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MidAmerican and Iowa wind farm property tax

by: greggheide

Mon Feb 18, 2013 at 13:16:12 PM CST


(The author of the Iowa Renewable Energy Farmer blog raises an important question about a large wind farm in northwest Iowa. - promoted by desmoinesdem)

I've been trying to determine if MidAmerican Energy Company (MEC) is paying the correct amount of property tax on their wind farm property in Pocahontas County.  As it turns out, this is not an easy task for an interested Iowa tax payer. The reason for this winter "adventure" stems from the county supervisors proposed creation of a Tax Increment Finance district around MEC's wind project. If they proceed, tax revenue would be diverted away from our school district, fire department, etc., for other projects in the county. An individual taxpayer within the school district will mostly likely see their tax rates increase as a result.  Since the county is debating where to spend their "windfall" revenue, I became curious about how the county determined the tax rates for an asset with over a $1/2 billion in value. In the interest of full disclosure, I have a company that offers consulting for wind farm development, so I have some experience with this issue. (continues below)
 
greggheide :: MidAmerican and Iowa wind farm property tax

Iowa wind energy conversion properties are locally assessed. The county assessor's office informed me of the assessed value of MEC's project. It was built in 3 phases, with different values for the turbines in each phase. I asked to review all documents used to determine the value of the project, and was told by the assessor that they were not available to the public. Iowa law allows tax payers in the county to access this information, so, after I asked an attorney to send a letter asking for this information and referencing the appropriate section of the Iowa code, I now have about 80 pages of information on this project provided by MEC to the county for my review. Most of these documents are construction invoices paid by the utility, along with brief cover letters from MEC stating the value of turbines, substation, met tower, and land. The assessor tells me the construction invoices were not used, only the cover letters. The invoices are not in what I would consider a useful format for the county, but the cover letters themselves seem insufficient to determine the value of this sizable wind project.

The 80 pages of construction costs MEC provided the assessor were probably capitalized by the utility and depreciated. Therefore, they probably should be included in the counties tax base. I contacted the assessor asking why there was no assessment for the power cables connecting turbines to the substation. Her response directed that I contact MEC and ask them. Other items not listed are construction insurance, contract labor expenses, overhead, interest, accounting charges, pre-construction land acquisition costs, land rent costs before construction, cost of compliance with regulations, transmission upgrades, etc. The cover letters provided by MEC to the county do not itemize these costs, so it is difficult for a taxpayer in the county to determine is this process was done correctly. Frankly, if this process was used for all of MEC's wind projects, each should probably be reviewed more thoroughly.

Since MEC is a rate regulated utility, they probably filed very detailed cost recovery documents at the Iowa Utilities board for this project.  Reviewing these documents should be an easy way for taxpayers and county employees to determine what the tax rates should be. I contacted MEC as instructed, asked some of these questions, and asked to review their utilities board filings for this project. Dean Crist at MEC responded, stating all relevant costs incurred by the utility were taken into account, and provided to the county. He also said their utility board filings would not be useful to determine the tax rates for this project and listed several reasons why. He also mentioned that "Costs of facilities beyond the first wind substation (e.g., transmission substations and lines) are not taxed as wind energy conversion property, but are separately taxed by local taxing authorities under Iowa Code Section 437A, utility property replacement tax, submitted in reports filed each year with the Iowa Department of Management and Iowa Department of Revenue.  MidAmerican is billed for and pays the taxes on these facilities as well."  This is presumably at a different tax rate than if the facilities were taxed as wind energy conversion property, potentially not very fair to a non-utility wind developer or our school district.

I disagree with his position on the utilities board documents, as the utility filings to a 3rd party who regulates them should be very helpful.  Any costs submitted to the utilities board for rate recovery on this project should be taxed as wind energy conversion property in my opinion.  If their submissions to the county are correct, MEC should welcome a request for supporting documentation by interested taxpayers. So far, they are ignoring this request. Since MEC is a state approved utility franchise, it seems more transparency on this issue would benefit all involved.

So it appears that I have "gone down the proverbial rabbit hole" trying to determine if my school district is receiving proper revenue from MEC's wind property.  Readers who have made it all the way through this post should be commended. More information on my effort to get to the bottom of this issue, will be posted as warranted on my blog-  http://renewablefarmer.blogspo...  

Gregg Heide
Pomeroy Iowa  

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I have never considered (4.00 / 1)
this angle to wind energy before. Thanks for digging into it and bringing the issue to our attention.

Tax-increment financing is best used to stimulate economic development in slum or blighted areas. I can't see how it's in the public interest to create a TIF district around a wind farm that a huge, profitable corporation is building on rural land.  

Invite other Iowa political junkies to join us at Bleeding Heartland.


TIF (4.00 / 2)
Thanks , I should add that our school administrator tells me that TIF districts have been created around 2 other wind projects in Iowa. He didn't mention locations. It doesn't seem to fit the intent of legislators when when they created TIF.  

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