By Karen Gleason
The 830 Times
Val Verde County Appraisal District officials announced the district has reached a
settlement in a years-old lawsuit over the ad valorem tax value of the Rocksprings Val
Verde Wind Farm.
Val Verde County Chief Appraiser Jackie Casanova and Matthew Tepper, attorney for
the Val Verde County Appraisal District, spoke to The 830 Times about the lawsuit and
its settlement earlier this year.
Tepper spoke about the history of the lawsuit, noting, “The Rocksprings Val Verde Wind
Farm was constructed mostly during calendar year 2017, so the first year that it went on
the (appraisal) roll as a completed wind farm, was the 2018 tax year. That year, the
company that did the mineral and industrial appraisals for the appraisal district noted the
value of the wind farm at just over $176 million.”
Tepper said the wind farm filed a protest with the appraisal review board.
He said, “A lot of time when you’re appraising a property like a wind farm, you do it on
the income, the amount of income (such a property) generates. There’s a formula you use
to translate that into a value. Well, the income that the wind farm had had in 2017 was
almost zero, because they didn’t start operating until September or October, so their
income workup had a very low number because there really hadn’t been any income
generated yet.”
Based on that income information, Tepper said, the appraisal review board lowered the
wind farm’s appraised value to $101,400,000.
Tepper said, “At the time, Ms. Cherry Sheedy was the chief appraiser, and she thought
that was a grossly low value, and the (appraisal district’s) board of directors at the time
agreed with that, so the appraisal district board of directors authorized Ms. Sheedy to file
what is known as ‘a chief appraiser’s challenge,’ and so that 2018 value went to court
because the appraisal district disagreed with the appraisal review board’s lowering the
value to $101,400,000.”
He explained “it is fairly uncommon” for the chief appraiser to make such a challenge.
“Most lawsuits that involve the appraisal district are a property owner who is unhappy
with the value (set) by the appraisal review board, and they file the suit. Usually chief
appraisers will accept a value that comes from the appraisal review board, and if you’re
talking about a single-family home or even a medium- to large-sized commercial
property, the impact of one property having a lower value isn’t really county-wide
enough to make it worth the district’s time or energy or anything else to take it to court,
but when you’re talking about a reduction of $75 million off of the appraisal roll, those
numbers are large enough that it actually causes every other taxpayer in Val Verde
County’s taxes to go up because as values go down, tax rates go up, and supposedly as
values go up, tax rates go down, so because of the size of it and because it was such a
huge reduction that the appraisal district just very much disagreed with, and the board
decided to go ahead and file suit,” Tepper said.
The wind farm case then began to work its way through the courts.
Tepper said, “It took several years, because it’s a complex case, so you’ve got to go out
and get appraisers and get the information from the other side. Additionally, by the time
it was ready to go, and originally, it was going to go to trial in early 2020, the courts were
all shut down because of COVID.”
He added, “Meanwhile, they’re adding, in each subsequent year, 2019, 2020, 2021.
Eventually the case went to a jury trial. The jury trial was held the first week of May
2022, and the jury came back with a value of the wind farm that was $197,417,993. It
was higher than what the (appraisal district’s) third-party company had set and what that
was, was the income-based number that the expert that the appraisal district hired had
come up with, so essentially, the jury agreed with our expert at trial.”
“Between the time the case had gone to the appraisal review board and the time it went to
the jury trial, the wind farm had changed their argument, and when it went to appraisal
review board, they brought up the income and basically said, ‘Because we had no income
in 2017, in 2018, it should have been a very, very low value.’
“When they got to court, they came up with this argument that said, the wind farm is
subsidized by the federal government, and so they are able to get what are called
‘production tax credits,’ and what that means is that every time they generate a megawatt
of electricity and they upload it to the grid, in addition to whatever they can sell that
electricity to on the grid, they also get a subsidy from the federal government in the form
of a production tax credit,” Tepper said.
He noted the production tax credit goes to the owners of the wind farm: New York Life
Insurance, New York Life Insurance and Annuity and General Electric. Tepper said
corporations like these “can use production tax credits as essentially the equivalent to
cash.”
