February 3, 2012
Michigan

Special windmill tax in the works

By Kate Hessling, Assistant News Editor, Huron Daily Tribune, www.michigansthumb.com 2 February 2012

UPPER THUMB – Proposed legislation creating a special tax for commercial wind, biomass and solar systems currently is being reviewed by the Michigan House Committee on Tax Policy.

“I think we’re going to be able to get this legislation through in a timely manner,” said State Rep. Kurt E. Damrow, a Port Austin Republican who sponsored House Bills 5278 and 5279. The bills create a separate category to tax the above alternative energy projects. It’s called the Alternative Commercial Energy Systems (ACES).

Damrow said the tax is designed to make it much easier for counties and townships to establish budgets, as the amount of revenue generated from the projects is not based on the depreciation scale that currently exists.

Huron/Tuscola Equalization Director Walt Schlichting said Damrow’s proposal would remove commercial wind, biomass and solar electric generating systems from the tax rolls. Rather than paying personal property taxes, developers would make ACES payments.

The payments either would be a base fee that’s established for each system based on the rated megawatt hours each unit will produce, or $4 per megawatt hour generated for sale.

“The tax would be an either or. It would be the greater of (two choices). The first choice is based on the production capacity,” Schlichting said. “… That’s option A. Option B is $4 per megawatt hour generated for sale. So the way I’m reading and understanding it is the tax would be the greater of those two things – either a flat fee based on capacity or a $4 per megawatt hour generated that year.”

Schlichting said he doesn’t see why the ACES tax can’t be a workable replacement for the personal property tax wind developments currently pay.

Currently, the amount of personal property taxes wind developers pay the county, local townships, schools and libraries decreases each year because of depreciation. Also, a ruling by the Michigan Tax Commission in October is expected to result in a decrease of revenue from local wind developments this year.

Damrow said his proposed plan is a county levied tax with 40 percent of the revenue going to the county board of commissioners general fund, 40 percent to the township general fund and 20 percent divided among the host county public schools. He said with his plan, a township with 50 commercial 1 to 3 megawatt generator wind turbines would see a minimum payment of $482,000 annually to its general fund, and the same amount would be paid to the county general fund. Based on 500 turbines, the annual minimum payment the local schools would share would be an additional $2.41 million, Damrow said.

In 2011, revenue from the local wind developments was $954,760, according to information from Huron County Treasurer Sherry Learman. Of that, $360,343 went to the Huron Intermediate School District and host school districts, and $239,739 was paid to host townships. The county $387,837 and the Pigeon Library received $3,306. The remainder was raised through summer and winter local administration fees.

Mike Krause, member of the Thumb Regional Renewable Energy Collaborative (TRREC), said TRREC currently is working with the Michigan Association of Counties, Michigan Township Association and officials from other counties that are experiencing wind development to develop a strategy to approach the State Tax Commission about why it lowered the amount of personal property taxes for wind developments. Officials previously estimated the county will lose more than a quarter million dollars this year because of that decision.

Krause said he’s interested in seeing how Damrow’s numbers compare to current and prior multipliers established by the State Tax Commission.

Krause said he’s sure Damrow’s bill will be part of the discussion as officials continue to look for a way to get revenue from wind developments if the personal property tax is eliminated.

“We need to look at all the alternatives, and this is another alternative for us,” he said.

Damrow said he believes his proposed legislation will be “the final outcome” as to of how wind developments will be taxed in the future.

He said he feels more comfortable having revenue from wind developments protected by legislation, rather than being vulnerable to changes by the State Tax Commission.

“We saw what happened with the tax commission overnight with no discussion, and you don’t want to risk that,” he said in reference to the tax commission’s October ruling.

Huron Intermediate School District Superintendent Joe Murphy told the Tribune he needs to study the bills completely before he can make an opinion about them.

“I look forward to working with officials from counties, townships, and wind energy to see a fair solution to the issue of taxation of wind energy,” he stated in an e-mail.

Harbor Beach Community Schools Superintendent Lawrence R. Kroswek felt the proposed legislation is very ambitious for residents and local school districts in the Thumb.

“Right now, we do need extra dollars coming into public school education,” he stated in an e-mail. “I believe that we are all tired of cutting programs and eliminating opportunities for our schools to educate the ‘whole child.’ I can only hope that we would have an opportunity to receive this type of funding and use it wisely on behalf of our children.”

Lakers Superintendent Robert Smith also was appreciative of the proposed legislation. He also praised Damrow for previously thwarting an effort to exempt wind turbines from all taxation.

“Those profitable companies need to support the communities who are directly impacted in many ways,” Smith stated in an e-mail. “Personally, I am pleased that the tax revenue in this proposal will remain in the county, townships and schools whose residents must view them spinning on the horizon. For schools, there is a potential, as I understand it of an additional $600 to $1,000 per pupil that cannot be used for salaries or benefits, only for educational programs. Such revenue will provide relief to the smaller districts in our county and should, in time, help everyone to provide an even better education.”