Michigan counties could lose millions of dollars from wind farm tax change

By Sam Inglot

Capital News Service

LANSING—Michigan counties with wind farms stand to lose millions of dollars in property tax revenue due to a recent change in tax policy.

Wind turbines are considered industrial personal property and taxed on their market value, said Rep. Kurt Damrow, R-Port Austin. Formerly each turbine’s tax liability was based on 100 percent of its value for the first year and depreciated over 15 years until bottoming out at 30 percent.

Photo: brooklyn (Flickr)

But the State Tax Commission changed the tax code in early December so that turbines are now taxed at 80 percent on the first year and that drops to 30 percent within five years, Damrow said.

The loss of tax revenue is significant in counties where large wind farms are under development.

In Mason County, construction has begun on Consumers Energy’s first wind park. The Lake Winds Energy Park will consist of 56 turbines when it begins generating power in 2013.

The change will result in a loss of $7.8 million in once-anticipated tax revenues over 20 years, said Fabian Knizacky, county administrator for Mason County. Originally Consumers Energy said the county would receive $29 million over 20 years.

“At this point we’re trying to find out what the justification for the change is,” Knizacky said. “We have not received any justification from the tax commission other than the fact they said that they evaluate valuations from time to time and adjust to more current values.”

The State Tax Commission adopted a new set of equations for determining the value of property, said Terry Stanton, director of communications for the state treasury.

They were adjusted to reflect changes in market prices of turbines purchased in the past. He said replacement costs due to wear and tear and old technology were factored in as well.

Consumers Energy has told the county that they were unaware of the tax change until recently and that they were not advocating for the shift.

“At this particular time we’re hoping Consumers Energy, through their good neighbor philosophy, will consider to reimburse Mason County at the full level that was anticipated,” said Lewis Squires, chairman for the Mason County Board of Commissioners.

Squires said the money would go to schools, senior citizens and other community projects.

“That’s a sizeable chuck of revenue that we were looking forward to distributing to the necessary agencies that needed it,” he said.

While bothered by the change, county officials are still looking forward to the revenue that the wind park will generate.

“It may reduce the amount of money we’ll be getting, but it’s still new money,” said Joseph Lenius, vice president of the Mason County Board of Commissioners.

“It sounds like it’s somewhat of a compromise due to the fact that if they didn’t do that, they’re looking at doing away with the property tax on commercial personal property,” Lenius said. “That would have meant the wind turbines would not have paid anything.”

Consumers Energy could not be reached for comment.

  • frank

    Thanks Dave
    I have to agree
    Funny all of a sudden big business gets involved they get a tax break
    when the average joe wanted to put up a wind turbine and go green these utilty companies protested and declaired they did not want to pay for the excess these mini gen sets made they wanted to give credits

  • Dave

    It is understandable that communities want (and need) a piece of the pie from commercial power generating infrastructure. On the other hand, if those fields where the wind farms are located were only engaged in agricultural farming, the property tax rate would be at an artificially-low agricultural rate and generate even less tax revenue.

    The tax revenue from wind power truly is a windfall (pun intended) that comes without the unintended consequences of coal- nuclear- and gas-fired generation plants. Since communities have always born those externalized costs, it only seems fair that reduced taxation on wind generation structures be born by those same communities.

    Ironically, apparently the current taxation language “allows” taxing entities to assess small wind generators as real property and tax them accordingly. For example, in Alpena County, private generators are assessed and taxed. Across the county line, in Presque Isle County, they apparently are not. Talk about disincentive to make a positive investment in our future!

    There should be a statutory exemption for small-scale wind generators that are primarily used to power one’s own home, even if a portion of the excess power is ultimately “sold” back to the grid. This would be no different than offering energy-efficiency tax credits, as the ultimate effect is to reduce fossil-fueled energy consumption.