By Richard Kerns
rkerns@newstribune.info
tribune staff writer
ELK GARDEN — A senior official with the West Virginia State Tax Department confirmed Monday that property-tax revenue projections by the developer of the proposed Pinnacle Wind Farm are correct, and that the project will deliver an average of $433,000 annually to Mineral County, for a total of $11 million over the 25 years of its projected life.
“If nothing else changes, these numbers are very solid numbers,” said Scott Burgess, assistant director of property taxes for the state of West Virginia. “We're pretty confident, given the level of costs, that that would be the tax generated for Mineral County.”
Burgess made his remarks at the monthly meeting of the Community Advisory Panel, organized more than 18 months ago by US WindForce as a sounding board for community concerns related to the Pinnacle project, which will site 23 400-foot turbines atop Green Mountain, just west of Keyser.
The West Virginia Public Service Commission held a public hearing last month in Keyser on the $131 million project, which is being developed in cooperation with NewPage paper corporation, partial owner of the land where the wind farm would be located. Later this month, the PSC will again review the project through a days-long evidentiary hearing in Charleston. The PSC has until Jan. 11 to decide whether to approve the project.
WindForce officials invited Burgess to the meeting in an effort to address concerns that the developer has been too optimistic with its tax projections. Citing a similar wind farm in Tucker County — where tax revenue has turned out to be far less than projected — opponents say WindForce has inflated the numbers to make the controversial project more appealing to local residents down how the Tax Department tallies property taxes for such industrial projects, Burgess decisively put such charges to rest.
Like other wind farms, property taxes for Pinnacle will be determined based on the cost of the project, which includes the value of the turbine components, wiring, site preparation, contractor costs and every other expense calculated into the $131 million total. The tax obligation is based exclusively on the project's overall cost, and has nothing to do with income that will be produced by the turbines through the generation of electricity. If the wind never blows, the taxes will still be due.
“It doesn't matter if they never turn,” Burgess said of the turbines. “This level of taxes is pretty much guaranteed.”
Wind turbines are taxed under a formula developed two years ago by the West Virginia Legislature specifically for wind farms, taking into account both their profit-making ability and their “green” value in improving air quality.
As a result, only a portion of the total project cost is assessed at full market value, similar to the way the state attaches only a minimal tax to pollution-control projects at conventional coal-fired power plants. Using an example of a $500 million scrubber that removes pollutants from a power plant's emissions, Burgess said such equipment is only assessed at 5 percent of market-value because the devices do not aid in the generation of electricity — and profits — but are added to address environmental concerns.
Burgess noted that numerous industrial and commercial operations, including farms, timberland and coal mines, are taxed at less than full market value. “There's many instances where the Legislature has either exempted or given preferential treatment,” he said.
The state formula for wind turbines assigns 79 percent of the project cost to the 5-percent valuation for pollution control projects. The remaining 21 percent, which generates the bulk of the tax obligation, is assessed at market value.
For Pinnacle, that means that about $103 million of the project cost is taxed at only 5 percent of total value, equating to just over $5 million, which is then assessed at the state-standard 60 percent value. Finally, the resulting figure — about $3 million — is then taxed at the county tax rate of 2.58 percent.
That leaves about $28 million assessed at full value. Sixty percent of that total equates to about $16.5 million that is taxed at the the same 2.58 percent.
Under figures provided by WindForce, annual property tax bills for the project will vary from a high of $512,000 six years into the project, to a low — reflecting depreciation — of $312,000 near the end of the projected 25-year project life. However, Burgess noted that the project will never depreciate to a zero-value, as the state maintains a “floor” on such depreciation.
Under the state-mandated revenue split, the average annual tax of $433,000 will provide about $310,000 a year for Mineral County schools, and $123,000 for county government.
Addressing concerns that WindForce may have inflated the $131 million cost upon which all of the tax calculations are based, David Friend, vice president of sales and marketing for the company, said the estimate was part of the application submitted to the PSC, and was the result of an intense, protracted effort to estimate the cost of turbine components, transportation, site preparation and the myriad other costs that will go into development of the site. He said the final tally may deviate “3 or 4 percent, up or down” given market conditions and other variables.
“It isn't just some number we picked out of the air,” he said.
All three Mineral County Commissioners attended Monday night's meeting, which was held at the Elk Garden Fire Hall as part of WindForce's effort to hold advisory panel meetings in the communities that will be affected by the Pinnacle project.
Commissioner Janice LaRue, who worked for 25 years in the county assessor's office before becoming commissioner, said she found Burgess' presentation comforting, given the county's pressing need for revenue. “It was reassuring to see that spreadsheet,” she said.
Addressing the situation in Tucker County, where 44 turbines were erected in 2000, but promised tax revenue never fully materialized, Burgess noted that the project was developed before the 2007 law that established the 79/21 percent split for wind farms. In addition, he noted a “gentleman's agreement” between the county and developer that fell through when the project was sold to another power company.
“That handshake didn't translate into a contract ...,” Burgess said. “That's not going to happen to this project because the law's already in place.”
Elk Garden, W.Va —
