It seems that wind farms are fast becoming one of the true bumper crops for rural farmers and landowners in the Coastal Bend. Our consistent winds, wide open spaces and the pro-business attitude of our general population make our region an ideal location for the wind generating industry to build and expand.
The wind energy business benefits greatly from state and federal tax incentives. In the state of Texas, virtually every wind farm has also negotiated lengthy property tax abatements (313 agreements) with local school districts and county governments. Given the current funding models for public schools in Texas, only a very few “property rich” school districts can reasonably consider rejecting a proposed property tax abatement agreement.
Considering the many tax benefits which the wind industry is granted, it is somewhat surprising how few local jobs are created in either their construction or their operations. The major components of wind turbines and structures are manufactured overseas. These components are then shipped to the final location and assembled on site. Aside from the limited number of new jobs required to transport and install the pre-manufactured components, construct the roadways and foundations, very few new jobs are created for their maintenance, repairs or operation. In fact, the average 100-turbine wind farm investment of over a quarter of a billion dollars, is typically only required to create 10 permanent jobs through their tax abatement contracts.
After taking advantage of these generous federal, state, and local tax abatements, these companies typically file valuation lawsuits against local county appraisal districts in an attempt to drastically lower their property taxes. This is almost always done immediately after their tax abatements expire.
Many of the arguments put forward for the lower valuations are disingenuous. While wind turbines typically do depreciate at a faster rate than other industrial investments, they are still a significantly valuable investment after 10 years of depreciation. Wind companies often attempt to use comparable values from a number of west Texas wind farms as a basis of their valuation arguments. Those investments were often made in small rural counties that did not have the resources or expertise to fight expensive property valuation lawsuits.
Additionally, the market value of wind in our region is shown to be as much as 45% higher than other parts of our state. Our wind consistently blows at the same time that peak energy usage occurs. Thus, wind companies receive much higher income per kilowatt of energy generated. This added value creates a higher market value for property tax valuation purposes as well.
We know that landowners benefit from the lease income for each wind turbine on their property, but how can local leaders get the most value for the average taxpayer while still encouraging wind farm investments?
First, all tax abatement agreements should be negotiated so that they expire in a phased manner and should extend no longer than 10 years. Secondly, tax abatements should be granted only for maintenance and operations (M&O) taxes. No abatement should be granted for bonded indebtedness (I&S) taxes. Third, local school districts and counties should consider passing bond improvement programs very early in a wind farm’s life. By doing this before the taxable value has significantly depreciated, wind energy companies will more closely pay their fair share of taxes. It will also lower the effective cost of bond funded public infrastructure projects to the average taxpayer and homeowner. Fourth, local county appraisal districts should rigorously fight valuation lawsuits brought in bad faith by wind farm investors.
Local taxpayers are hurt when “Big Money” is allowed to game the property tax system for their own benefit.
Bill T. Wilson II, an architect, is vice chairman of the San Patricio County Appraisal District, a Portland City Council member and past chairman of the San Patricio County Economic Development Corporation. He submitted this column, unsolicited.
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