Thursday, April 6, 2017

MidAmerican Wind Property Tax Update


In the previous post, one item on the list sent to the state department of revenue and department management asked for help identifying MEC's wind assets listed under the Iowa Utility Replacement Tax, and comparing the assessed replacement tax of the asset to what the assessed tax would be if the asset was classified as wind property under Iowa Code 427.B.

At an informal meeting with Webster county officials last September, I was directed to the state department of revenue and the department of management for this information, even though wind property is assessed locally in the state. Since neither state agency has responded to that list of questions and concerns on record yet, let's take a look anyway, as some of this information is available online. We won't be able to completely resolve this issue without confirmation from state, local government,or utility, as you'll see shortly.

MidAmerican declared the following substation built for its Webster County Lundgren wind project as wind property in 3013.

    
 In 2015 the utility then changed its mind and declared the substation was to be moved to the state utility replacement tax instead, even though it was built to connect the wind farm to the grid.



 
 The utility explained the reason for the switch, was that a small transmission line separated the grid connection point from the wind project collection facilities.

 As the staff person at department of management (DOM) noted, the department of revenue(DOR) prepares these reports for  DOM . The department of management website lists replacement tax assets, gas or electric, by county and township. The electric assets are classified as trans or elec. The only MidAmerican electric assets listed that are close to the substation location, are 1 transmission asset and 1 electric asset in Burnside township. The transmission line is assessed at approximately $76,000 and the electric asset at $1500, so is the $1500 asset the substation removed from local wind assessment? Even if it's not THE substation, it is likely a substation, so it serves as a reasonable comparison of replacement tax and wind property tax rates. This is why I contacted state officials to take the guess work out.  




  If this electric asset was classified as wind property, using a estimated township tax rate of $24 per thousand dollars of valuation, it would be assessed at $21,952 when the 427.B.tax reached year 7.





So did the utility declare this asset as wind property because it tax rate in the first year would be zero? Then move it to replacement tax later because it would generate a lower assessment there? When I review 427.B, it seems this asset should assessed locally as wind property.


 
 Unfortunately, there is a bigger problem here. These same two Burnside township assets appear on the replacement tax reports back to 2011, and up to 2017, though the substation was declared wind property in 2013 . So it appears this substation was removed from local assessment and is still not listed in the replacement tax reports. So has a $3 million dollar wind asset been taxed little or nothing since it was built about 4 years ago? It also appears that utility, county officials, and state agencies have not noticed. This is why I contacted state officials at year end for more information. MidAmerican has more than 20 wind projects in the state now, so has this happened elsewhere? It seems reasonable that Iowan's would expect more scrutiny and transparency when it comes to the utility's taxes.     

   











Thursday, March 30, 2017

MidAmerican Wind Property Tax Update





 I did send a lot of the  MEC Wind information posted on this blog to the state department of revenue - property tax department (DOR) late last summer. After hearing no response. I then reached out to the Department of Management (DOM) for information in December.  The staff person that replied asked for a list of questions. I sent the admittedly long list of questions below. I then received a reply that most of these questions dealt with items that DOR was responsible for, and that the DOM staff person would reach out to DOR to coordinate a response or schedule a meeting.

A few days later, I received a unscheduled, less than civil phone call ( this is an extremely generous description on my part) from the DOR property tax department.  There were several points of disagreement between the caller and myself, so once again, I asked for them to respond to my question list below in writing.  I then emailed them a summary of the phone conversation. I'm still waiting for an on the record response. 

Pretty much from the start of my research here, I've found several state and county officials contacted about this issue less than cooperative, and reluctant to go on the record regarding it. That said,  I'm certainly willing to discuss with them in in more detail in order to shed further light on this. Who knows, if these folks would simply meet and be more forth coming with information, it might clear up a lot of the discrepancies that I've listed here in previous posts. 

 I know the state and county employees responsible for these items are busy folks, but given the amount of inconsistencies here, i think it's important to address this.
So let's break down the question list while waiting for a response.       

1 - Utility replacement tax -  Local government and emails from a MidAmerican employee  confirm that the utility is reporting wind energy assets under the utility replacement tax instead of 427.B - SPECIAL VALUATION OF WIND ENERGY CONVERSION PROPERTY.
DOR was adamant during the recent phone call that this was not happening, despite the fact that an MEC employee has stated otherwise. and information was sent to them detailing this.  

