New industry and tax abatements go hand-in-hand these days, especially in booming San Patricio County. Tax abatements allow new industry to avoid paying taxes until a date set by the county, usually between five and 10 years. It helps new industry generate income before having to pay taxes.
For wind farms, such as the new El Algodon Alto Wind Farm LLC, owned by RWE Renewables Americas LLC, commissioners have usually followed the same guidelines as bigger industries such as ExxonMobil-Sabic or Steel Dynamics Inc., to whom they granted abatements.
El Algodon Alto Wind Farm LLC recently filed for a variance through commissioners court to allow it to receive a 10-year tax abatement.
“That’s sort of standard operating procedure,” San Patricio County Appraisal District Vice Chairman Member Bill T. Wilson II said. “But there are currently two lawsuits that are underway against San Patricio Country.”
Those two lawsuits are from Papalote Creek Wind Farm I and II, which were completed in 2010 at a cost of $460 million in Taft. Their 10-year tax abatements are up, and they are seeking lower appraisal values. They are also owned by RWE Renewables Americas LLC and are the oldest wind farms in the county.
“Basically, (wind farms) are filing against the San Patricio County Appraisal District to have their appraisals lowered on every taxing entity that they’re subject to.”
Wilson also stated that was standard operating procedure for wind farms all over the state, not just in San Pat County.
RWE Renewables Americas LLC Energy Services Director Mike Fry said that was not the case with his company, however.
“As far as I know, RWE – which owns Papalote I and II – this is the first time they’ve ever filed a lawsuit in the state of Texas,” Fry said. “I’ve been on the appraisal district side for nearly 20 years, and I’ve been a consultant now for nearly another 20. I’ve been working wind since probably 2005 and I might have been involved in maybe three (lawsuits) total. Maybe.”
But, in other parts of the state such as Val Verde County, its county appraisal district filed a lawsuit against Rocksprings Val Verde Wind LLC to get a state district judge to throw out a decision made by the Val Verde County Appraisal Review Board to lower the original appraisal of $176.4 million to $101.4 million.
In Nueces County, according to Wilson, Flint Hills Resources got its tax appraisal lowered significantly, which in turn caused Tuloso-Midway ISD to have to repay nearly $4 million in taxes. The school was forced to seek help from the state to help with its budget in 2017.
“So these kind of deflections really hurt the government entities if they have to go back and rebate taxes from prior years, so it’s a very serious issue,” Wilson continued.
He added that if a wind farm is valued at $200 million to $250 million when it receives its 10-year abatement, by the time it has to pay taxes, the farm can sue to have the appraisal lowered because its value has depreciated over those 10 years, meaning it not only avoided paying taxes for a long period of time, but its tax burden has also significantly diminished.
“If they come in and want to cut their valuation by $100 million dollars, that’s about a million dollars a year that the school is going to lose,” Wilson said.“And just to give you an understanding relative to the cost of these lawsuits, just the two lawsuits currently underway, the board of directors authorized almost $300,000 just in preparation; that didn’t even get you to court. And that doesn’t include our attorneys.
“We always contest it because there’s too much money at stake not to. And I think there should to be consequences. If you’re going to sue the district and the county for the appraised value then you should not be getting additional benefits.”
He also said he’s not against abatements, but wants them to be used for what they were meant to be used for – job creation.
The county’s guidelines and criteria for tax abatements clearly states “ … the purpose of tax abatement is to provide an incentive and is offered by the taxpayers of San Patricio County via the County Commissioners Court, to attract investments, that lead to better quality of place and better services. The wealth created by these enterprises leads to more service and retail businesses, which in addition to improving quality of place, increases the tax base. In summary, by giving incentive in terms of tax abatement, the citizens agree to give up short term tax benefits, for long term benefits.”
“The whole idea behind it was to create new business that didn’t compete with existing business, create new property value that will increase revenue to local governments and create jobs that would benefit people that work in these new jobs that benefits all the surrounding businesses, whether it’s property owners, restaurants, banks, or stores – any of those things,” Wilson explained.
Fry said, “I’m not going to speak for all the other consultants that have wind farms out there, but I mean, it’s not common practice for these wind projects, or even renewable energy projects to file suit. It happens every once in a while, but it’s not often.”
Wilson said that if residents look back 25 years ago when tax abatements were first introduced into the county, most industrial investments required a significant force of construction workers on-site. But now, most materials are prefabricated overseas and shipped in, like the parts for wind turbines.
That limits the number of jobs created by the farm.
After that, it takes one person to maintain 100 turbines per wind farm for the 30-year contract term.
El Algodon Alto Wind Farm LLC would create 10 full-time, but high paying, jobs in the county.
“You’re going to see a lot of lawsuits like this,” Wilson added. “The county appraisal district has been watching industry lawsuits on valuation closely for five or six years because we know these continued losses are going to happen.
“They’re not just going to be wind farms, it is going to be all of this industry. There’s just too many dollars at stake.
“And we’re not protecting the taxpayers’ interest if we don’t fight them. It’s one thing for somebody to make a claim that it’s rigged, but it’s another to try and game the system and use it at the expense of the average taxpayer.
“Every dollar we shift away from industry we shift to homeowners and small business. We need to remain cognizant of that.”
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