Counties deal with tax issues on turbines

WORTHINGTON -- A couple of years ago, Murray County collected more than $1 million in production tax revenue from the wind turbines that span the horizon along the Buffalo Ridge.

For several years, in fact, the county collected large amounts of tax dollars from the wind turbines and spent the money on special projects. They built a new grandstand at the Murray County Fairgrounds, constructed a new county human services building on the edge of Slayton and erected a new storage building for county property.

"We had some major building projects," said Murray County Deputy Auditor Barb Lewis. "The (production tax revenue) went a long ways to help."

Then, in 2008, the Minnesota Legislature decided to make a change. Instead of letting all of the production tax dollars flow into a county for use as the county saw fit, lawmakers told counties the production taxes received must be included in the calculations used to determine maximum levies.

In essence, the move limited how high counties could set their levies, thereby providing some tax relief to property owners.

Because of the limits, counties can no longer afford to do special projects or, in some cases, maintain what they have.

In Cottonwood County, Auditor Jan Johnson said only about $3,000 was collected in production tax in the year before the change took effect. It wasn't enough to do a special project with, but it was a start.

In 2009, Cottonwood County collected more than $78,800 in production tax from 35 wind turbines.

"The sad thing about the whole thing is it means nothing," said Johnson. "There are no dollars for the county. In fact, with that law change, the county actually loses money on this."

With the way the legislation was written, 100 percent of the production tax must go toward the county's levy. From there, the county had to distribute 14 percent of the proceeds to the townships where the towers are located, with the remaining 6 percent paid to the school district.

In 2010, school districts will be removed from the funding formula, shifting 20 percent of the production tax income to the townships while the county retains 80 percent of the share.

"On the outside, it appears that we break even, but in our case, it cost us a little over $15,000 in 2009," Johnson said.

Cottonwood County has the production tax issue at the top of its priority list, and county officials have repeatedly talked with state leaders to request the production tax be removed from the levy limit.

"The idea behind the production tax was to give the county and the townships extra income to pay for infrastructure," said Johnson. "(The heavy loads) do some severe damage to the roads."

Annette Bair, a staff member with the Rural Minnesota Energy Board, said not only was the option taken away from counties to use the income for special projects, but the money can't be used on road or infrastructure projects either.

"It may be that special projects were never done because there weren't the funds to do it," she said.

That was the case in Murray County.

In 2009, Murray County collected nearly $1.3 million in production tax from its 228 wind turbines in operation. After paying the township and school shares, it was left with little more than $1 million and no option to use the funds as it sees fit.

Pipestone County, on the other hand, had used its proceeds from the production tax for property relief even before the state enacted the legislation requiring counties to do so.

Sharon Hanson, who has served as Pipestone County administrator for the last five years, said the funds in that time have always been used to offset the levy.

"Hopefully, what we're able to do with those savings then is to prioritize one project or another," she said.

Pipestone County, home to 199 wind turbines, collected $443,937 in production taxes in 2009. In 2010, Hanson said the county stands to collect $357,000.

"Our wind turbines are smaller than the ones that are being sold now," she said.

While the change in state legislation didn't really impact Pipestone County, Hanson said, "We don't really need the state telling us how to spend the money. I think locally we can make the right decisions. It's better to do it that way and not have strings attached."

Thursday: The impact on Nobles and Jackson counties with major wind farm projects planned in 2010.