Unfair tax treatment



Everyone should be greatly encouraged that wind complexes all around are being expanded and refitted. West of us, Allete Energy of Duluth is upgrading its early-generation complex by $45 million at least. To the east, MidAmerican Energy is refitting its newer Fonda-Pomeroy site with a $250 million upgrade. An expansion of capacity to the south of us is well underway. Increased production royalties should flow to property owners. Consumers will benefit from cheaper power than fossil-fueled production. It further positions Iowa for a bright energy future.

But there is a problem.

Hundreds of millions of investment in new generating capacity is being created in Buena Vista, Pocahontas, Sac and Ida counties yet none of that new property valuation will be taxed. Millions upon millions that could go to property tax relief or to better roads or to subsidize daycare for the working rural poor instead will flow to the investors.

That’s because of a June letter from an attorney with the Iowa Department of Revenue who no longer works there. The letter, in response to a query by Allete, confirms that the department believes, informally, that new valuation will suffer no property tax. That is based on the original Iowa law that caps taxable valuation at 30% of the “initial investment” in the wind complex. In the case of Allete, the valuation is based on the assessed investment as of 1994. We are aware of no other industry that is allowed to freeze its property valuation in time but for the energy companies. Not even the ag productivity formula can allow farmers to escape the county treasurer.

The new valuation should be taxed on the same scale as the initial investment: on a seven-year de-escalating schedule that starts out with a complete tax abatement until in the final year it is capped at 30% of valuation. Cities, schools and counties are leaving their futures on the table by ignoring this agency letter that is being treated as if it were the law.

Fortunately, Buena Vista County Assessor Kathy Croker is on top of it. She is alarmed by the tax giveaway. She has asked County Attorney Dave Patton for an opinion. His opinion should have greater import, issued formally, than a letter written informally by a staff attorney who is no longer in the state’s employ.

This also is now on the radar screen of the Iowa State Association of Counties. Democratic gubernatorial candidate John Norris, for one, is looking into it. He is a former chairman of the Iowa Utilities Board. He knows the law. We are sure he will raise it as an issue, since much of his campaign is built on a rural foundation. One of his most intriguing ideas is to divert that new, incremental valuation to bonding for local projects. The county board of supervisors could capture the additional valuation and use it for whatever the local priorities are, sort of like the tremendously successful Vision Iowa bonding program. Vision Iowa used gambling and tobacco proceeds. Maybe county officials wouldn’t like his program, but the point is that this new investment in rural Iowa could create fantastic opportunity if properly leveraged.

Wind technology is improving at break-neck speed. Turbines installed today are three times more productive than they were 20 years ago. That suggests that they are three times more profitable, at least. The property tax draw ought to reflect that. A wind turbine is enormously more profitable for Warren Buffett than our old tin shed on Railroad Street is for us. Yet we get taxed plenty. We, then, subsidize the beating gravel roads take when turbine trucks haul in blades that are 23 feet longer than the current ones are. If we suggested to Assessor Croker that we would like to put a second story on our tin shed, and would appreciate no tax whatsoever, she would have a good laugh on us (as she should) and suggest we take up our issue with the legislature.

 We eagerly await word on Patton’s decision. It can come none too soon since Allete and MidAmerican deserve to know at what rate, if any, they will pay on their new and improved property. For now, they believe they will owe nothing. So do many government officials. That’s not fair to other property classes. Iowa has tried to facilitate wind energy expansion in myriad ways through state and local government. Every inducement and accommodation has been made. The industry has been treated fairly. So should the rest of us. Tax new investments in wind complexes on the same graduated scale as the original investment. We would prefer that our tax valuation on home and property were locked into 1994 levels. But no lawyer for the tax department will write us that letter.