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Champaign wind farm tax break battle looms  

Credit:  By Matt Sanctis, Staff Writer | Springfield News-Sun | Oct. 23, 2013 | www.springfieldnewssun.com ~~

URBANA – Developers of a Champaign County wind farm said they’re preparing to seek a special tax treatment from the state and county commissioners that would bring millions in new revenue into the county.

But some local officials said unanswered questions remain, and opponents argued the tax treatment is more about maximizing profits for the company than it is about making the project feasible. The wind farm recently cleared a hurdle when it received approval to move forward from the Ohio Power Siting Board, but the question of how it should be taxed remains a sticking point locally.

Combined, the two phases of the Buckeye Wind project would include about 100 turbines spread throughout six townships. The siting board voted to allow both phases the project to move forward and recently turned down an appeal to reconsider the decision on the second phase. Opponents said they plan to make a final appeal to the Ohio Supreme Court.

The next step, developers said, is to submit an application to the Ohio Development Services Agency to allow the wind farm to make a Payment In Lieu of Taxes, or PILOT. If the state has no objection, the proposal would then move to Champaign County commissioners. They would then have 30 days to approve the PILOT agreement, reject it or take no action, which would have the same effect as turning down the request, said Jason Dagger, a spokesman for the project.

The turbines could generate between $1.2 million and $1.8 million annually for the county, based on a 200 megawatt project, Dagger said. Those payments would make the project one of the county’s largest sources of revenue, providing additional funding to the county’s general fund, four local school districts and other taxing districts within the project’s footprint.

“We never wanted to promise something we couldn’t fulfill,” Dagger said.

If taxed like a traditional utility, the wind project would pay higher taxes up front, but that value would decline over time, making the revenue less predictable and leading to little revenue toward the end of the project’s roughly 20-year life, Dagger said. The PILOT payments, although smaller, would provide a source of revenue that would remain the same each year for 20 years.

State legislation passed in 2010 allows qualifying projects to be exempt from paying personal tangible property taxes. Instead, the company would make PILOT payments, which could pay between $6,000 and $8,000 per megawatt, depending on how many Ohio employees are hired during construction. The county can also impose additional fees as long as it does not exceed a total of $9,000 per megawatt of energy produced.

The idea behind the legislation, Dagger said, was to make Ohio projects competitive compared to those in neighboring states like Indiana and Pennsylvania.

Tom Stacy, an opponent who tracks wind farms throughout the state, said the tax treatment is more about maximizing profit than it is making the project feasible.

“The PILOT is not a make-it or break-it issue for the developer,” Stacy said, “but rather an issue of how profitable the project would be for private investors.”

Approving the PILOT could mean millions less in revenue for the county over the life of the project, Stacy said.

“Remember, the developer is not a public utility tasked by the Public Utilities Commission of Ohio to serve the public good at the lowest reasonable price, but rather a private equity fund whose motivation is to maximize profit for its shareholders,” Stacy said.

Dagger said a new tax structure was needed as the state tried to attract wind projects and increase the amount of renewable energy produced in the state. Dagger said the wind project is a private development that, unlike a traditional utility, is not guaranteed a profit. Wind farms have a different capital structure than traditional utilities and needed the new tax structure due to the capital investment needed to build new projects, Dagger said.

If taxed like a traditional utility, Dagger estimated the taxes up front would initially be about three and a half times higher than under the PILOT. But that figure would depreciate, meaning the county and other entities would receive a large influx of cash early on, but little to nothing toward the end of the project.

It would be difficult for the wind company to move forward without the PILOT agreement, Dagger said, and so far the company has not explored other options.

“I don’t know what that future would look like,” Dagger said.

It’s difficult to provide an exact comparison between the PILOT and a traditional utility tax, said Karen Bailey, Champaign County auditor. But using estimates provided by the state, a single wind turbine valued at $1.5 million under a traditional tax would provide about $19,700 to be split between several entities in Union Twp., including the county general fund, the school district and local levies. In that case, the West Liberty-Salem School District would receive a $12,800 payment in the first year, for example, while the township general fund would receive $460.

Under the PILOT, the wind farm would make a base payment of $12,000 to the county for a 2 megawatt turbine. In Rush Twp., that turbine would mean $1,540 to the township, and $5,909 to the Triad Local School District.

In addition, the taxes would affect school districts in different ways. A traditional tax would count toward the amount of revenue a school district receives from the state, while the PILOT payments do not. Dagger said that means the state could then cut the amount of money it provides to a district under a traditional tax, leaving little to no new revenue. Under the PILOT, the wind farm’s payments would be separate from the revenue provided by the state and would not count against the district.

Regardless of how the funding would work for schools, that’s a debate best left for others, said Matt Sheridan, superintendent of Triad Local Schools.

“My job is to run a school district, not to decide whether to build wind turbines,” Sheridan said.

The Wayne Trace Local School District in Paulding County is one of the few in the state to have received revenue from an operating wind farm. The wind farm was not as controversial in that county, and the district received about $300,000 in payments in the first year, said Stephen Arnold, superintendent for the district. The district is expecting to receive additional revenue in the future from a second wind farm as well.

The money is placed in the district’s general fund and can be used for a variety of purposes. The money is not a windfall for the district, Arnold said, but it does provide an additional source of revenue for now.

“It doesn’t replace a levy, but it’s money we weren’t getting,” Arnold said.

But Bailey said other questions remain unanswered, including what would happen if the wind project was unprofitable or unable to make its payment for some other reason.

For example, the county can take action if taxes aren’t being paid on a home or similar property, but it’s not clear what the county could do with an abandoned turbine.

Bailey also raised concerns that the turbines could prevent future building projects because of setbacks imposed for safety, or that neighborhoods where the wind farms are located could become less valuable.

Bob Corbett, Champaign County commissioner, said the wind farm still has not finalized a road use agreement with the county to determine what roads would be used during construction and how they should be repaired. Corbett said he’s still researching the controversial issue, knowing whatever decision is made will not please everyone.

“I’m going to do what I feel is best for most of the people in the county,” Corbett said.

All three commissioners have worked to gather information to make an informed decision, said Dave Faulkner, a Champaign County commissioner. It’s often difficult to find unbiased information because it’s such a controversial issue, but Faulkner said he tried to keep an open mind.

Faulkner said he’ll make the decision he feel is right for the county when the time comes.

“It doesn’t matter what decision you make, you’re not going to make any friends,” Faulkner said.

Annual tax benefits to local school districts under the proposed PILOT:

$269,000 – Mechanicsburg

$280,000 – Triad

$114,500 – West Liberty-Salem

$121,500- Urbana City

Source: Everpower Wind Holdings, Inc.

Balanced coverage

Springfield News-Sun reporter Matt Sanctis is dedicated to balanced coverage of the controversial wind farm proposed for Champaign County, earning state recognition in explanatory journalism for his stories.

Source:  By Matt Sanctis, Staff Writer | Springfield News-Sun | Oct. 23, 2013 | www.springfieldnewssun.com

This article is the work of the source indicated. Any opinions expressed in it are not necessarily those of National Wind Watch.

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