Lee County led way in determining how industry is taxed
DIXON – A wind energy bill sponsored by state Rep. Tom Demmer received unanimous approval in both legislative chambers, and is expected to receive the governor's signature.
Senate Bill 2612 will renew the process by which wind energy devices are assessed for property taxes. The bill extends the law that was scheduled to sunset Dec. 31 for 5 years.
Demmer said the bill is important for the wind industry and local taxing bodies. Before legislation first was passed in 2007 to streamline the process, costly and time-consuming legal challenges were not uncommon.
"This takes some of the guesswork out of establishing a tax base on generating power," Demmer said. "It provides predictability not just for investors, but for local governments looking to them for revenue."
Lee County collects the property taxes from wind companies for several taxing bodies. The bulk of that money – 65 percent to 70 percent – goes to the schools.
Demmer's district produces 462 megawatts of wind power, and each megawatt generates between $8,000 and $13,000 in local taxes annually.
The most recent estimate of the total taxes paid by Lee County wind energy projects to all taxing districts in the county is now $3,358,000.
Wendy Ryerson, chief assessment officer for Lee County and past president of the Illinois Chief County Assessment Officers Association, has played a key leadership role in the way the wind industry is assessed in Illinois.
In 2004, when the state's first wind farm became operational in Lee County, there was no template for assessing the business. At the root of tax assessment is determining what is real property and what is personal. Real property – land and attached buildings – is the tax generator.
Lee County decided to assess at 25 percent real property and 75 percent personal property. A year later, Bureau County chose to assess the value of wind farms at 100 percent real property, forcing the business to pay much higher property taxes.
Ryerson said Lee County looked to another power generator in figuring out how to assess the wind industry.
"Originally, Lee based the formula on its electric utility, and that was how we deemed the 25 percent real estate assessment appropriate for wind energy," Ryerson said.
The inconsistencies among the taxing counties continued for a few more years, and momentum grew for establishing a state standard. While some thought Lee County's assessment was too low, it beat the alternative.
"Many counties had no precedent, and it ended up being argued in the courts, which was in no one's best interest," Ryerson said.
As the first to deal with the situation, Ryerson said she became more involved in the state's efforts to streamline the process.
"I had ours in place, and I was afraid of how the state's standard could affect us," Ryerson said.
In 2007, the state Legislature passed the first bill to get all counties on the same page, and it was loosely based on the formula used in Lee County. The language was changed to also account for the size of the turbines – $360,000 per megawatt of generation capacity.
Ryerson said, in retrospect, the original tax rate set up for wind turbines in Bureau County made the industry more amenable to a state standard.
"I think it brought everyone together at the table, and built consensus among developers and assessors," Ryerson said.
The final consideration was how to account for construction cost inflation. That problem was solved by adding a 4 percent annual depreciation adjustment, and an appreciation alteration based on the consumer price index.
While the budget impasse makes it difficult to celebrate any legislative victory, Demmer said the wind energy bill addresses a common business concern in the state.
The Dixon Republican is a member of a bipartisan budget group that has been meeting daily. He said they are inching toward getting a short-term budget deal done.
"This is a small issue in the state now, but it fits in with a theme we hear a lot," Demmer said. "We're looking for ways to support business and local government, and predictability seems to be the number one concern."
Demmer’s legislation was supported by the Illinois County Assessment Officers Association, the Fair Assessment Information Resources Committee, and the Illinois Farm Bureau.
SEE THE BILL - Visit shawurl.com/2nmo for the entire bill and its path through the Legislature.