A-    We already are familiar with calculating tax valuations using 427.B.  We would like to get the formula used to calculate the replacement tax for electric generation, transmission, and distribution. 
During the phone call, DOR declined to provide this information, citing Iowa code 437.A.  
Since the kilowatt hour generation totals of the utilitys wind projects were listed on their federal filings, I'm guessing all their assets kWH information are available federally, but it is confidential at DOR.  So, the public can't see if the information provided by the utility to DOR for tax purposes matches the federal numbers? This is ridiculous.  

B-    County government was unable to help us identify utility wind assets  in the replacement tax records available online. 
I was directed at an informal meeting with Webster county officials to contact DOR and DOM to get this information. So far, state officials haven't helped. 

C-    We would like assistance from the appropriate state agency to identify wind assets in the replacement tax records, and compare difference in valuations  if the assets were classified under 427.B.
See above.

D-    Who made the determination that Wind assets could be classified under the utility replacement tax? 
As noted above,  the DOR was unaware this was happening, so it seems the utility probably made this determination.    

E-     How does the utility report replacement tax to DOR, and what methods does DOR use to verify those reports? 

  Is the utility self reporting it's replacement tax filings to DOR as it seems to be doing with its county wind property filings , and what, if any, methods are in place for DOR to to verify those submittals? 

2 -  Clear description of state level and  county level responsibilities  in determining wind property valuations.

                A - County officials have told us that Department of Revenue does not allow wind valuations to be contested, while DOR explained to me previously that wind valuations are determined at the county level, and DOR only offers guidance. Please clarify state and county responsibilities for wind valuations 
Still waiting for the response.

                B -  What are the discovery methods for schools , interested tax payers, etc. to determine if wind energy valuations are properly calculated?  
Given the difficulties I have encountered, I'd say there's room for improvement here.   

                C -  transparency – I had to hire an attorney to access property tax filings by the wind farm owner in Pocahontas county. Please verify that these are public records. 
No response yet.  



Follower shout out


In addition to the daily blog visitors here,  A fairly consistent number of viewers stop by every time a new post is added.  Only one viewer so far has requested  to be added as a follower. That person recently announced that he is considering a run for Governor. He also served on the board of the Iowa Wind Energy Association . Here is a recent interview at Bleeding Heartland. I thought Mike might be interested in providing a statement on these wind property tax posts, and the one to follow, as the Department of Revenue and management heads that would be in charge of further scrutiny of this issue are appointed by the governor.  I try to keep things non partisan here, so I should note that MEC has built wind projects since first authorized by Governor Vilsack, and during the terms of Gov. Culver and Gov Branstad Some of these projects are more than a decade old, so the items I've raised here cross several administrations.  




 

1967 Impala SS427 Convertible For Sale


Yes, this is an energy blog. But, a number of renewable energy people that I've met over the years were originally , or still are, hardcore car enthusiasts. 


Therefore,  I've decided to sell  a pretty rare car of mine, though the restoration is not quite complete, and list it on the blog. If you're seriously looking for a cool, really rare car , please provide your contact info in the comments section . All comments need to be approved by me, and I won't make them public.

I'd like to find a good home for this car. Chevy built about 2100 Impalas in 1967 with the Z24 Super Sport package equipped with a 427 Cu In engine. I've never seen anything from Chevy that listed how many of the 2100 were convertibles, though I've seen some guesses from car hobby people that maybe 10% of those were convertibles.  

I've seen sales in the $100,000 area for cars like this. Since it still needs finishing. I'm certainly open to offers. All the hard stuff is done though. Please don't contact me unless you are serious and include contact information where you can be easily reached.

.
I've owned this car since the mid 80's, It was an original numbers correct car with about 70,000 miles, good running, cracked lacquer paint etc. 


I drove this car as is for several years, while acquiring parts for the resto. Great car to drive.
Started a full resto a few years back. This car was not rusty, had some small parking lot dings, one slight dent on a rear quarter, maybe the previous owner found the side of their garage door. Did weld in an area next to a rear wheel well. The metal on this car was in amazingly good condition.

Paint and body came out beautiful. Entire drive train overhauled.

1967 factory 427 car, red exterior with white top and black interior, as listed on the original factory build sheet, which I have. 


Motor, transmission, rear end are numbers correct.
All trim that was replaced, was replaced with NOS. parts. Re chromed bumpers and other misc. parts at AIH in Dubuque.
NOS mufflers and resonator tail pipes.

