Tuesday, June 10, 2014

Does MidAmerican pay correct wind property taxes in Iowa ?

It’s time to update efforts to determine if MidAmerican (MEC) is paying correct property taxes on their wind assets in Iowa, I’m going to concentrate on a small segment of the MEC wind project near me. The project was built in 3 phases. The 3rd phase consists of thirteen 2.3 megawatt turbines, 5 in Pocahontas County, and 8 in Calhoun County.  Curiously, each county valued the turbines differently, Pocahontas at $3.66 each, Calhoun at $3.60 million. These figures were quoted to me during visits to each assessor office. Since then, the two county assessors have apparently networked and each county’s assessment currently stands at $3,631,990. I’ve asked each assessor to show me how they calculated the valuations, and how come there was a difference in the original valuations.  Both have recommended I review the MEC property tax filings I accessed in both counties.  

I’ll get to the filings shortly, but first, state law allows Iowa taxpayers to contest property tax assessments in an annual April to May period at a county review board. I filed a petition contesting MEC’s wind values in Calhoun County during May.  I requested an oral presentation, and was allotted 15 minutes to present information supporting my concern about MEC’s wind property valuation. I noted the difference between the valuations in each county, concern that the utilities don’t appear to itemize all project soft costs in their county filings, and my general concern that the county valuation was vastly south of the project cost caps negotiated by MEC, Office of Consumer Advocate (OCA), and the Iowa Utilities Board (IUB), all entities with much experience with wind costs. I also offered to help, as I have consulting experience with wind projects. I requested the county access MEC’s Utilities Board filings and thoroughly review them.  The county dismissed my petition for “lack of standing”.
It’s Interesting to note (also a little disappointing) that the Calhoun Assessor noted in a letter dismissing my claim that she had contacted the IUB. She wrote that the cost caps weren’t relevant to valuations, and that the final project cost was $1611 per KW. See below. 

 We can compare the project cost per kilowatt to the county wind property valuation. A 2.3 megawatt wind turbine = 2300 kilowatts. 2300 x $1611 per KW = $3,705,300, a number higher than either county valued the turbines, and higher than MEC’s county filing appraised the turbines.  I relayed this to the assessor by email and received the following response – “As I have said before, we do not assess per kw.  That is what you are using to compare.  We are assessing the same as Pocahontas County, as well as every other county with wind energy property.”
This is why I asked the county to review the IUB filings to determine why the numbers were different, and determine if all hard and soft costs are accounted for in the valuations, as the Department of Revenue (DOR)  advises County assessors to do.  Also at issue, what items are used to determine the IUB caps?

OK… back to the utility filings. A few interesting examples are below.  The first 2 are examples of the ledger invoices costs listed in the MEC Calhoun County filings. 

In my opinion, I think it’s hard to determine if these are actual costs incurred in the county, or general costs at multiple locations. A more useful format would be itemized costs of turbine towers, nacelles, foundations, balance of plant, and per turbine soft costs. I can’t determine if the underground cable between turbines is accounted for in this filing. The filings for the 3rd phase in Calhoun County included these invoice records. Pocahontas County has all three project phases, but MEC only included invoice records for the first phase. It appears the utility filed no supporting documentation for the other 2 phases. The filings over the last 5 years have also raised and lowered the value per turbine.   See below. A decrease in cost was filed in 2013.   Also note that MEC lists 11of the 2.3 megawatt turbines installed in Pocahontas County. 

A 2014 filing raises the value, again with no supporting documentation. Also note MEC counts 8 of the 2.3 megawatt turbines installed in the county.  The Pocahontas county Assessor counts 5 of the 2.3 megawatt turbines, by the way.

So what to do about this issue?  I found quite a few items that conflict with each other while examining this small segment. Given that the Utility seems to have misplaced some of the turbines they thought were in Pocahontas County, and that there seems to be differences between the utility county filings and information provided by the IUB, it seems fair to question the costs submitted.  Since the Calhoun assessor notes that all counties are using the same method to calculate wind values, here are my recommendations:
1-This is an Open Records issue! Both counties originally denied my request to see these records. Once they were reminded of the section of the Iowa code that allowed citizens to review property tax filings, they allowed me access. My local review board petition was dismissed using Utility board information that I have not had access to yet. Lack of transparency has been a big problem in sorting things out with this issue. Iowans should have access to these records.     

2 – Every county with MEC wind assets should review the MEC filings at the IUB, and thoroughly review their own current methods of wind valuations. MidAmerican originally offered to make their tax department personnel available to review this issue.They have yet to do so. It seems that 3rd parties should be involved in this process as well. I'm volunteering. 
3. Again, 3rd party consultants familiar with wind costs should be involved as well. That might be difficult, as most consultants might have conflicts of interest, having worked for existing projects.  The IUB and OCA are watching out for the ratepayer, so they may be perceived as having a conflict as well.  

4. The DOR should offer more assistance to county assessors to determine if all hard and soft project costs are accounted for. Iowa now has several billion dollars of wind assets installed. Even small mistakes on valuations can add up to larges values not on the state tax rolls.  
So, I’ve shined a ray of sunshine on this issue. It needs more work.  I still haven’t learned why MEC and the IUB modified the cost caps for this project 5 times , but the county only has 3 property tax assessments for this project. Citizens can appeal to a state review board if they don’t agree with their (or their neighbors) Property assessments. I’m hoping local government will address it.  I’m still reviewing about 100 pages of MEC’s county filings, so more interesting stuff will probably surface.  Stay tuned…   

P.S. It’s probably obvious to blog visitors that writing skills are not my greatest asset, So thanks for checking me out and enduring grammar errors, fragmented sentences, etc. I’m covering some energy issues that I really think need more discussion in Iowa, not all of them positive, so I’m going to try ending with an inspirational link when posting. 

Recently, Germany set another renewable record, generating nearly 75% of their electricity with renewables – without building a bunch of big transmission lines. Almost half of renewables there are owned by farmers and regular folks, instead of the corporate business model that makes up the majority of U.S. renewables. Iowa is nowhere close to that number, though we enjoy better wind and solar resources than Germany.  It’s time for Iowa to think locally when it comes to renewables!            

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