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.