Tepper said, “So using those two income streams, both what they sold the electricity for
on the open market and the federal government subsidies, our expert came up with a
value of about $200 million – $197,417,993.
“Their expert did not look at the production tax credits. He took the position that those
were intangibles, and that we could not tax those, and so for 2018, he had a value that
was right on top of $67 million. The jury heard all the evidence, They heard the
arguments about how only tangible property was taxable, and they decided on the $197
million,” he added.
He said the wind farm appealed and eventually, the San Antonio Court of Appeals
decided the production tax credits should not have been included as part of the income,
agreeing with the wind farm that those credits were “intangible.”
At this point, Tepper said, the appraisal district was getting ready to go to trial on the
values set in subsequent years: 2019, 2020, 2021, 2022, 2023 and 2024.
Tepper said, “Our expert did a work-up of the values based upon pulling out the
production tax credits and based upon his numbers from 2018 through 2024, without the
production tax credits, we then got into negotiations, and we ended up settling the case
for 2018 through 2025, before we either have the trial on 2019 through 2024, or we had
to retry the 2018 case.”
He said the appraisal district ended up settling the dispute over the 2018 value at $126
million.
“That is $24.5 million of additional value than what we would have had on the roll had
we just gone with the appraisal review board’s number and not settled the case. That both
results in the taxing entities getting the difference in tax revenue between the $101.4
million and the $126 million, and it also results in there being higher values, which
means that the tax bills for all the other property owners in Val Verde County were a
little bit lower than they otherwise would have been,” Tepper said.
“The other thing that was interesting about the settlement, is the appraisal review board
number for 2018 was $101,400,000, and that was actually the agreed-upon value under
the settlement for both 2024 and 2025, so we ended up where our year eight value was
the same as what the year one value would have been. Of course, a wind farm has a
limited life, it’s property, so with each passing year, typically the value of the wind farm
goes down,” the attorney added.
Tepper said of the settlement, “We would have preferred to have had the values that our
expert came up with originally, at the $200 million, what we really would have wanted
was the $176 million, but we do feel like it was a very good outcome, both for the
taxpayers of Val Verde County and for the entities, by retaining that value. If we’d
started at $101 million in 2018, our value in 2015 would be down to like $60 million to
$70 million, and that would result in everybody else’s tax rates going up, so we feel that
with the result that we got, we have more equal and uniform taxation, we are more
spreading the tax burden amongst what the real value is in Val Verde and, in addition, to
bringing some stability to the rolls for the taxing units, the wind farm had only paid on
that $100 million number, for 2018, 2019, 2020, 2021, 2022 and 2023, so it ended up
bringing in a real cash infusion for all of the entities.
“The school district was able to send out bills after we resolved the cases, so they owed
an additional, just under $730,000. The county sent out bills for just under $400,000, and
the hospital district sent out bills for just under $72,000.
Additionally, the way that state
funding works for the school districts, the school district was able to file what’s called a
‘taxable value audit,’ because their state funding was based upon the certified roll that the
appraisal district put out,” Tepper said.
Tepper said additional state funding came to the local public school district as a result of
the lawsuit and settlement.
“We do feel that we brought equal and uniform taxation and helped out the taxpayers of
Val Verde County,” Tepper said.
He added, “I think we’ve got a way that we can appraise the wind farm moving forward,
so we know what the values are going to be and the (taxing) entities are going to get
values that they can rely upon and in the short term, all of the entities, but particularly the
school district, got a real cash infusion, which I am sure that they can use.”
Tepper said the owner of the wind farm is a company based in France. He said a
company called Akua USA is the general partner, and the limited partners are General
Electric, and the New York life insurance companies. Tepper noted that Akua USA is an
American company that is a subsidiary of a French company.
Casanova, who became chief appraiser when Sheedy retired, said of the settlement, “”By
settling the lawsuits, the appraisal district brings stability to the appraisal roll and avoids
the risks and expenses of additional litigation.”
The writer can be reached at delriomagnoliafan@gmail.com
