LANSING – Michigan counties with wind farms stand to lose millions of dollars in property tax revenue due to a recent change in tax policy. In Mason County, Lake Winds Energy Park being constructed by Consumers Power could see its tax bill reduced by about $8 million over the next 20 years.
Wind turbines are considered industrial personal property and taxed on their market value, said Rep. Kurt Damrow, R-Port Austin. Formerly each turbine’s tax liability was based on 100 percent of its value for the first year and depreciated over 15 years until bottoming out at 30 percent.
But the State Tax Commission changed the tax code in early December so that turbines are now taxed at 80 percent on the first year and that drops to 30 percent within five years, Damrow said.
The loss of tax revenue is significant in counties where large wind farms are under development.
In Mason County, construction has begun on Consumers Energy’s first wind park. Lake Winds Energy Park will consist of 56 turbines when it begins generating power in 2013.
The change will result in a loss of $7.8 million in once-anticipated tax revenues over 20 years, said Fabian Knizacky, county administrator for Mason County. Originally Consumers Energy said the county would receive $29 million over 20 years.
“At this point we’re trying to find out what the justification for the change is,” Knizacky said. “We have not received any justification from the tax commission other than the fact they said that they evaluate valuations from time to time and adjust to more current values.”
The State Tax Commission adopted a new set of equations for determining the value of property, said Terry Stanton, director of communications for the state treasury.
They were adjusted to reflect changes in market prices of turbines purchased in the past. He said replacement costs due to wear and tear and old technology were factored in as well.
Consumers Energy has told the county and the Ludington Daily News that they were unaware of the tax change until recently and that they were not advocating for the shift.
“We had no involvement in this. We had no request,” Dan Bishop, Consumers Energy spokesman, said Friday evening.
Bishop said, based on current tax tables, “We’re still talking about $21 million in new tax benefits for (taxing agencies) in the county.”
And, he said, the about $230 million project is only part of Consumers total of $1 billion in investment in Mason County in the coming decade. Starting in 2013, Consumers will undertake an $800 million refurbishing of the Ludington Pumped Storage Plant. Bishop said this is the biggest investment the company is making anywhere in Michigan.
“At this particular time we’re hoping Consumers Energy, through their good neighbor philosophy, will consider to reimburse Mason County at the full level that was anticipated,” said Lewis Squires, chairman for the Mason County Board of Commissioners chairman.
Squires said the money would go to schools, senior citizens and other community projects.
“That’s a sizeable chunk of revenue that we were looking forward to distributing to the necessary agencies that needed it,” he said.
While bothered by the change, county officials are still looking forward to the revenue that the wind park will generate.
“It may reduce the amount of money we’ll be getting, but it’s still new money,” said Joseph Lenius, vice chairman of the Mason County Board of Commissioners.
“It sounds like it’s somewhat of a compromise due to the fact that if they didn’t do that, they’re looking at doing away with the property tax on commercial personal property,” Lenius said. “That would have meant the wind turbines would not have paid anything.”
State Rep. Ray Franz, R-Onekama, said the legislature is trying to reform personal property tax law in Michigan and wind towers present a special case since the towers are personal property and their bases are real property. The thought now is to move them into the class of property called utilities and not include utility property in the personal property exemption, meaning personal property tax would still have to be paid on them.
For more, see related story.