The agreement deals with the perception among the counties that they have not been getting their fair share of revenue from the state's 320 MW of wind capacity. The skirmish began when counties noticed some wind developers were building projects smaller than 2 MW to take advantage of a $0.015/kWh state incentive for small plant and an exemption from property taxes. But the projects were actually strung side by side along ridges in Minnesota. The counties said they should be taxed as if they were a larger project.
In 1992, as a wind power development incentive, the state legislature exempted all wind projects from property tax. But by 1994, counties became concerned that although large wind projects could be sited within their borders, they would end up with no revenue from the developments, says the American Wind Energy Association's John Dunlop.
The situation was corrected in 1995 when the legislature set property tax rates for wind projects, but put them on a sliding scale according to size, believing that small wind is good for local communities. Larger projects between 2 MW and 12 MW were 90% exempt from property taxes, while projects larger than 12 MW received a 35% exemption.
Counties forced a re-negotiation of the taxes in 2001, a year in which wind developers paid $1.4 million in property taxes. Dunlop says the first proposal by the counties for a production-based tax would have increased tax payments three-fold, but wind advocates were able to reduce county claims to a 25% increase of the present value of payments over the life of a new project. There will be little or no impact on most existing projects.
Hardest hit by the change, because they were previously untaxed, are small projects, which must pay $0.00012/kWh, or about $735 a turbine every year, Dunlop estimates. Projects of 2-12 MW will pay $0.00036/kWh and large projects $0.0012/kWh. Dunlop says the wind industry likes this arrangement because it ties the level of taxes to the ups and downs of their revenue from each turbine. At the same time, counties receive steadier revenue not subject to equipment depreciation.