Options include --
Tach and gauges
AC
Power windows
tinted glass
Bucket seats
Auto trans
optional Wood steering wheel
AM FM 8 track
Factory air shocks
Power steering
Factory disc brakes with rally wheels

All listed on the build sheet. Also have protecto plate.
I've tried to do everything correct on this restoration.
Also have many photos of the restoration process. 





Some pictures of the car when first purchased 

and of the resto, I have lots of these

 







Monday, March 27, 2017

MidAmerican Highland Wind Project tax valuations



I've been seeing a pattern with MidAmerican's  county wind property tax filings. The utility seems to be consistently reporting lower valuations to county assessors, than than the wind project costs that MEC reports to FERC. North American Wind Power featured the utility's Highland wind project in April 2016. The article interviewed the O'Brien county assessor Lowell Dykstra, who reported a valuation of $820,195,459.00 for the wind project.






And, once again, the utility reported a higher valuation to FERC. $822,632,795, or $2,437,337 higher than the county.









 
So, where exactly is the missing $2.4 Million?  Has it been omitted, or reported under the Iowa Utility Replacement Tax at a more favorable rate? Or some other scenario?  $2.4 million missing or possibly incorrectly included in a different tax structure over the 20 plus year lifespan of the project will add up to significant missing revenue for state and local government. Additional information from from state and local property tax officials, and the utility are welcome here.

 

Tuesday, March 7, 2017

MidAmerican Wind property tax




Anyone living in Iowa is probably aware that the states budget is in dismal shape, forcing legislators to make some very unpopular funding cuts. Maybe state officials should look into MidAmerican's wind property tax filings to see if they have missed some additional revenue.    

There are numerous posts on this blog that cover my concern that the utility's wind project assets may be undervalued. This update lists a few exanples where the utility's county wind property tax filings simply don't match their press releases, their Federal filings at FERC, or their Iowa Utilities board filings. Every one of their county filings I've reviewed so far, lists lower project values than the utility reported for the same project elsewhere. This story plays out in three parts:

1 - Reported project costs.    

First, let's look at the MEC Lundgren project in Webster County. This press release  found online provides the cost of wind VIII, which Lundgren is a part of .This cost , divided by the number of wind turbines in wind VIII, results  in almost $80,000,000 higher costs than the Utility filed for property valuations in Webster county
Some of the $1.9 billion will be substation and grid upgrades, but since those are valued in Webster county at about $12 million, the numbers clearly are a long way from balancing.
These wind projects will  on the tax roles for years , and if several million dollars are missing each year…   

It is interesting to note that the $80,000,000 higher number actually is closer to what the Iowa Wind Energy Association estimates the cost ofinstalling wind energy to be.


 






$1.9 billion divided by 448 total turbines = a value of $4,241,071 per turbine. The utility reported a value of $3,493,871 for each turbine to Webster County.






MidAmerican also reported a higher cost to the Federal Energy Regulatory Commission than they listed on their Webster County valuations, though the values are about $5 million higher here.





The other MEC wind project example is the Pomeroy project , located in Pocahontas and Calhoun counties . I went to the Calhoun county property tax review board  with this concern, and was rejected, but in the rejection letter  , the Assessor actually provided information that showed I was correct.






The board dismissed my "protest"  "due to lack of standing". Interestingly, In her letter announcing the review boards decision, The assessor mentions she contacted the Iowa Utilities Board (IUB), and that the final installed cost of MidAmerican's wind project in the county was  $1611 per kw.

The wind industry frequently refers to cost figures in $ per kw . In this
case, the turbines are 2.3 megawatt turbines, or 2300 kilowatts.   $1611 x
2300 = $ 3,705,300. MidAmerican's property tax filing to the county was
$3,631,990 total acquisition cost per turbine, a difference, of $73,310 per turbine. So the assessor is basically telling me I was right, but dismissing my claim anyway.

$73,310 x the 184 total number of wind turbines in this project comes to $13,489,040 , and actually the utility Reported about a $15,000,000 higher project cost at the federal agency than  they reported to the county. Definitely closer the utility's federal filing than its county valuation.    





Here are the county values.  (email with county assessors for Pocahontas and Calhoun counties). This project has been in operation almost 10 years, so we have the possibility that about $150,000,000 hasn’t been taxed.
Plus, MidAmerican has 20 plus wind projects, and I’m seeing these same discrepancies in every one  I’ve looked at so far.





2- The Utility is listing some wind assets in the Iowa Utility replacement tax instead of reporting them as wind assets under Iowa Code 427B.

