Illinois still working on how to tax turbines, economic development issues 

Financial compensation for property owners isn’t the only monetary aspect of the debate over wind turbines.

Economic development and tax abatement issues are also a huge factor, said members of a panel that spoke Wednesday at the McLean County Farm Bureau to bus tour participants from Champaign County.

Marty Vanags, director of the McLean County Economic Development Council, said an enterprise zone around the twin cities of Bloomington and Normal was extended to allow the Twin Groves Wind Farm an exemption on sales tax, to the tune of $23-26 million in construction savings for buying steel, wire, and other materials purchased in the state of Illinois.

Vanags said another significant economic impact was job creation. While there are about 250 workers on Horizon sites for construction, the farm will employ about 40 people year-round for maintenance and operation, he said.

“Jobs, workers and material – all that impacts us,” he said.

“In Illinois, unlike Ohio, townships don’t have zoning authority,” said George Gordon, a professor at Illinois State University and chair of the McLean County’s land use and development committee.

Bob Kahman, McLean County supervisor of tax assessments, said Illinois abolished personal property tax in 1979, but individual counties were allowed to redefine industrial machinery subject to real property tax, at varying rates.

“Counties with nuclear and hydroelectric plants set high rates to capture revenue,” he said, noting Illinois has the most nuclear facilities in the nation.

Kahman said most counties set the real property rate for industrial equipment at zero, but counties like Grundy County, which had a 95 percent rate, were hostile to the wind farms, and wanted to “tax them out of existence.”

Kevin Johnson, from Congressman Tim Johnson’s office in Bloomington, Ill., (no relation) said Johnson represents 22 different counties in the state. He said about 75 percent of contacts to the office were supportive of the Twin Groves Wind Farm, but four proposed wind farm sites to the north of McLean County in Livingston County have generated a lot more controversy.

“There’s a lot of people saying I support it, but not in my neighborhood,” he said. “Livingston has more people and smaller tracts of land.”

Kahman said the state attempted to level the playing field earlier this year.

“When you get different answers in different counties, then it’s an unfair competitive advantage,” he said.

Kahman said an “income capitalization” bill died in the legislature, since it proposed taxing the turbines based on the electricity they produced.

Instead, a modified flat rate proposal of $360,000 per megawatt produced annually was adopted by both houses, with provisions to allow for depreciation of the structures. However, the bill was partially vetoed by the governor.

“So that’s where we’re at now, and the energy company can look anywhere they want in the state,” Kahman said. “It is different in other states, for instance New York, where (turbines) are exempt by statute but pay in lieu of taxes.”

Court precedent set on cases involving cellular and radio towers defined the concrete and tower part of the turbines as real property, while the nacelle and blades are personal property, since they are easily removed, Kahman said.

“The nacelles themselves are highly marketable,” he noted. “We ran a lot of scenarios, let’s say in the middle of the night they go bankrupt. Nobody’s going to just leave the towers there because they can be sold for profit.”

Kahman said the companies also had to put $25,000 in an escrow account for decommissioning the turbines after 13 years of operation, as well as pay for road improvements.

“These are big companies with a lot of resources. Make sure you get what you need to make yourself whole as a jurisdiction,” he advised.

“It’s going to be sustainable property tax revenue for us for a long time.”

By Breanne Parcels
Staff Writer

The Urbana Daily Citizen

29 September 2007