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‘Millions and millions’ in wind turbine tax revenue could sit idle for years

The tax dispute between NextEra Energy Resources L.L.C. and local municipalities could continue for years, end up in the Michigan Supreme Court, and tie up what one Tuscola County official called “millions and millions” in desperately needed tax revenue.

That’s according to Mike Hoagland, controller, Tuscola County, who provided an update on the tax dispute during the Tuscola County Board of Commissioner’s committee of the whole held Monday.

Hoagland provided the update in light of a Dec. 2 meeting of the board of the Michigan Renewable Energy Collaborative (MREC), an organization of counties that banded together to fight legal battles associated with wind-related projects.

The MREC board was updated by its attorneys from Detroit law firm Clark Hill P.L.C.
“The (Michigan) Tax Tribunal is expected to hear this case in March or April of 2017,” Hoagland wrote in a memo to the Tuscola County Board of Commissioners. “Both parties will most likely appeal the Tax Tribunal ruling and it could take up to two years for the Court of Appeals to hear the case.

“There is even the possibility the case could be appealed to the Michigan Supreme Court,” Hoagland continued.

For three years in a row, subsidiaries of NextEra Energy Resources L.L.C. have filed petitions against Tuscola County and several townships, contesting taxes paid for its operating projects, Tuscola Bay Wind and Tuscola Wind II – located in Gilford, Akron, and Fairgrove townships.

Juno Beach, Florida-based NextEra Energy Resources is a subsidiary of NextEra Energy Inc., and has been working for the past two years on a third Tuscola County project called Tuscola III Wind Energy Center. The $200 million project would be located in Almer, Ellington, and Fairgrove townships.

In the petitions, attorneys for NextEra Energy Resources have argued two main issues: that the value of wind turbines should be lowered because they were partially funded with federal grants, and that the assessed values in general were too high.

As a result, the petitions claim the NextEra Energy Resources subsidiaries paid too much in taxes and are due refunds.

“This issue is a big deal to NextEra because they are contesting it in other parts of the country,” Hoagland said. “NextEra will spend significant amounts to try to obtain a favorable ruling. MREC attorneys are following the outcome of a related dispute by NextEra in California.”

Bryan Garner, manager of communications at NextEra Energy Resources, said the company wants only to pay its “fair share” of taxes.

“We aren’t going to speculate about what might happen with the tax tribunal, or how parties might react to its decision,” Garner said. “Our goal is the same as it has always been, to pay our fair share based on Michigan law. We are always open to settlement discussions.”

Until something happens in the tax dispute, the impact is felt locally as taxypayer-funded government bodies and organizations such as the Tuscola Intermediate School District have had to put money away in case they need to pay it back – instead of reaping the benefits of the wind turbines.

Tuscola County has socked away about $1.5 million so far, and Hoagland said it’s fair to guess member organizations of MREC have collectively put away “millions and millions.”

It’s the kind of money a place like Tuscola County cannot afford to sit on.

During Monday’s committee of the whole meeting in Caro, the board discussed at length the financial distress the county faces in light of several factors, such as reductions in shared revenue from the state and generally flat economic growth.

Board members also pointed out the board has cut costs in just about every feasible way, while facing the potential of huge capital outlays, such as the kind badly needed at the aging Tuscola County Jail.

During Monday’s meeting, Tuscola County Board of Commissioners Chairman Thom Bardwell read into the record a letter dated Oct. 11, 2011 that was addressed to the board.

The letter started out by stating that “NextEra Energy Resources is very much aware of discussions of the state of Michigan regarding personal property taxes (back then).”
“We are also aware from our experience in many communities across the country that property tax income derived from wind generation facilities is very important to rural communities,” Bardwell continued.

Further, later in the letter, Bardwell read: “If the state of Michigan should eliminate the personal property tax we are on record with the local newspaper, school districts, economic development corporations, that we are committed to making the same level of payments that would be required under the current system of property taxation.”

The letter also indicates NextEra Energy Resources’ officials were committed to working with local taxing entities to ensure such payments into the community continue.

“NextEra Energy Resources is committed to supporting the communities where we do business. I hope this letter is sufficient assurance of our commitment,” Bardwell read.
Bardwell said he read the letter because he is “bothered” by what he called a “more aggressive approach” by representatives of NextEra Energy Resources with regard to Tuscola III.

Further, he said he views the tactic “pay as you go” and “bait and switch.”

“Unless I’m missing something…it’s an integrity issue,” Bardwell said.

In the meantime, work continues to find a solution before the tax dispute case proceeds.
Carl Osentoski, executive director, Huron County Economic Development Corp. and coordinator of MREC, said a new kind of assessment table specific to wind turbines could help settle the matter sooner.

The so-called “trending table” was developed with input from the parties involved in the tax dispute.

The table is specific to wind turbines and takes into account variables such as the value of power generated through capture of wind energy, which could change depending on demand.

“If, for example, one source of energy is determined to not be usable and wind energy replaces it, then wind turbines become very valuable,” he said.

Osentoski said all of the parties would have to agree to use of the table.