Property Taxes and Renewable Energy

This is the third installment in our series of articles from our friend and writer, Loren Flaugh, who lives in Central Iowa. We call his series the Primer on Renewable Energy and Transmission. Loren is a born storyteller, as you’ll see in his look at county property taxes and wind farms.

One benefit from the development of a wind farm is the huge property tax revenues that flow into county coffers. While observing how closely one Center Township landowner scrutinized a Court House map showing Highland Wind Energy Project wind turbine site locations, I eased in closer. Joel Wright was bent over jotting down notes of specific sites.

Clearly conflicted over the project, Joel noticed me and said, “I don’t know whether wind energy is an efficient generator of electricity or not. If it weren’t for the huge property tax revenues that wind farms generate and pay into a county, I don’t think many wind farms would ever get built.” In a nutshell, Wright’s one sentence laid bare his diverse feelings about wind energy.

Wind energy developers routinely claimed that wind farms are a great revenue generator for counties. Our ordinance provides for a 7-year graduated property tax abatement period. During the first year after the wind farm is commissioned, no property taxes are collected. With each succeeding year, the rate jumps by 5%. At the 7th year, the property tax rate reaches 30% where it’s permanently capped.

For a 2007 Wallace’s Farmer Magazine feature story, the county assessor and I calculated, year by year, just how much impact the construction of a wind farm would have for county coffers. The results were staggering.

With a net acquisition cost of $666 million in 2007 terms, the 500 MW Highland project would pay in $799,000 in the 2nd abatement year. Taxed at 15% in the 4th year, the property tax payment jumped to $2.4 million. At 20% in the 5th year, $3.2 million was collected. At the 7th and final year of the abatement period, the 30% rate yielded a whopping property tax payment of $4.8 million.

But how are these receipts divvied up? Basically, 50% of the 7th year payment or about $2.4 million went for county government operations. The other $2.4 million went to the two school districts where turbines are located. When the deputy county auditor tallied all the property tax receipts coming into the county in 2007, the total came to almost $14 million.

Essentially, the $4.8 million payment from the Highland Wind Farm accounted for over one-fourth of the county’s entire tax base.

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The Primer on Renewable Energy and Transmission is a 7-part series we are featuring in our newsletter and online. It stems from a talk writer Loren Flaugh gave to Iowa State University students in the spring of 2014. Part 2 looks the regulatory system. Part 3 (here) describes property tax benefits from wind development. You can find Loren’s full presentation here.