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Windfall could turn into misfortune

Report says school districts might pay price when ad valorem levels off

The word windfall might naturally come to mind when considering how school districts in Oklahoma have been affected by construction of wind farms in recent years.

While there's no doubt that ad valorem (property) taxes paid into local districts on behalf of wind energy companies have swelled school budgets, a report issued recently by the Oklahoma Public School Resource Center concluded that districts should be careful not to become overextended financially on expectations of continuing robust wind farm revenues. Rapid increases in ad valorem taxes that are typical in the first five years after a wind farm's construction tend to flatten out and then fall off.

The study cautions that districts that pass expensive, multiyear bond issues may over the course of time end up financially strapped.

"In many districts this could be disastrous if the wrong set of events occurred, such as an abrupt downturn in collections of gross production (taxes) coupled with the loss of the ad valorem revenues," the report states. "These factors coupled with the issue of bond issues are substantial concerns for districts with wind energy systems."

The wind energy industry has been greatly encouraged by the state. Lawmakers, eager to attract new industry and jobs and interested in generating more of Oklahoma's electricity through renewable resources, agreed several years ago to offer wind energy companies five-year exemptions on paying ad valorem taxes. To help them to get established, the state agreed to tap other revenue streams  state personal and corporate income tax collections  to pay ad valorem taxes billed by counties for the first five years after a wind farm's construction. Such arrangements are not uncommon. Several other states, in fact, extend the same exemptions for up to 10 years. (Beginning this year, wind energy facilities in Oklahoma are no longer eligible for the exemption.)

The benefits

The incentives did work in attracting wind energy investment, and benefits have been measurable:

nSince 2003, several dozen wind energy systems  the industry's preferred terminology  have been established, the vast majority in windy western Oklahoma. Rural communities have benefited not only from resulting construction jobs and spinoff jobs but also from jobs related to ongoing operations and maintenance of wind turbines.

nAccording to the American Wind Energy Association, Oklahoma has exceeded its goal of generating at least 15 percent of its electricity by way of renewable resources. Currently, about 19.5 percent of the state's electricity is generated by wind or other renewables.

nA study commissioned by the State Chamber of Oklahoma Research Foundation estimated that owners of existing and planned wind farms will pay $948.5 million in property taxes through 2043.

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