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Millions at stake in wind turbine tax litigation

The installation of wind farms over the past several years has provided an economic boost to many Michigan counties.

However, millions of dollars could be at stake due to changes made during that time by the State Tax Commission regarding the formula used by communities for taxing turbines.

Gratiot County now has five wind farms that include a total of 345 turbines.

The first was completed in 2012 and since then wind energy has resulted in bringing in $49 million in tax revenue for the county, townships and school districts.

But taxation disputes with Consumers Energy and DTE could cut future revenues and even require the repayment of some taxes already levied.

It’s estimated that the utilities have invested more than $1 billion in Gratiot County since 2012 and created 28 full-time jobs as well as provided land payments to 500 property owners, according to a 14-page memo sent by County Administrator Tracey Cordes to county commission members.

“The State Tax Commission approved a multiplier in 2007 for use in 2008 for all owners of wind energy systems,” she said. “This scheme remained in place for all of 2008, 2009, 2010 and 2011 and was deemed acceptable to everyone.

Significantly, this was the basis for tax revenue estimates provided by the utilities to local governments and the media when the original wind park developments were up for approval.”

About 15 wind parks in the state were constructed based on those original revenue projections, she added.

Initially, the true cash value of a wind turbine was taxed at 5 percent depreciation annually over the first 15 years, then at 30 percent during the next 15 years.

But that changed in 2011 when the STC “inexplicably” adopted a new tax table that started at 80 percent of the true cash value and then declined to 30 percent in year seven, Cordes said.

That change alone would have resulted in the loss of more than $3.2 million in tax dollars for Gratiot County between 2012 and 2019, she noted.

In response, Gratiot and several other counties, along with about 80 townships, Intermediate School Districts, libraries, individuals and other impacted entities, formed the Michigan Renewable Energy Collaborative in 2012 to combine financial resources in an effort to challenge “what we view as an arbitrary and costly change” in wind turbine tax collections,” Cordes said.

Nine of Gratiot County’s 16 townships currently have wind turbines and seven of those – Bethany, Emerson, Hamilton, Lafayette, North Star, Pine River and Wheeler townships – are members of the MREC, along with Greater Gratiot Development Inc. and the Gratiot-Isabella Regional Education Service District.

Coe Township is also part of the group, while Isabella County, along with Gilmore, Nottawa, Wise and Isabella townships, are non-paying members, according to a list provided by Cordes to county commissioners.

Then in 2014, the STC adopted yet another tax table, which remains in effect today. If it were applied it would have reduced the county’s tax revenue from 2012 to 2019 by an additional $1.36 million.

“Neither the 2011 nor the 2014 revisions were based upon facts,” Cordes said. “There was no input from typical information sources such as the federal government, appraisal publications and industry groups., nor were municipalities consulted.”

After the most recent STC changes the MREC commissioned Appraisal Economic Inc. to create its own tax multiplier table.

“AE developed a conservative table using industry best practices and extensive industry data,” Cordes said. “Most local assessors – and all assessors in Gratiot County – have chosen to use the data-driven AE table rather than the arbitrary 2014 State Tax Commission multiplier table.”

The disagreement has “spawned massive litigation,” she noted.

“Since 2012, 1,109 tax appeal cases have been filed with the Michigan Tax Tribunal by the utility companies and private developers with respect to wind energy systems throughout Michigan including in Gratiot County,” Cordes said.

“There are currently 594 wind energy system personal property tax appeals pending in the Tax Tribunal, which have been consolidated by wind park into 17 separate cases.”

Of the pending litigation only one case had been tried in the Tax Tribunal thus far.

“The parties argued the case in the fall of 2019,” Cordes said. “The decision has been expected ‘any day now’ since June 2020. It is fair to assume that the decision in this case will influence the resolution of many of the other cases.”

But even then she expects the “loser” to appeal the decision.

If MREC does lose it would not only mean a reduction of millions of dollars of tax revenue but also result in the county being on the hook to reimburse the utilities for any prior overpayments.

It would also reduce the amount collected annually for five countywide millages – Commission on Aging, sheriff’s road patrol, parks and recreation, library, and economic development/agriculture.

“While a decision of the Tax Magistrate will push this issue one way or the other, an ultimate decision will only be further delayed (by appeal) and the many other cases will likely remain in abeyance,” Coredes said. “Furthermore, all turbines that have come on line since 2019 will be subject to this same laborious, expensive process.”

Now the MREC is pushing to have the issue settled in the state legislature.

Last month Cordes met with state Sen. Rick Outman, who “welcomed the idea,” she said.

“Taxation based on any table other than that which was initially represented to our community leaders results in a loss of millions of dollars in revenue and a windfall for the utilities,” Cordes explained. “Given this stake, and as a result of our significant investment in this effort to date, we must continue our commitment toward a fair resolution.”