ENID, Okla. (AP) - Wade Patterson’s work could cause wind farm property values to rise. The Garfield County assessor’s calculations could help provide a framework for his counterparts who are evaluating similar energy projects across the state.
The Journal Record (https://bit.ly/1Kt6TEI ) reports that his assessment could cause tax payments to increase. But Oklahoma State University agricultural economics professor Shannon Ferrell said the change could actually help wind developers.
Wind projects receive a five-year ad valorem tax credit. The Oklahoma Tax Commission evaluates a wind farm’s value for the first five years and pays taxes to counties from a state fund. County commissioners calculate property values from the sixth year through the estimated 20-year project life span.
Patterson said the assessment method he plans to use will likely be different than the state’s method. The OTC uses a cost evaluation method, which uses the fixed cost for equipment and construction. He’s examining an income evaluation method, which calculates how much money a wind farm would generate in electricity sales.
The income evaluation calculation is a better way to examine a project’s value, because developers are constantly maintaining and upgrading equipment, Patterson said. If a wind turbine receives a new drive shaft or new bearings, the equipment has a longer life span and the fixed costs have changed.
“We just don’t know how long it will last until it wears out,” Patterson said.
His first project to assess will be the Chisholm View wind farm. The project started operation on Dec. 31, 2013, so he won’t need to evaluate it until January 2019. But he said it is important to establish an income-based evaluation method well in advance.
Patterson said wind developers told him they are concerned the income-based method could vary greatly from county to county.
“So let’s come up with a methodology that is easy to understand and fair, so the developers know what they need to turn in to us,” he said.
Ferrell examined the industry for a report the State Chamber of Oklahoma Research Foundation commissioned. The report was published in November. He said he looked at OTC tax assessment data for his research.
He said the income-based method is a more accurate way to examine the total property value for the life span of a wind project. The estimated tax payments paid based on the income method will likely be similar to the cost method over the life of the project, he said.
Paying a progressively higher tax rate from the sixth year going forward could be beneficial for developers, Ferrell said. Typically those projects have a 10- to 15-year payback period.
“The cash flows are most constrained in the first few years of a project, so if they can defer some of the tax to the end of its life, that can help the cash flow,” Ferrell said.
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Information from: The Oklahoman, https://www.newsok.com
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