MidAmerican Wind Property tax Update

What kind of changes would simplify county assessors ability to verify that all wind farm costs are accounted for when performing assessments. Memos to the assessors from the department of revenue instruct them to do just that, but it doesn't appear that is being done, MidAmerican, and probably other wind projects as well, seem to self reporting their wind farm costs.

Proper formatting of cost reporting filings by wind projects would be a great help to assessors comply with the DOR's recommendation. In my opinion, MidAmerican's county filings leave much room for improvement. But, before we get to that, let's review a filing by an independent wind project in Pocahontas county that,I think, did a very good job of reporting the installed cost of their wind project.

 

Cover page lists total cost, and a per turbine cost.These are 2 megawatt turbines, I believe, and the installed cost per kilowatt in relatively close to the Iowa Wind energy Association's cost estimates of constructing wind turbines    

 

 

Nicely organized.

As you can see, project costs are organized so the assessor can see the cost of individual items, such as turbines, foundations, labor, construction, substation equipment, and it is possible for the assessor or a 3rd party consultant  knowledgeable with wind project costs, to contact suppliers of this type of equipment to verify costs, and visually inspect the wind property verify that all equipment and costs have been listed.

Note that this project includes substation grid interconnection costs as wind property, when I noted in previous posts that MidAmerican is claiming these costs in the Iowa utility replacement tax. This is very unfair to this Minneapolis company, as I don't believe they could utilize the replacement excise tax to lower property tax costs. 

Now let's review examples of MidAmerican's wind filings in the same county.  While the MEC filings I've reviewed have cover pages with cost summary's, their breakdown of substation and turbine costs don't list as many individual items. The assessor must navigate 50 some pages of the invoice spreadsheet list that frankly, seem hard to verify they were used on this project. 

Also, the MEC reported this project to cost less on a cost per kilowatt basis, than the independent project  in the same county listed above. It's installed cost is also lower than the cost the utility reported to FERC and the utilities board. Also lower than the Iowa Wind Energy Association's cost of wind estimate for that time period. This should concern a county assessor IMO.   

It also concerns me that I can't verify that MEC always includes supporting documentation of costs when adding turbines at a site, or in this case, when costs were lowered one phase of this project  a few years later with no apparent explanation or documentation as to why they were lowered. 

      

That's all for now. 

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MidAmerican Property Tax Update

If the utility's wind  property tax are in fact, too low, how much is the state short?

That's a good question that state and local officials could help sort out, but since  they haven't yet, let's estimate it.

The last few posts list several of the discrepancies I've identified while trying to determine if MidAmerican is paying the correct amount of property taxes on their wind projects in Iowa. So how much revenue is the state possibly leaving on the table? I haven't found a formula yet describing the amount of property tax dollars stay with local schools and government, and how much goes to the state budget. I suspect some of the blog visitors are public employees, and are most welcome to provide that information. However, I can can give a estimate of property tax dollars that government might be leaving on the table. Let's start with the difference between the utility's press release concerning their Wind 8 project  and the actual property filings for the Lundgren project, part of Wind 8
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Even though this project is listed at the federal level at about $5 million more it is assessed for, let's assume the utility knew what it was talking about in the press release.The utility press release seems to claim the 107 wind turbines at the Lundgren location cost about $80 million more than they are assessed in Webster county. Some of the cost of this wind project will be substation and interconnection costs, but since they are valued in Webster county at about $12 million, there's still a lot money not accounted for here.

So let's use $80,000,000... a nice round figure.  When wind project property assessment reaches its maximum level of 30% of the projects value, $24 million of the $80 million is taxed. Using an estimate of $24 of tax per $1000 of property, is the state leaving $576,000 per year on the table with just one wind project? There are another 341 turbines in wind 8, so, subtracting some money for substation and interconnection costs,, maybe another $1.5 million is missing annually on wind 8? Seems like  a discrepancy that's more than $2 million annually is worth tracking down!

Though I'm not sure if the FERC cost numbers are accurate, given the large difference between those numbers and the press release figures above, let's use them for another example, the Pomeroy project. The utility said  this project cost about $15 million more in their FERC filings than assessed locally. The utility also told the state utilities board the project cost about $13.5 million more than assessed. Let's use $15 million.   $15 million x .30 percent = $4,500.000. That number x $24 per thousand =$108,000 annually. There's still the rest of the utility's 20 some wind projects to check as well.

The potential mistakes identified in the utility's replacement tax filings are even more concerning to me, because if I have found even a few, I'll bet there's more. Since the state hasn't replied to my question asking how the state makes sure the replacement tax reporting is accurate, we can't be sure. But it can't be ruled out that the utility self reports its replacement tax, just as it seems to be doing with its wind property taxes. The state should go on record as to how this task is performed, since MidAmerican is one of the state's largest tax payers.

When I find errors like the utility forgetting how many turbines they have installed in Pocahontas County, they shouldn't be allowed to self report.  It's hard for me to have much faith in the turbine costs with mistakes like this.


 Pocahontas Assessor notes  that 5 turbines were installed in this phase of the project. the utility thinks it was 11.

   
 Or was it 8?

 So, What needs to be done about this? 
 MidAmerican's wind projects and replacement tax filings need an audit in my opinion... several years worth. The results need to be transparent for the state's tax payers to review. If current state law doesn't allow for that, legislation should be passed that does allow for that. We need to see that local assessments were correctly performed and reviewed by the state to insure accuracy.

Comments from public officials are welcome, and I'm willing to update these property tax posts if provided with additional accurate information. 

 

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