OKLAHOMA CITY – When a wind farm decided to set up shop, Minco Public Schools saw its assessed tax base increase nearly $50 million in about a decade.
With that increased valuation, the 250-student district, about 20 miles north of Chickasha, was able to finance a new high school, middle school and improve its athletic facilities, said Kevin Sims, superintendent.
But in the past year, Sims learned that the county assessor and wind company disagreed on the valuation of the wind farm – 70% apart, in fact, or about $1.5 million in expected tax revenue that was placed into escrow until the question is resolved. Minco schools can’t use any of it until the protest is settled.
Now the district’s budget is in shambles, Sims said.
Minco taxpayers, who had been promised a 4% tax cut, will instead face a 4% increase in January to cover bond debt. And while many districts are using federal coronavirus aid to hire math and reading specialists, Sims is using the funds instead to pay for teacher salaries, insurance and utilities.
“When those federal dollars dry up … we’re going to go broke, just point blank, through no fault of our own,” Sims said.
For years, state lawmakers have offered qualifying manufacturers – including wind developers – a tax credit: Build in Oklahoma, and the state will foot the tax bill for the first five years. Under the plan, some poor rural districts have seen valuations – and revenues – soar.
But now that property tax exemptions are rolling off the books in record numbers, the wind, oil and gas industries find themselves at loggerheads with county assessors and school districts. Assessors contend their valuations are accurate. Rural school districts have built their budgets – and new schools – on the values assessors – or their third party contractors – have given the property.
Wind and oil industry representatives, however, contend that school districts and counties have relied for years on overinflated property valuations. Companies said they complained years ago to the state’s Tax Commission that their property valuations were flawed, but were told they had no standing to challenge them because Oklahomans were the ones paying the bills through the property tax incentive program.
As State Rep. Dick Lowe, R-Amber, recently, put it: Counties and schools had little incentive to protest because both loved the large assessments.
“Someone else is paying the bill,” he said. “You take me out to dinner, I’m eating on you. I’m going to enjoy what I like.”
But now that the burden has shifted from the state to industry, the top taxpayers in the many rural counties are protesting their valuations “creating havoc in our schools around their budgets and finances,” said Pam Deering, executive director of the Cooperative Council for Oklahoma School Administration.
Lawmakers, meanwhile, find themselves wrestling with how to salvage the situation after contentious, years-long feuds have erupted between county assessors and energy producers that have left many rural school districts in dire financial condition. Lawmakers spent a day at the Capitol in September holding hearings, apologizing to angry constituents and businesses for being “a bit late” on the issue, and vowing to find solutions as Sims and others pleaded for relief.
“If you’re going to protest taxes, and you’re going to impact local budgets, we need to have the realization that there’s something that we’ve got to do to help these local entities stay in business and do their jobs,” said Andy Evans, with the Oklahoma Public School Resource Center.
County treasurers are currently holding a combined $80 million in escrow in disputed property taxes for more than 100 school districts, said Mandy Snyder, Noble County assessor, who recently spoke at a legislative hearing on behalf of the County Assessor Association. Wind, oil and gas are not the only industries that protest their valuations, but they make up the biggest percentage, she said.
Under state law, any property owner has the right to challenge their property valuations in court, but must pay the assessed amount under protest until the case is resolved. Those funds are then placed in escrow and the county treasurer cannot appropriate them until the case is resolved.
School budgets though are based upon the values certified by the assessor – even if millions end up being disputed.
“Can you imagine what a gut punch that is to the schools, to the teachers that they can’t hire, the bus drivers that lose their routes, but mostly to the students, our kids, that are missing out on technology, and books and important things that they need because the budget is just short, the money is held up in escrow?” Snyder said.
In 2019, 27 Oklahoma counties faced multi-million tax protests – the majority in the western half of Oklahoma. In Pittsburg County, Snyder said two companies are actively protesting about $58 million in value – asking for about an 84% decrease. Payne County has about $915 million worth of oil and gas valuation protests. Major County has a company asking for a 92% decrease, and Dewey County is in litigation with 4 of 5 of its wind farms.
“This isn’t where the industry wants to be,” said Mark Yates, speaking at the legislative hearing on behalf of a regional trade association that represents 50 companies that own, invest in or buy clean power in the region.
Companies want to be celebrating successes, not talking about property protests, he said.
“(The) contentious nature that has been fostered now over the last several years and festered in counties, it’s not healthy,” Yates said.
Scott Crisler, tax manager for DCP Midstream, which has gas gathering and processing assets across the region, including in Oklahoma, said protests aren’t new. But what is unusual is the sheer number the company has been forced to file in Oklahoma compared with other states. Since 2015, the company has filed 108 appeals across a multi-state region in district court – 88 of those in Oklahoma.
He said of the 88 appeals, 97% have been filed in counties represented by one third-party consultant that is working on behalf of county assessors, but he did not name the company.
Crisler said all states in the region assess property taxes based on the same standard – fair cash value, or the price at which someone would buy or sell a property. But he argued that Oklahoma’s valuations are consistently above the fair-market value compared to other states, prices paid by willing buyers, values generated by the Oklahoma Tax Commission cost schedule and utilization rates.
He said his company has experienced an 80% decline in gross production taxes paid to Oklahoma from 2014 to 2020. Plants that remain open are running at half of current capacity and field equipment utilization is at 45%.
“Despite these dramatic declines in volumes and margins since 2014, one thing has not declined in the midcontinent, that’s the systemic overtaxation of oil and gas property in Oklahoma based on valuations from third-party consultants,” he said. “These excessive and unrealistic values by the county’s consultants unfortunately offer false promises to counties, public schools and CareerTechs of large tax revenues that are contrary to law.”
Deering, the school advocate, said she’s been working with districts for the last two years on tax protests. She said frustrations continue around what people view as “frivolous” protests designed to slow the process or stall paying taxes.
She said schools can get relief in the state aid formula for appealed property tax values, but that relief may not arrive until the next fiscal year.
Deering also said lawmakers should consider solutions. One may be addressing the state aid formula so instead of using projected property tax collections, the state uses actual collections from the prior year to calculate aid. That way districts would not be using a value that contains the protested valuations.
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