Wind tax windfall 

There’s a big fight brewing over the amount of property taxes paid by the owners of wind farms in Michigan. Out of the blue, last fall wind developers got a big tax cut that they say they didn’t ask for. But now townships and counties that were promised those tax dollars are pushing back.

Lure of Taxes
When big wind farms come into an area one of the benefits they tout to get local support is the increase in tax base. It’s a pitch that Carl Osentosky has heard wind developers make often in Michigan’s Thumb area.

Developers say “It’s a benefit to the community. That’s how the community gets to benefit is we’re paying these taxes,” Osentosky recalls. He’s head of the economic development office in Huron County.

He says most local officials welcome wind developers and the investments they bring. Millions of dollars from property taxes on turbines go to counties, townships and schools.

Hard to Set Value
But late last year, an obscure state panel changed the way taxes on turbines are calculated.

Doug Roberts chairs the three-member Michigan Tax Commission. It’s their job to figure out the value of property if you tried to sell it. And Roberts says it’s nearly impossible to do that for wind turbines because there’s no market for used ones. “Which means then what is the market? If you go on the internet, or something, I could not find if I wanted to purchase a three-year old wind turbine, they almost don’t exist,” he says.

So Roberts decreased the value of turbines to reflect that.

No Explanation
A group of local government officials, mostly from the thumb area, says the change amounts to a tax cut of 27 percent. And they complain it’s not clear why the change was made. Some of them filed requests for information with the Tax Commission under the Freedom of Information Act.

Larry Merrill says they were looking for the studies, the data on which the Commission based its decision to change the taxable value of wind turbines. Merrill is director of the Michigan Townships Association. He says what they got back was…nothing.

Merrill says there was no data offered to support the change that will cost local governments millions of dollars. “It doesn’t do a lot to keep a high degree of confidence that the tax system is fair and equitable,” he says.

Drastic Change
Townships and counties can’t understand how the Commission could make such a drastic change with no notification, no hearings and no clear reasons to support its decision.

Doug Roberts, chair of the Commission, says those are fair questions but he used his best judgment because the sales data for turbines didn’t exist. “All I’m telling you is I never saw it, I’m not lying and I did ask for it. I have never seen it,” he says. “And I’m willing to change my mind.”

But the group of counties and townships with wind farms says it found studies to support a higher value for turbines. And almost all the townships in Michigan with wind farms ignored the decision of Roberts and the other tax commissioners. They sent out tax bills based on the old formula.

Developers Appeal
Now, a major developer of wind energy, the utility DTE, is appealing the issue to the Michigan Tax Tribunal.

Wind developers insist they didn’t ask for the lower tax rate on turbines. But they feel compelled to protect their customers who could benefit from the lower taxes. So DTE will ask the tax tribunal to overturn the tax tables used by townships and put the tax commission rates back in place.

There could still be a negotiated settlement between DTE and the townships. But all that could be trumped by a new state law.

New Law?
A lawmaker from the Thumb area says wind energy in Michigan is booming with a total value of about ten billion dollars. And representative Kurt Damrow thinks the local communities that are hosting large wind farms ought to receive the tax benefits they were promised.

“When all of these things were put into place, the zoning was presented and the wind farm and the utility companies came to us and said we want to be your partner,” Damrow says.

He’s introduced a bill that would tax turbines a flat fee that would go directly to townships, counties and schools. And most importantly, he says, it would strip the tax commission of any authority to set the tax rate for turbines. “My biggest concern is that is still stays under the position where the tax commission could change it within twenty-four hours,” Damrow says.

But there are other lawmakers who want to do away with taxes on wind turbines altogether. That would be part of broader legislation that would eliminate all business property taxes in Michigan.