One ugly model

(Thanks to updated information provided by Paul Warneck, director of the Jefferson County Real Property Tax Office, I have updated this blog post.)

At a public hearing on the Galloo Island Wind Farm payment in lieu of taxes deal, no one from the town of Hounsfield raised a voice in support of or in opposition to a plan that will bring $2.14 million annually to the county, town, Sackets Harbor Central School and Jefferson County IDA. You have to wonder why.

The deal, after all, will give the wind farm a 45 percent break on taxes that would be due without the PILOT. On an assessment of $400 million (the project will cost at least $500 million to build), from a total property tax bill of $4.8 million, the school district alone would receive $2 million a year. The district's budget for this school year is $7,900,835. Hmmm. Is someone giving away the farm?

Likewise, the county would receive $2.5 million and the town $245,700 if full taxes were paid. Under the terms of the PILOT, the county will receive $750,000. Only the town gains; it will receive $321,000 under the PILOT but would get only $245,700 under full taxation. And the town gains only because the school district agreed to concessions in its share of the pilot.

There is, however, a caveat: If the town were receiving full taxation, the additional taxable assessed value created by the wind farm would lower the tax rate for everyone by 58 percent — from $2.56 per thousand to $1.08 per thousand. On a house assessed at $125,000, the town tax would drop from $320 to $138 — a savings of $185. Similarly, for Hounsfield property in the Sackets Harbor Central School District, the tax would drop from $22.28 per thousand to $8.94 per thousand. Taxpayers won't realize those savings, however, because under the PILOT, the property is assessed but not counted toward the tax levy.

Then, of course, if you're starting to ponder the full cost of corporate welfare, you can add this into your philosophical equation: by being certified by the IDA, which will take title to the wind farm for the duration of the PILOT in order to grant these benefits, the developers will avoid paying almost $23 million in sales and mortgage taxes. Almost half of that would have gone to the town and county. While that is concentrated over the initial year or years of the project, it's still a chunk of money.

And don't forget the 30 percent of project costs the federal government will subsidize the project if it gets in under the wire for stimulus funding (which is the reason this is all being rushed to get done), and an accelerated depreciation schedule from the IRS that will allow a 40 percent depreciation in the first year, and full depreciation over five years.

Add it all up, and you can see just how much this "private sector" developer will rely on federal, state and local taxpayers to permit him to make profits. Especially galling is the extent to which local officials, especially the IDA, are doling out hard-won tax dollars to bring, at best, a handful of jobs to the region, and a short-lived flurry of construction money. And with the employees of this project likely living on an island miles out in Lake Ontario, it's not as though they're going to be pouring their wages back into Sackets Harbor or Dexter or Watertown. It would be interesting, indeed, if the IDA were called upon to tell us the cost per job for this project: could it reach $1 million?

Most PILOT agreements give a graduated tax break that never exceeds 75 percent and which drops over time to zero. This agreement keeps the break, although adjusted for inflation, throughout its 20 year lifetime. And there is no host community component to this; at least if Hounsfield were getting a landfill, it would receive compensation unique to the siting. As it is, the town is going to be the red-headed stepchild of this agreement. And Jefferson County won't be far ahead of the town.

If this is the model for future wind farms in Jefferson County, we're in big, big trouble. If the marketplace plus controlled federal subsidies can't sustain wind development, it should not be the obligation of local and state taxpayers to foot the bill for the developers' profit margins. We all seem to be forgetting this: this is not an industry we're courting to come here. It's coming here because here is where the wind is. It's not as though we're competing with a

site in central Ohio for this.

Next time there's a public hearing on a wind farm PILOT agreement, it wouldn't hurt if those of you who think this model is broken and should be tossed out would show up and speak your mind.