UPPER THUMB – DTE Energy has filed an appeal with the Michigan Tax Tribunal over a township board of review’s decision to raise the true cash value of 56 wind turbines above what was recommended by the Michigan State Tax Commission.
Wheeler Township, located in Gratiot County just west of Saginaw, is one of a number of townships that have decided the true cash value of wind developments are more adequately determined by the previous ways wind turbines were assessed before the State Tax Commission made changes last fall to lower the amount of revenue local units of government and other entities receive from wind developments.
The townships in Huron County that have wind developments made the same determination as Wheeler Township.
Wheeler Township Supervisor Jerry Rohde told the Tribune the township wasn’t surprised DTE filed the appeal. However, the Wheeler Township Board of Review felt the changes made by the State Tax Commission did not accurately reflect the true cash value of the wind turbines.
“When we bought into this project, we (did it) expecting a certain rate of return on our tax millage, and that was changed by the State Tax Commission, and they could not provide us any studies or anything that would substantiate why they (made the changes),” Rohde said.
Rohde said the township will collect the taxes based on the decision made by the local board of review. However, it’s setting aside roughly $37,000 it would have to pay back to DTE if the company wins its appeal. That money is just the tax money the township would lose if DTE prevails, he said. It does not include the money that the county, schools and other entities, including the local fire department, would lose.
Rohde said it normally takes the State Tax Tribunal a couple years to go through the hearing process.
“Unless something is done to settle this issue ahead of time, like a stipulation between the township and DTE, we might be sitting there for two years or more before this even comes up for a hearing,” he said.
Wind turbines are classified as industrial property, and the only taxes wind developers pay are personal property taxes.
Though a series of bills designed to eliminate property taxes on industrial property passed the Michigan Senate earlier this spring, the proposed legislation specified that industrial processing does not include the generation of electricity for sale, according to the Michigan Township Association. This was done to ensure that wind turbines will continue to be taxed for local government purposes.
A wind turbine’s taxable value ultimately results from local assessors and boards of review, which are responsible for determining the true cash value to be placed on a property.
The State Tax Commission is responsible for providing a format to help assessors determine the true cash value to be placed on a property.
Last fall, the State Tax Commission determined the value of a one- to two-year-old turbine is much lower than previously considered. Prior to making the changes, new turbines were assessed at 100 percent of their value.
Per the changes, they would be assessed at 80 percent of their value.
The change would significantly lower a turbine’s taxable value – which has caused much concern from local units of government, schools, libraries and other entities that benefit from taxes from local wind developments.
Huron County officials estimate that based on about 20 mills, a new wind turbine that previously would have raised about $32,000 the first year it’s taxed, would now raise only $25,000, per the tax commission’s changes.
However, while the State Tax Commission provides the format to help assessors determine the true cash value, it’s ultimately on the assessors and local boards of review to determine what the true cash value is.
A coalition of local officials from areas around the state that are experiencing wind energy developments sought documentation from the State Tax Commission that justifies why it made the changes last fall.
Many, like Rohde, felt the commission did not have sufficient reasoning to justify the change.
The coalition sent local boards of review a legal opinion and information that supported the position that the tax commission’s ruling does not accurately reflect the true cash value of wind turbines.
It then was on the assessors and local boards of review to decide whether to go with the old way values were determined or to follow the tax commission’s changes. In making their decisions, they had the legal authority and obligation to deviate from the use of the tax commission’s wind turbine assessment information if they determined the commission’s findings do not reflect true cash value for the turbines being assessed, according to the coalition’s legal opinion.
In Huron County, all the boards of review in townships with wind developments opted to go with the old way. County officials are not aware of any appeals being filed regarding any of the local projects. However, there’s concern that future decisions could be appealed – particularly because DTE is planning a number of projects in the area.
“So (what will happen) next year? Who knows,” said Carl Osentoski, Huron County Economic Development Corp. executive director and member of the Michigan Renewable Energy Coalition.
DTE Spokesman Scott Simons said the changes made by the State Tax Commission have put DTE in a very difficult position. He said DTE did not advocate for the changes, but the utility must adhere to them.
“Our electric rates are scrutinized by the Michigan Public Service Commission, (and) we must show prudent and responsible decisions when incurring any costs, including abiding by the current tax multiplier tables (the tax commission set last fall),” he said. “So if a local jurisdiction recommends we pay under the old (tax multiplier tables), we have an obligation to appeal based on the current tax law.”
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