Special report: Wind farm agrees to pay taxes

An issue with the Rock Falls Wind Farm in Kay County and an agreement with the Blackwell Economic Development Authority that would affect funding for Newkirk Public Schools and Deer Creek-Lamont Public Schools have been the subjects of several newspaper stories. The Blackwell Journal-Tribune has conducted its own investigation and uncovered the following issues:

Tax-exempt status being challenged in court

Appeals have been filed against the Kay County and Grant County assessors office for not granting ad valorem tax exemptions to the Rock Falls Wind Farm in district courts. The ad valorem taxes involved are estimated to be at $2.2 million. Parts of those funds would go to the school districts of Newkirk and DCLA, and would vastly impact school funding for both districts. The owner of the wind farm was quoted in a recent newspaper article as saying that the company will pay the $2.2 million in December because it did not previously realize the impact the taxes would have on school funding. On July 9, the Rock Falls Wind Farm filed appeals of the ad valorem tax assessment in the district courts of Grant County (CV-2018-11) and Kay County (CV-2018-55). John Robertson, executive director of the BEDA, told the Journal Tribune that while the ad valorem will be be paid every year, EDF, the parent company for the Rock Falls project and is a subsidiary of Électricité de France, which is owned by the country of France, is still challenging the assessment value of the project in court with the assessors. As of Monday, county assessors have replied to the J-T’s request for information, but there has been no court date set to hear the appeal.

BEDA waives competitive bidding for bonds

The bonds were bought without bids being sought as the BEDA waived that requirement in their meeting. The BEDA authorized up to two billion dollars in bonds to be bought. The City of Blackwell is named the beneficiary in the agreement with the Rock Falls owners. The bond indenture agreement shows $222 million in bonds were issued for the project. BancFirst in Oklahoma City is currently the bond vendor. The agreement also does not include a schedule of fees for the lawyers, the financial advisor or for the bank. Robertson said that BEDA felt comfortable with BancFirst and that they were big enough to handle a large bond issue.

BEDA signs economic development agreement with EDF

The BEDA signed an economic development contract withEDF, prior to the issuing of the bonds. Exactly how the project will benefit Blackwell remains to be seen; however, the parties involved are already in negotiations in order to revise the agreement to give better terms to the BEDA. That revised agreement, approved by the BEDA in August, has not been returned to BEDA as of earlier in the week. The agreement says, “BEDA has determined that it is consistent with its purpose and desire to incentivize and assist Rock Falls with the financing, construction, operation and ownership of the Wind Farm, and that such assistance will benefit BEDA and its beneficiary (The City of Blackwell), and positively economically impact the local, regional, and state economy and inhabitants; and Oklahoma state and local officials have determined that wind farm incentives are better left to and handled by local entities and officials such as the BEDA. The agreement further says that BEDA can incentivize and assist Rock Falls with the financing, construction, operation and ownership of the Wind Farm using nonrecourse renewable energy lease revenue bonds.”

Oklahoma legislature eliminates wind incentives

In the agreement, it is stated that Oklahoma state and local officials have determined that wind farm incentives are better handled by local entities and officials such as the BEDA. Over the course of the last two legislative sessions in Oklahoma City, many of the tax breaks were eliminated. House Bill 2298 was signed into law in April 2017 and required wind farms to be operational by July 2017 in order to qualify for some of the tax credits previously approved. The Rock Falls wind farm did not go online until 2018.

BEDA agendas show no prior discussion until June 21, 2017 meeting

A review of the BEDA agendas in 2017 prior to the June 21 meeting, show no discussion of the economic development agreement with Rock Falls. All the prior meeting agenda items for executive session were worded with “Matters pertaining to economic development, including the transfer of property, financing or the creation of a proposal to entice a business to locate within BEDA’ jurisdiction.” The economic development agreement, the bond agreement, the sub-lease agreement and the ground lease agreement were signed in November 13, 2017.

Lease payment arrangements

The BEDA approved revisions to the lease at its August 15, 2018, meeting but EDF has not returned the agreement and has not agreed to the revisions, so BEDA is reverting to the original agreement. The agreement would result in 10 years at $408,000 a year and 10 years at $25,000, with the lease terminating in 2042 benefitting the BEDA approximately six million dollars over the duration of the lease.

Who is paying for the bonds?
The bond contract indicates $222 million in bonds were purchased on November 13,2017. The contract indicates a repayment plan of twice a year with a five percent interest rate but does not detail how much the actual payment will be. If EDF defaults on the bond payments, the BEDA would then be responsible for the bonds and the wind farm. According to John Robertson, EDF is responsible for paying the bank for the bonds.He did not know what the payment arrangements were.

Why did BEDA keep it a secret?

BEDA Executive Director John Robertson admitted in a previous interview to keeping the agreement a secret so that other economic development groups would not copy the idea before the project was completed. Kay County District Attorney Brian Hermanson told The Oklahoman’s Randy Ellis, “It’s merely a transfer for the purpose of avoiding paying taxes. It has never been done before in the State of Oklahoma-a question whether it can be done. We say that it cannot be done and that it was not appropriate.” Robertson told the Journal -Tribune that it was common in the economic development business to keep projects secret.

Where does BEDA go from here?

The contracts have all been signed. If the court rules against BEDA and Rock Falls on the assessment appeal, the $2.2 million assessment is surely to go up as the wind farm becomes more efficient and operational. It is unclear whether the BEDA will be responsible for paying legal fees for the appeals or if EDF will be responsible for them. It is true BEDA can accumulate debt while Blackwell cannot commit beyond each fiscal year.

City of Blackwell is the beneficiary

What exactly does that mean?
A review of City Council agendas shows no discussion of the wind farm other than when council members were all at the June 21,2017 meeting of the BEDA. The question remains as to what Blackwell’s liability for the bond debt is, and what benefits Blackwell receives as the beneficiary. Robertson is quoted in a prior interview saying that the BEDA is pursuing the agreement “to help Blackwell Schools out.” However, the wind farm is not in the Blackwell Public Schools District; it is located in the Deer Creek-Lamont and Newkirk districts.

What do state officials say?

The Journal-Tribune has reached out to the Oklahoma State Auditor and Inspector General’s Office, the Oklahoma State Attorney General, State Representative John Pfeiffer (R-Orlando) and Kay County District Attorney Brian Hermanson over the course of the last week. The offices of the state auditor and the attorney general said they were aware of the situation in Kay County, but no formal opinions had been sought out as of Friday, November 16. Hermanson told the Journal-Tribune that he had no new comments and was in a “wait-and-see mode.” A message was left with Pfeiffer’s office, but the call had not been returned as of Monday.

John Robertson’s and BEDA’s response

The Journal Tribune sat down with Robertson to discuss the wind farm controversy on Tuesday. Robertson told the Journal- Tribune that EDF was ready to walk away from the project because of the state’s change in tax benefits.

EDF response

Sandi Briner, the public information officer for EDF, emailed the Journal-Tribune the following response Tuesday afternoon: “Following a meeting with local school superintendents on October 24, we arrived at a better understanding of the funding issues facing rural school districts in Oklahoma. We therefore decided to terminate the agreement with BEDA.

Terminating the bond transaction further terminates the payments and instead the ad valorem taxes paid by the project in December 2018 will be distributed by the counties as they normally would. The appeal of the Board of Equalization determination also concerned the assessment of the project and the appeal remains in force. This is a common proceeding for a development of all kinds and is the right of every taxpayer. We hope to find a resolution on that soon.”

The Journal Tribune will continue to follow the issues as they are resolved.