Taxing Wind Farms

By Gordon HopkinsIt is rare that a company asks to be taxed more, but that is exactly what happened at a recent meeting of the Jefferson County Commissioners.The Steele Flats Wind Farm in Steele City is owned and operated by NextEra Energy Resources. Representatives of NextEra appeared at a public hearing on Tuesday, March 1, to discuss possible changes to regulations governing wind farms in the county. The existing wind farm was referenced multiple times as a source of tax revenue for the county. During the hearing, county commissioner Gale Pohlmann expressed concerns that NextEra was not paying as much in taxes as was anticipated.“There’s a lot of numbers that have been thrown out about property tax, real estate tax, nameplate capacity tax and I’ve asked our local treasurer to provide us with some information on Steele Flats and the taxes that have been paid since its inception,” said Pohlmann. “The total taxes paid in 2020 is $245,000, not (the anticipated) $450,000. So where are we missing the other $200,000?”David Levy, an attorney and partner with Baird Holm, LLP, which represents NextEra, met with county commissioners at a subsequent meeting on Tuesday, March 8. Levy acknowledged that the company was, indeed, likely not paying as much in taxes as it could be.“So we’ve spent a lot of time on this in the last week. I’ve talked with the assessor (county assessor Mary Banahan) a couple of times. She’s been very helpful,” said Levy. “What we discovered was some of the components that the state law says, and the Department of Revenue say, should be part of that real property tax have not been assessed and valued and taxed as part of that real property tax.”Levy tried to explain what his research found.“So we took the numbers that we have from NextEra,” said Levy. “When we add in the lease, the tax on the lease payments and the leasehold value, we get to it. That wasn’t being taxed at all.”Pohlmann asked, “Basically, there should have been a tax on the lease payments?Levy confirmed, “And the leasehold value.”Levy noted that NextEra has paid approximately $15 million in lease payments over the last 10 years for the Steel Flats project.“Visiting with Mary a little bit this morning on this issue. She said that the Department of Revenue,” said Pohlmann. “Was a little lax and not too clear on how that net present value is to be taxed.”Levy said, “And by the way, I mean, this is the irony of what you all do. You all, and the governor and the legislature, have worked very hard to push the levy rate down. Levy rates have gone down over the past six or eight years. That’s good for the taxpayers. That means less revenue to the county. Jefferson County has a low levy rate, I would expect when we’re all done with this, that because of that, you’ll be more in the $5,500 per megawatt range, rather than that $6,000 or $6,500, that I’ve seen in counties that have higher levy rates. So I wanted to make that point.”Levy stressed that his numbers were only estimates and preliminary, He explained the way forward, “Mary (Banahan) gave us a comprehensive list of information that she needs. We’re working on getting that information. We’ll work with Mary and maybe the Department of Revenue, and maybe a professional appraiser, economist or somebody who can really help us figure out that leasehold value properly.”Levy said, “Mary has to set the preliminary values by March 21 of this year. So we still won’t have the final answer by then. But then there’s a process through what she can do. And then we (NextEra), as the taxpayer, we can file a protest as well during the month of June. It’s kind of a funny thing to protest your own taxes up, but it does happen occasionally. So point of that is we can buy some time through the process until about August to try and get these numbers so to make sure that at least going forward, that you know that the county is getting everything to which it’s entitled.”

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