Wind farm tax incentives cost state millions
Tax incentives offered by the state of Oklahoma have fanned rapid growth of the wind energy industry in recent years, creating jobs especially in rural western Oklahoma, increasing property values to the benefit of many school districts, and helping the state to achieve a goal of increasing the amount of electricity generated within its borders by renewable energy sources.
Those positives, however, have been eclipsed by continuing financial costs borne by Sooner State taxpayers, leading members of an Incentive Evaluation Commission created by the Legislature in 2015 to conclude that the incentives are no longer needed or desirable to continue in the long term.
Five members of the commission, which includes Lyle Roggow, president of the Duncan Area Economic Development Foundation, issued a report recently that found that an agreement made by the state to pay ad valorem (property) taxes to counties on behalf of wind farms for the first five years after a wind farm's construction has cost Oklahoma taxpayers tens of millions of dollars annually in recent years, including more than $32 million in 2014, more than $27 million in 2015 and nearly $30 million in 2016.
The same five-year property tax exemption is provided to other new manufacturing industries getting started in the state. According to the Oklahoma Tax Commission, wind facilities have received the highest total exemption in each of the last four years. About 38 percent of the total reimbursements paid by the state in 2016 were due to wind exemptions.
While it's true that the wind energy industry has created jobs, including those associated with initial wind farm construction, some associated with ongoing maintenance and operations, and some "spinoff" jobs, such as those in local restaurants that might not exist if not for wind farms, the commission found it difficult to quantify the economic benefits of those jobs to the state. The report does note that other manufacturing industries that have benefited from the exemption have created more jobs at a lesser cost to the state. While 27 percent of the ad valorem monies paid by state taxpayers to counties was on behalf of wind farms, the report notes, the wind energy industry is credited with creating just 7.2 percent of the jobs.
"Wind projects are disproportionately benefiting when comparing job creation and capital investment," it states.
While it's true, too, that wind farms have increased property values to the benefit of counties and some school districts, the commission found it difficult to see how those benefits extended to the state as a whole.
"What we were addressing is the impact of these incentives on the state," Roggow said. "For places like Guymon and Enid and Rush Springs, (wind farms) have been a great deal, but we're looking at the state's obligations and the state's benefits."
According to planning by the Oklahoma Legislature, beginning this year, wind energy facilities are no longer eligible for the five-year ad valorem tax exemption. The Incentive Evaluation Commission supported that, pointing out that the obligation of state taxpayers to pick up property tax bills of wind farms had put the overall Ad Valorem Exemption for Manufacturing program on an un-sustainable path.
"From the project team's perspective, the modification of the program to eliminate eligibility for facilities engaged in electric power generation by means of wind was a necessary and appropriate step ... With wind removed, the growth trajectory for the program appears manageable," the commission's report concludes.