In a call with the Iowa Department of Revenue, the staff I discussed this with maintained that this was not happening, even after after I emailed them the following information, which leads me to the conclusion that MidAmerican likely made this decision on their own.

More than likely , this lowers the tax rates on those assets, affecting local government and schools. Neither DOR or local government has assisted identifying these assets in the utility replacement tax filings yet, I can compare the assets current tax rate ,  to what the assets would be taxed as if classified as 427.B wind assets.

Also, it seems unfair , as I don’t think a non-utility owned wind project could use the replacement tax. Below, is an example of this from the Lundgren wind project in Webster county.  
I also have an archived email from a MidAmerican employee stating this was done at the Pomeroy project location, so most likely at all their 20 plus wind project locations.

After visiting with DOR about this, I couldn’t help but wonder if MidAmerican is self-reporting  all their replacement tax filings as well , and what , if any , methods DOR uses to verify those filings.

 
MidAmerican filed this document in Webster county:
  





The utility later filed this document, stating the above substation was being transferred to replacement tax area.











Here is an aerial view of the 2 wind energy substations. The lower substation is the item discussed in the filings.  The filings above indicate  that both were constructed to connect the wind farm to the grid.
Certainly wind related assets appear to be included in the lower station.  This is one instance of wind property in the replacement tax system.










3 - Iowa Department of Revenue's Property tax division gives clear instructions to county assessors for valuing wind project assets. County assessors don't appear to be following those instructions on the MidAmerican projects I've reviewed. 


This  2010 Department of Revenue mail to county assessors, directs them to be sure all wind plant costs are accounted for.






I met with the Department Of Revenue in 2014, after which , their legal department sent me the memo below which pretty well confirms the 2010 directive above . There are several answers to questions from county assessors here that also support these documents












Yet, Assessors don’t seem to be doing this. The email below from the Pocahontas County assessor to a wind developer states that usually she receives a simple cost per turbine  letter form the wind project. The developer below did provide very detailed cost information that supported their property tax filing .  The MidAmerican filings I’ve reviewed often have no supporting documentation, definitely not as well documented as the Gamaesa  project below.  The Gamesa project also appeared to have a higher cost per installed kilowatt (again closer in line to IWEA's estimates)  than the Midamerican project in the same county .







The below email from the Calhoun County assessor states that every county with wind property is assessing the same way.  
So, the Department of Revenue gives clear directives how wind property should be assessed, but county assessors aren’t doing it in my opinion. 












I’ve sent quite a bit of info to the Iowa Department of Revenue and Department of Management, in addition to county assessors in Webster, Calhoun, and Pocahontas counties, so it will be interesting to see what develops.  







Wednesday, August 10, 2016

Heat Pump Clothes Dryers



Our 1970s era clothes dryer is a bit more noisy than it should be. It is pretty easy and usually low cost to repair. My area appliance store has a number of these machines in service yet, but, I've been researching  heat pump dry clothes dryers back before they were available in the U.S. Now, they're here and it might be time to upgrade.  It was harder to justify buying a new dryer when the replacement would consume just as much electricity as the old unit and repairing our current one was more cost effective than purchasing a replacement. 

My rural electric coop doesn't have much info about heat pump dryers, but about 3 years ago, I found a link from their national association that wasn't very kind to the new tech. The title -
"On the Way: A $2,000 Clothes Dryer"  was kind of the first clue they would rather you stayed with the  higher KWH consuming dryer, though in the article, a price point of $1000 to $2000 was mentioned. Looks like the title price was off a bit. 







After listing many good features, lower energy costs, no outside venting, so lower fire risk,and  lower environmental impacts, the REC  program manager then noted “If you have a large family, no way in the world can you get a device that takes twice as long to dry your clothes.”. He concluded by suggesting that members who wanted to save money should hang their clothes outside to dry. Given this curmudgeon like advice, It was refreshing to see the new found love for energy star dryers (including heat pumps) from the RECs in my latest coop newsletter



     



Who knows, maybe the REC's can also change the "get off my lawn!" attitude they display towards members who want to generate their own electricity, because a lot of them will want to do just that!   



 As for dryers, since we haven't purchased one yet, here's a gentleman who has been living with a heat pump dryer for a while, and he's put much more info together than any of the utility programs I've been able to find

About the only items I would add. to his excellent blog post, is that retail electric rates will probably continue to rise over the life of this appliance. Also, many consumers will be replacing dryers with much less drying capacity than the new dryer, resulting in many less dryer loads annually . Given these items, consumers might see slightly improved economics than listed .