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Comment by Tom Olds on May 17, 2012 at 5:31am

Hart,

 

Here is something I wrote about TIFs a year or so ago.  It is a little dated, but still relevant.

 

What’s the difference between “Standard Taxation” and a TIF and why should you care?

What happens to your taxes if your town lets a Wind Company put up some wind turbines? What is the difference between “Standard Taxation” and a TIF agreement with the wind companies?

So far, all wind projects in Maine have been TIF’d, except for Freedom’s three turbine project (Patriot Renewables). Mars Hill, Stetson, Kibby, Lincoln, Lee, Winn, and Oakfield, and Vinalhaven have all negotiated TIF’s with the Wind Companies.

Standard Taxation (Jackson, Maine example, figures by Maine State Municipal Revenue Service)

Under standard taxation, your town’s school tax (by far one of the largest items on your town’s budget) and county taxes are determined by the state’s valuation of your town. The higher the value of your town, the larger your percentage of the county and school district’s budget your town will pay. There is a direct and unavoidable relationship between your town’s value and its share of the county and school’s budget. Conversely, the other towns in your county and school district benefit by your town’s increased value in that their percentage of the county and school budget goes down a little. Let me make it clear that while the turbines in your town will pay a lot of dollars in school and county taxes (a common wind company argument), this money is not “extra” money for the school district. This money only serves to take the place of money that the other towns in the school district would have had to pay, thus making them happy that you decided to approve a wind project.

The state reports the value of your town every year. But since this a long and involved process, they are always two years behind. So basically, if your town constructs turbines this year, the state doesn’t “catch up” for two years and for some reason I can’t explain, the school district doesn’t catch up for three years.

So for the first two years, your town has this new source of tax income (the turbines) that the state can’t see and won’t see for two years. Depending on how many turbines your town has, this could be a considerable amount of money. Your town could choose to spend this new income knowing that it would last for only two years, or they could decide to reduce everyone’s taxes for two years.

The following example uses figures from Jackson, Maine (pre-turbine town value of $34,000,000). The figures were prepared by the Maine Municipal Revenue Service.


Let’s say Jackson puts in eight turbines (a $24,000,000.project) and we don’t agree to a TIF. Our mill rate falls from .02065 to .01209 and things look great for two years until the state re-evaluates the town (they are always two years behind). Because of the new, much higher town value, the state reduces our municipal revenue sharing, and the county ups our county taxes. The mill rate goes up, but things are still not too bad.

In the third year, the school district “sees” the turbines and raises our share of the school budget by a huge $250,000.. Now our mill rate jumps back up to almost what it was in the first place before the turbines. In fact the owner of a $150,000. piece of property in Jackson would save only $120. off his taxes each year. The other towns in the county and our school district are happy, because their taxes go down a little bit because Jackson is paying a larger percentage of the school and county budget.

We should be paying more, because our town is worth more. That’s the way it works with “Standard Taxation”. At least we had two good years!

What is a TIF (Targeted Incremental Financing)

A TIF is a way of shielding the increased valuation to your town that a project (like turbines) normally brings, from the state, the county and the local school system. The proceeds from the TIF cannot be used for the reduction of property tax…so no tax relief! TIF’s were originally invented to lure companies with lots of good paying jobs to your town, and they were well worth it. But since a turbine project produces so few good paying jobs (about one job for every six to ten turbines), that’s no longer the case.

How to figure a TIF. (Jackson, Maine example)

It’s fairly easy to figure. Take our present mill rate (.02065), times the value of the wind project, say $24,000,000 (eight turbines times three million each is $24,000,000.) and we come up with $495,600. That’s approximately the tax amount that Mt. Harris would have paid under “Standard Taxation”. Next, the town sits down with Mt. Harris, LLC and negotiates what percentage the town gets to keep and how much Mt. Harris gets to put back in their pocket to help them finance their project.

In most TIF’s negotiated so far, the town gets 40% and the wind company keeps 60%. So out of that $495,600. we get to keep 40%, or $198,240. and Mt. Harris puts the rest, ($297,360.) back in their pockets. Sweet deal for Mt. Harris! That’s what we get the first year, but because the turbines are depreciated 3% (maybe even 4%) each year, by year 21 we only get $132,424 or less. There is a catch though. We can’t use the money to give back to our citizens in the form of tax relief, we have to spend it on state approved “economic development projects”.

Next you create a TIF district.

TIF districts can be only 2% of your town’s land mass. It can be separated so that you have several small areas.

Now you decide how to spend your money.

Your expenditures have to be pre-approved by the state and the majority of the money has to be spent within the TIF district, and only spent for economic development. Lincoln, for example, is going to buy a building, tear it down and put up a parking lot … cost $1,000,000. I think they also did some lighting. Other towns are going to build business parks, etc., but most towns just do some paving at $250,000. per mile. Oakfield managed to get a new fire station approved. Some towns have added economic development staff and set aside a considerable amount of money for lawyers to help administer the TIF.

Some (very little) spending is allowed for community wide projects. But no community swimming pools and no new town offices or community centers or ball parks are allowed! Some scholarship funds and one or two day care centers, staff and building, have been approved.

