Wind Turbine Tax

From the Daily Globe


Turbine tax named No. 1 priority
WORTHINGTON — The Rural Minnesota Energy Board and the Association of Minnesota Counties have identified the wind turbine production tax as their No. 1 priority to be resolved in the upcoming legislative session.
By: Julie Buntjer, Worthington Daily Globe


Editor’s Note: This is the second in a series of stories about wind turbines and their impact on the rural landscape.

WORTHINGTON — The Rural Minnesota Energy Board and the Association of Minnesota Counties have identified the wind turbine production tax as their No. 1 priority to be resolved in the upcoming legislative session. What they want is for the state to reverse its 2008 action that calculated production tax payments into a county’s maximum levy. The move limited a county’s ability to finance projects.

Both Nobles and Jackson counties have a keen eye on the outcome of the production tax issue, as major wind farm projects are planned for construction in each county in 2010.

In Nobles County, enXco is planning a 201-megawatt Nobles Wind Farm to consist of 134 turbines. The wind farm will be concentrated in Olney, Dewald, Larkin and Summit Lake townships.

In neighboring Jackson County, two projects are being developed for 2010 construction. Iberdrola Renewables will erect 58 turbines in Enterprise and Wisconsin townships near Jackson, while enXco plans to construct 134 turbines in Heron Lake and Hunter townships near Lakefield.

Nobles County Commissioner David Benson, who is also former chairman of the Rural Minnesota Energy Board (RMEB), said he was among those that fought hard to get the wind energy production tax in place. Now the counties are back where they started.

Initially when wind turbines began cropping up in rural Minnesota, counties were only collecting a tax on the base and the tower — a mere 10 percent of the value of the turbine, said Benson.

“We, on the Rural Minnesota Energy Board, said that’s ridiculous — there’s not enough income to the local entities,” he added.

Eventually, RMEB backed a plan in which counties would collect property taxes on 30 percent of the assessed value of the entire tower — including the nacelle, which is the turbine’s generator. Benson said the nacelle is 90 percent of a turbine’s overall value.

Not long after the state changed the tax formula, one of the major wind energy companies took Lincoln County to tax court on the issue. Benson said the legal fight lasted for about 18 months and ended in a settlement. Still, the county was left with a legal bill of more than $100,000.

“We saw that as just not fair,” said Benson.

The next year, RMEB convinced the state that the Minnesota Department of Revenue needed to do the assessments on wind towers and defend that assessment in a court of law if necessary.

As time went on and towers depreciated in value — at least on paper — the Sustainable Energy for Economic Development (SEED) Coalition went to work to developing a tax that would be collected based on the amount of energy production from each turbine.

The wind energy production tax went into effect in 2003.

“This was something that was supposed to be in addition to what the normal state aid is,” said Benson.

It was extra money until it was taken away by the Minnesota Legislature in 2008.

“Two years ago, this was all gravy for the counties,” said Nobles County Assessor Byron Swart. “Lincoln, Murray and Pipestone (counties) had big (wind turbine developments), so they got the most money.”

Swart said those counties could do special projects with the additional money coming in through the production tax — projects in which the county didn’t have to go to the taxpayers with either bonding projects or property tax increases.

“With the money (Nobles County) could build a library,” said Swart.

That would certainly be an option, agreed Benson. However, if the state does reverse its decision on the disbursement of production tax revenue, he said he would like to see the money spent on things like roads and bridges, or programs that reduce crimes and benefit families.

“Transporting these large loads has an impact on our roads,” said Benson. “We have so many needs. We may lose our program aid, and I would like to put (the tax revenue) into preventive work.”

He specifically mentioned more funding for Community Correction’s Circle Sentencing program, early intervention with mental health and addressing the rising number of out of home placements managed by the county’s family services department.

“This would be something that we wouldn’t have to tap into reserves or raise the property taxes (to fund),” Benson said.

Rising revenues

In 2009, Nobles County collected approximately $125,000 in wind energy production tax dollars from 37 turbines. That money, in essence, reduced what the county could levy in property taxes. Residents see a slight tax break as a result of the state’s change, but it has ramifications for counties already struggling to keep within their budgets.

It will only get worse if changes aren’t made to the formula before the 2010 wind farm developments are completed.

Swart said Nobles County anticipates property tax revenues from turbines to jump to more than $1 million by the time the turbines are fully online and producing energy in 2012.

In Jackson County, Auditor-Treasurer Kevin Nordquist said the county collected $219,000 in wind energy production tax revenue in 2009. Of that, the county retained $175,000, while $31,000 went to the townships where wind turbines are located, and $13,000 was paid to the school districts.

In 2010, with school districts taken out of the funding formula for wind energy production tax revenue, 80 percent of the tax stays with the county and the remaining 20 percent goes to the township. Nordquist said Jackson County will collect $350,000 and the townships will get $90,000. The county currently has 114 wind turbines in production.

“We do not expect to see full production revenues from the new towers until payable 2013,” Nordquist said. By then, the county will have approximately 306 towers in operation, generating an estimated $1.34 million in wind energy production tax revenue for the county and townships.

The hope now is that before those new turbines come on line, the state will no longer tie production tax revenues to levy limits.

“Wind development is occurring in areas where we didn’t think it ever would,” said Benson, adding that with more counties realizing the tax formula needs to change, more support is being gathered to present to the legislature.

Benson said areas of the state that initially didn’t seem conducive to wind energy production are now looking to wind turbines as a source of revenue — including counties in northwest and west-central Minnesota, southeast Minnesota near Rochester and even along the state’s North Shore.

Wind energy development projects will continue to crop up as long as it’s profitable and, according to Benson, it is the major U.S. companies and international players that are reaping the benefits.

“We want wind energy for the benefit of the planet, but we should all be able to benefit,” Benson said. “The individual landowner that has a tower (contract) gets a good payment, but that’s just a miniscule of the profit these companies are getting.”


See Friday’s edition of the Daily Globe to read about the weighty issues of wind energy development in southwest Minnesota, in particular the impact wind farm construction has on the region’s roads and bridges.