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.  

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