TIF’s and your local school district.

The state has told me that the other towns in the school district could vote not to honor your TIF. They could become angry because your town is not paying its full share. If they did that, your town could be forced to raise hundreds of thousands of extra dollars to pay the school district. And remember, paying off your school district with TIF revenues is not an approved use the money according to the state. Neither can you go to the Wind Company and re-negotiate. You signed a contract!


History of TIF’s and Wind Projects in Maine

All of the wind projects built and proposed, permitted projects in Maine have been TIF’d, except for the three turbine project in Freedom.

Mars Hill has negotiated the best so far, but they were the first and First Wind has learned a lot since then. Mars Hill broke all the rules on their TIF and you will never see another one like it. Lee and Winn negotiated a standard 40/60 . Lincoln and Burlington did a little better with a 50/50 split.

Oakfield had a TIF at one point, but they seem to be getting a sweeter deal (bribe) from First Wind. I don’t know if the TIF is still in effect or not. If it is, First Wind may be using their 60% savings from the TIF as bribe money. Oakfield has just learned that First Wind’s project has grown by 12? turbines and that the turbines will larger than originally thought, too. So things are in a bit of a flux in Oakfield and a lot of people are quite upset that the deal they thought they negotiated with First Wind seems to be changing.

Vinalhaven’s crafty negotiators managed to keep 10% of the TIF proceeds and gave 90% back to Fox Island’s Wind (the “for profit” side of the project).

In a LURC district such as Stetson, and Kibby, I believe the county kept 40% and the Wind Companies kept 60%. But it is a little different in LURC districts and I’m not exactly sure how it operates. I read recently there are so few economic projects in the works that qualify for TIF proceeds in those areas, that the money is just sitting there.

Recently, in a Somerset County meeting, First Wind proposed a 30/70 split (they keep the 70% of course).

If Angus King has not asked for a TIF yet for his Highland Project, he certainly will.

Tax Shift Tables

When a wind company shows a town a TIF proposal, they always include a “tax shift table”. This table purportedly shows the tax savings (in education taxes, county taxes, and revenue sharing) to the town if they go for the TIF. In Burlington’s case (12 turbines), the tax shift benefit over 35 years would be $8,817,534.

In reality, it shows what the Wind Company should have paid in taxes under “standard taxation” over that same 35 year period. But to many people, at first glance, it looks like a heck of a deal.

New, $4,000. per turbine law

The state, as I understand it, has a new law that mandates the Wind Company pay the town $4,000. per year per turbine. In Jackson’s case, that would mean about another $80. per year off your taxes (on a property valued at 150,000.).

Conclusion

A wind project in your town or LURC district will give you a slight reduction in your personal property tax if the project is not TIF’d. There would be no reduction in personal property tax if the project is TIF’d.

Considering all the negative effects of wind turbines on people and wild life and the loss of property values near turbines and the small number of jobs created, they just aren’t worth it.

Tom Olds

Posts:3

Joined: Sat Oct 16, 2010 10:36 am

Comment by freemont tibbetts on May 16, 2012 at 2:05pm

   Hart,     I have the tapes I took on the two times Mike Rogers of the Maine Revenue Services came to Dixfield to tell us about TIFs for the town of Dixfield. I burned out quit a few to DVD"s and passed them out around town. I think I have some left you can have Hart. But if I don"t have any left, I would be happy to make some up for you if that will help you.       Freemont.

Comment by Dan McKay on May 16, 2012 at 8:29am

Hart, Mike Rogers of the Maine Revenue Services came to Dixfield a while back and had some interesting things to say about TIFs.

1. He feels that the present form that TIFs have evolved into is far from the original intent when TIFs were created by state government .

2. Once a TIF is accepted through the state, the state has no way to follow up and determine if the town is compling with the TIF agreement.

My take on TIFs is that only an idiot would give thought to investing other people's money into such a risky investment as wind power. TIFs kill the power of the " average Joe " property taxpayer and transfer the power to government.  

 

Comment by Tom Olds on May 16, 2012 at 5:31am

Brian Hodges from the state has copies of all the TIFs.  Brian.Hodges@maine.gov  $5 each

"We now have a $5/TIF fee.  If you would like a copy of each of these, it would be $5 per each total and the invoice would be included in the mailing.  If you do want this, please send me your billing and delivery information.  We should be able to get these in the mail by next week."

Thanks,

Brian S Hodges, Director of Tax Incentive Programs

Office of the Commissioner

Department of Economic & Community Development

59 State House Station

Augusta, ME 04333-0059

(207) 624-7415

 

Tom Olds

 

Comment by Gary Campbell on May 15, 2012 at 4:33pm

See: www.ppdlw.org/map.htm   It's not all the info you seek but it's a start.

Also see the Wind Assessment Report prepared by CEI Jan. 2012:
www.ppdlw.org/articles/cei_wind_assessment_2012.pdf

and

Maine Wind Energy Assessment Report prepared by the OEIS:
www.ppdlw.org/articles/oeis_assessment_2012.pdf

Hope this helps.

Gary Campbell