Crow Lake Wind project paying $300K more in taxes than first projected

WHITE LAKE -- Look what the wind blew into three area counties: A wind farm is paying a total of nearly $800,000 in new tax revenue to school districts, counties and other governmental entities.

In its first tax payments since beginning operation last year, Crow Lake Wind, part of Bismarck, N.D.-based Basin Electric Power Cooperative's Prairie Winds division, paid $297,346.35 to agencies in Jerauld County, $257,182.74 in Brule County and $238,812.54 in Aurora County.

The total payment that was received by numerous agencies in the three counties in mid-April was $793,341.63. The taxes are based on energy production and are paid in addition to preexisting property taxes.

South Dakota Public Utilities Commissioner Chris Nelson said the payments are about $300,000 more than was projected two years ago.

Nelson said that at a public hearing in 2010, the firm estimated paying $500,000 a year to entities in the three counties. PUC staff did further investigation and were provided data that led them to estimate entities in Aurora County would get $266,312, those in Brule County would receive $140,693 and Jerauld County entities would get $100,495.

"These numbers now are excellent for the local taxing entities," Nelson said.

He said Basin Electric may have been conservative with its guess, or just "didn't know when the blades would start spinning."

Daryl Hill, a spokesman for Basin, said a couple of factors may have contributed to the higher-than-expected tax revenue. He said power generation from the project has been very strong, and because the taxes are tied to generation, that may be pushing tax revenues higher. Hill also said Basin's projections only took into account the 100 turbines it owns, and not the eight additional turbines owned by other entities.

The $363 million project is located on 40,000 acres in southern Jerauld, northwest Aurora and northeast Brule counties. Power is transmitted through the Western Area Power Administration's electric transmission system at the Wessington Springs Substation. The project is comprised of 108 turbines, 100 of which are owned and operated by Prairie Winds, a subsidiary of Basin. Seven turbines are owned by local investors who formed the South Dakota Wind Partners. One is owned by Mitchell Technical Institute to enhance its wind turbine technology program.

Jerauld County Director of Equalization Susan Jost said the wind farms are providing a windfall to government entities.

"The landowner still pays the taxes like they always have," Jost said, referring to traditional property taxes. "We did not lose any property tax dollars from the land. That did not change. All the money is an increase in taxes."

Wessington Springs School District Business Manager Julie Kraft said the funds will be the difference between seeking an opt-out and living with the budget. An "opt-out" is a method local governments employ to go beyond state limitations on annual tax increases.

"It was in our budget," Kraft said of the wind money. "Without that, we would have had to have another opt-out, or request one."

She said the district budgeted a little less than the $180,861.41 it received, just to be safe.

White Lake School District business manager Carol Gillen said the $139,535.91 it received was also a great aid to the district. It would have been forced to make some tough choices without it, Gillen said.

"It would have probably meant more cuts to the district or a bigger opt-out," she said.

The money is being split between the general, capital outlay, special education and pension funds, Gillen said.

Kimball Superintendent Sheri Hardman said she had no idea what to expect and is pleased by the infusion of cash.

"It'll be a nice added amount to our taxes," Hardman said. "Right now we're going to put it into our three funds: the general fund, capital outlay and special education."

All three county governments said the money will be placed into their general funds.

Jerauld County Commission Chairman Larry Olson was an advocate for the wind project and said it has fulfilled his expectations.

"It means a lot. It makes an impact," Olson said. "We've got some road and bridge issues. We tried for an opt-out and that failed. Every dollar we get off those wind dollars is a blessing, that's for sure."

Aurora County Auditor Susan Urban said all the towers in Aurora County are on leased land, so taxes are still being paid on the land by the landowners.

"There are only two parcels of land that Prairie Winds owns, and those will go off the tax rolls next year because they will be centrally assessed through the state," Urban said.

Those two parcels total 30 acres, and Prairie Winds paid $791.94 in taxes on them in 2012.

Michael S. Houdyshell, the director of the South Dakota Department of Revenue's Property and Special Taxes Division, said commercial wind farms pay a two-part tax in lieu of property taxes: the nameplate capacity tax and a 2 percent gross receipts tax that is based on the actual number of kilowatt hours of electricity generated during the previous year.

"The nameplate capacity tax is $3 multiplied by the nameplate capacity in kilowatts. Note that for the first year after the commercial operation date, the nameplate capacity tax is prorated based on the number of days it is in service," Houdyshell said in an e-mail to The Daily Republic. "This particular project was not in operation for the entire 2011 calendar year, so a pro-rated tax liability was claimed.

All of the nameplate capacity tax money is distributed to the counties where the wind towers are located.

The county auditor distributes the money to the county government and to the other local taxing districts where the wind towers are located, Houdyshell said. The money is distributed in the same fashion as agricultural land taxes.

The gross receipts tax, meanwhile, is calculated by multiplying the number of kilowatt hours of electricity generated by the South Dakota base rate, which is $.0512.

Houdyshell said energy companies may apply for a rebate for the first 10 years, when they can get up to 90 percent of the gross receipts tax back in the first five years and up to 50 percent in years six through 10. The rebate ends after 10 years, or when the cumulative rebate amount has equaled 50 percent of the cost of the wind collector system and any transmission, he said.

In years one through five, the 10 percent that is not rebated is distributed to the counties. The 90 percent rebate comes from state government.

Starting in year six, when the rebate fades to 50 percent, the other 50 percent is split between the counties and the state. The counties' portion increases to 20 percent, and the state gets 30 percent.

Ron Rebenitsch, now the executive director of the South Dakota Wind Energy Association, was the project manager for the Crow Lake wind project.

"I think this is a great deal for the counties," he said. "The project spent a great deal of money improving the local roads at no cost to the counties, the counties have (more than) $700,000 of increased revenue, the landowners are receiving substantial annual payments from each turbine, and I can't think of any cost increases that the counties will experience because of the project.

"On top of that, 12 local, permanent, well-paying jobs have been created, plus the counties see increased economic activity resulting from the project. What could be better?"

Rebenitsch said the wind farm has also worked out well for its owners.

"The project is performing as expected, and it came in on budget -- actually, under budget," he said.

Rebenitsch said landowners in the vicinity are "generally satisfied. There's always some little issues that arise." During the construction process, for example, some were aggravated by the traffic and temporary damage to roads.

But he said the company promised to improve roads and provide tax revenue and has done so.

"Generally, it's been positive all around," he said.

Nelson said the landowners also came out ahead. Landowners in the state receive between $3,000 and $5,000 annually for each wind tower placed on their property, he said.

Brule County Highway Superintendent Shannon Rasmussen said Basin has lived up to its promises to repair any damages caused to local roads.

"I'd say everything's back to normal," Rasmussen said.

"I'd say they're probably about the same. Most of the traffic's coming up through White Lake where they have their main substation."

He said roads were damaged by heavy trucks that used the roads in the winter of 2010-2011. But the company promised to rebuild the roads to normal conditions and has done so, Rasmussen said.

"I think everybody was satisfied with the way they took care of things," he said.

But he said there will be some added expenses for counties and townships, which will face increased costs on road maintenance and snow removal from country roads.