Published:
Tribune Staff Writer
BAD AXE —
“We just want to make sure we get our fair share and everyone’s treated
equally,” said Mike Krause, member of both the Huron County Economic
Development Corporation (EDC) Board and Thumb Regional Renewable Energy
Collaborative (TRREC).
Krause said in the long run, renewable energy projects will be very valuable
since state law requires at least 10 percent of the state’s energy come from
renewable sources by 2015. Michigan’s Renewable Energy Portfolio Standard,
which lawmakers adopted in October 2008, also requires that, for the most part,
renewable energy systems used to satisfy the “10 percent by 2015” law be
located in Michigan.
Because the Thumb has been identified as the number one area in the state for
wind energy generation potential, and because of the state’s energy mandate,
it makes the area ripe for wind development.
“This is the biggest thing to happen to the Thumb region since the Great Fire
of 1881,” Krause said.
One of TRREC’s goals is to provide education to townships, local schools, road
commissions, seniors, medical care, transit, libraries and others that could be
impacted by renewable energy developments in the area of taxes and job creation.
To do that, collaborative members — which consist of representatives from
Huron, Tuscola and Sanilac counties — investigated how wind projects currently
are taxed.
Annual depreciation,
possible tax abatement
Wind energy systems (i.e. turbines) are classified as industrial property,
Krause said. Unlike real property, property values are determined by their
market value.
The Michigan State Tax Commission, with input from wind developers, established
a schedule where turbines are taxed at 100 percent of their value the first year
of operation and then the taxable value depreciates by 5 percent each year until
year 15, when they are taxed at 30 percent, Krause said. After year 15, the
schedule remains at 30 percent.
As an example, he said a $4.8 million wind turbine would have a taxable value of
$2.4 million for the first year. If 20 mills were levied, the total tax revenue
from the turbine for the first year would be $48,000. Each year, until year 15,
the tax revenue from the turbine would decrease by 5 percent, resulting in
revenue being $14,400 at year 15 and every following year.
Because wind turbines are considered industrial personal property, they are
exempt from paying the State Education Tax of 6 mills and Local School Operating
Tax of 18 mills.
On top of that, turbines also may qualify for a personal property tax exemption
from the Michigan Next Energy Authority.
Krause said that means an energy developer could get a 100 percent tax abatement
on a wind development once the project is complete — that is unless the local
tax collection units and school districts pass resolutions disallowing the
exemption.
Impacted local units (i.e. townships) and school districts are notified when a
Michigan Next Energy Authority exemption is approved, and the units have 60 days
to pass a resolution opting out of the exemption, he said.
If the local tax collecting units of government/schools do not opt out within 60
days, they have no way of collecting any taxes on the wind turbines until Dec.
31, 2012, which is the sunset date the Legislature set in the Michigan Next
Energy Authority law, Krause explained.
After that sunset date, any certified exempted wind energy system would return
to the tax rolls at their tax depreciated value, unless the law is extended —
which officials said on Tuesday could happen because the goal of the exemption
is not to encourage just wind development, but renewable energy manufacturing in
As a result, TRREC members and county commissioners on Tuesday stressed it’s
very important that local schools and townships are aware of this, so if a
request for exemption is made in their area, they will be able to opt out of it
and can collect local taxes on the wind energy systems. And if a township
doesn’t opt out and an exemption goes into effect, it means no local
government — including the county — will be able to collect any taxes on the
development, Krause said.
He noted TRREC has been building a rapport with the Michigan Economic
Development Corporation (MEDC) so if a local township is sent a notification
that an exemption has been approved, county officials will be notified and can
make the local unit aware it has 60 days to act or it will lose out on tax
revenue.
“As new developments come in, as we better understand what the tax
implications are ... it’s our responsibility to ... make sure information is
as transparent and open as much as possible,” said Huron County EDC Executive
Director Carl Osentoski, who also is a TRREC member.
Hundreds of millions of dollars at stake
Krause said the Michigan Next Energy Authority exemption is the only tax
exemption option for wind energy systems. He said the MEDC is of the opinion
that since
“We have a natural resource that people want to develop,” he said, adding
tax abatements won’t be the incentive they currently are in the future because
developers won’t have a choice but to create alternative energy developments
because they will be required to have 10 percent of their electricity come from
renewable sources by 2015.
If all local units failed to opt out of the Next Energy exemption as future
developments are erected, it could cost the Thumb hundreds of millions of
dollars in the future, Krause said.
As an extreme, he cited estimates showing that if 1,000 turbines were erected in
the Thumb (Huron, Tuscola and Sanilac counties), and no townships opted out of
the exemption, the Tri-County area could lose $445.99 million in tax revenue,
assuming the turbines are taxed an average of 20 mills.
Krause stressed that is just a snapshot of the significance of future revenue
from wind developments, and noted area townships and schools shouldn’t be
ashamed for collecting taxes on wind developments.
“Twenty mills is not the end of the world — it’s what constituents in this
county deserve,” Krause added. “... To represent your community and your
constituents, you need to get something in return (in the form of tax revenue
from developments).”
He said the area has to think of wind as a natural resource.
“If we discovered gold in
According to Huron County Treasurer Sherry Learman, turbines located in
Turbines located in
Learman said turbines located in
Turbines located in
The total property tax collected in the area from both Michigan Wind 1 and
Harvest Wind — including all taxes paid to the four townships, county, local
schools and libraries — exceeded $1.08 million in 2009 and are anticipated to
be around $1.02 million in 2010, according to projections from the Huron County
Equalization Office.
The next course of action
According to the presentation Osentoski and Krause gave during Tuesday’s
commissioners meeting, the number one item on the collaborative’s to-do list
is to make sure townships and local school districts opt out of Next Energy Tax
exemptions.
Other to-do items include:
• Educate each other.
• Build a coalition, including counties outside the Thumb area, to affect
legislation and Michigan Tax Commission regulations.
• Study the impact of increased taxes on local millage collections, job
creation and explore other options. This study will take some time, Krause
noted.
Following the TRREC presentation,
Damrow said the local wind developments are what made the area attractive to the
companies, which included a hybrid automotive manufacturing company.
Also during Tuesday’s meeting, the board heard from Brad Lila, Renewable
Energy Systems Americas Inc. (RES Americas) development manager, who said RES
will soon be submitting an application for wind overlay zoning, which is the
first step in zoning process to create a wind development.
He said RES is nearing completion of gathering leases, and so far, there are
about 60,000 acres under lease.
The company is looking at two different projects, Lila said. The first is
northeast of Kinde and the second is southwest of Elkton.
At this time, RES is waiting to see what ITC Transmission will do as far as
upgrading the transmission grid, Lila added.
Web Link >>
http://www.michigansthumb.com/articles/2010/07/21/news/local_news/doc4c46c9844b2fc328431959.txt