projects originally were believed to result in one job for every five turbines. In reality, the EDC estimates that ratio is about 1 in 10 – and it more than likely will be 1 in 15 in the future, as turbines become more reliable and more of the maintenance can be done remotely, Osentoski said.

A number of wind developers and wind proponents were at Tuesday’s Huron County Board of Commissioners meeting, where a resolution creating the county’s newest wind district was up for the board’s approval.

Concerned by uncertainty of taxes

The district was requested by Geronimo Wind Energy, LLC for the Apple Blossom Wind Farm, a project David Shiflett, lead developer for Geronimo Energy in Pigeon, previously explained could consist of up to 73 turbines and have an assessed value of $159 million.

Shiflett said the tax revenue to the local area would be about $2.8 million, and $1.2 million will be paid to participating landowners in the district, which is located on the west side of the Thumb and includes portions of Fairhaven, McKinley and Winsor townships.

Proponents encouraged the board to approve the new district, citing the environmental benefits of wind energy and noting the state has not eliminated the personal property tax, so the county currently is receiving tax revenue from wind developments.

Yvonne Bushey, of Citizens for Wind Energy, said local jobs have been created and a Bad Axe manufacturer has been making wind turbine components.

Shiflett said Geronimo Wind Energy will create a community foundation to benefit the community, and the company is including as many landowners as possible in the project – including landowners who only own an acre or two. He said he’s also made a considerable personal investment in the community through money paid for rent and meals, clothes, supplies, etc.

Huron County Board of Commissioners Chairman Ron Wruble said all that investment is minuscule compared to the tax revenue created by wind developments. He indicated it’s not the county’s intent to collect a large amount of revenue from wind farms in order to have gold-plated walls. The main emphasis, he said, is to ultimately have the opportunity to drive down millages.

Wruble questioned how the board can approve another wind district when there’s uncertainty as to whether the taxes in place will exist in the future. The revenue to different government agencies – i.e. townships, county, roads and intermediate school district – is why many Huron County residents voted positively for wind developments last November, said Wruble, Allen and Osentoski.

Allen said the discussion would have been different last November if there had been the threat of the elimination of personal property tax.

Discuss creating a trust

The only way the county has the ability to have any direct impact on a device used to replace the loss of the personal property tax is through the county’s right to regulate land use through zoning, Allen said.

It’s not possible to completely prohibit zoning for wind developments in the county, he said. However, the county can establish reasonable conditions as a requirement for the use of land, which have a substantial relationship to the public’s general welfare.

Because numerous developers have indicated they are willing to pay the equivalent of the personal property tax, so long as they can move forward with their respective developments, Allen suggested the county create something akin to an irrevocable trust agreement. The developer only would have to fund the trust if the state eliminates or alters the personal property tax.

“The concept is that they’re not going to have to pay a dime more than they would if the personal property tax was in place,” he said. “And the only time they’d have to pay that dime is if a dime was removed by the personal property tax. Then they would have to put that dime in the trust.”

Allen said there would have to be some type of security device – i.e. posting of a performance bond – to ensure the trust would be funded.

“In other words, the intent of the device would be to maintain the status quo of the local revenue source, thereby reducing some of the uncertainty created by the threatened elimination of the personal property tax,” he said.

Wruble said county officials met with officials from Tuscola and Sanilac counties and various wind developers last week to pitch this concept.

“We wanted to develop some kind of coalition of developers and governmental entities where we could put something together – something similar to what (Allen) has drafted for us or look at something else … – (and) we could approach Sen. (Mike) Green or Rep. (Kurt E.) Damrow to sponsor legislation that would be lobbied for by both sides of the fence,” he said, noting the wind developers have a much larger voice in Lansing than county officials do. Therefore, it would behoove county officials to carve out a plan that has the backing of wind developers so something can be put in place to reduce the uncertainty.

Developers react

Representatives from DTE Energy and Geronimo Energy on Tuesday stressed the companies are willing to work with the county on this issue, though they felt the odds are low of the personal property tax being eliminated or altered without a replacement in place to make up the lost revenue.

Charlie Daum, development director at Geronimo Wind Energy, said the most important thing is to make sure whatever mechanism is used to get revenue from wind developments is something that’s equal for everyone, so not one party or company is more competitive than another.

Daum said Geronimo is willing to put together a plan that makes sense for everyone, and there are a lot of ways to do it. He said Minnesota uses a production tax, which equalizes the playing field. The industrial personal property tax currently place in Michigan also is a nice way to do it, Daum said.

DTE Energy Regional Manager Ron Chriss said DTE believes if the state reforms the personal property tax, it more than likely will follow a production tax concept.

He said there are three principles DTE is willing to stand behind: (1) utility-owned and independently-owned wind developments should be treated the same; (2) DTE opposes any effort to reclassify personal property as real property; and (3) DTE supports a comprehensive policy that restores revenue to local communities if there’s legislation repealing the personal property tax.

Gary Bauer, DTE Energy’s easement consultant, felt statements that the outcome of the last fall’s vote would have been different if the personal property tax was in jeopardy are very subjective. He reminded commissioners that landowners with easements and leases with wind developers also are constituents.

Board approves new wind district 5 to 2

Prior to the board’s vote, Wruble said county officials and members of the Thumb Regional Renewable Energy Collaborative (TRREC) previously attempted to have a meeting like the one held last week with wind developers, but there were some developers who felt the issue wasn’t important enough to attend. Now that there might be a delay in projects moving forward or the board may use its approval as a leverage going forward, the issue’s gotten some attention, he said.

Wruble was apprehensive of voting for the district Tuesday, and he suggested the board hold a public hearing to get more time to consider the issue and garner more feedback from the public. While this idea was favored by Commissioner David Peruski, who heads the Finance Committee, it didn’t have the support it needed to come to fruition.

Commissioners Steve Vaughan and John Horny made the motion/second needed to get the board’s vote on the district. Vaughan said the board already approved districts for DTE Energy and RES Americas, and voting down Geronimo’s request will not halt those developments.

Commissioners John Nugent and John Bodis expressed concerns about the potential elimination of the personal property tax, but voted with Commissioner Clark Elftman, Horny and Vaughan to approve the Apple Blossom wind district.

Nugent said if Geronimo met all the requirements set forth in the zoning ordinance to merit the creation of a wind district, then the county should approve the request. Bodis noted his constituents aren’t in favor of holding up wind projects.

Peruski and Wruble voted against the resolution. Peruski said he will not vote in favor of new wind districts until the personal property tax issue is resolved and the county’s noise ordinance is amended.

Wruble stressed he is not anti-wind, but Michigan law requires officials consider the welfare and benefit of the county.

“As far as I’m concerned, 90 percent of that welfare and benefit comes from taxes,” he said.

Following the board’s vote, Horny told Wruble, “you’re going to catch heat for this.”

Wruble responded that he’s not anti-wind and he just wanted more time. He said he didn’t want to vote no on the project, but “I am very fearful of what we’re gambling out there.”

Whatever voice the county had in Lansing was lost with that 5 to 2 vote, Wruble said.

“But hopefully things work out,” he said, noting he doesn’t want his signature on something that five years down the road isn’t benefiting the average resident.