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The price of doing business (on a Lake Erie wind project)

steel winds
Daniel Robison
The heads of the turbines are turned to face the strongest stream of wind. Steel Winds Assistant Operations Manager Stephen Slack walks among his flock.

There are eight wind turbines on the shore of Lake Erie in Lackawanna (known as Steel Winds because of they were built at a former Bethlehem Steel plant). Plans for six more are moving ahead, despite years of setbacks, cutbacks and a predictable bureaucratic slog.

In exchange for 15 tax-free years, First Wind (the wind company building the turbines) has agreed to a Payment in Lieu of Taxes (PILOT) of $100,000 a year. According to conversations I’ve had with Lackawanna Mayor Norm Polanski, the divvying of the PILOT was arduous because many different taxing districts wanted a piece of the pie. According to an article in the Buffalo News today:

The 15-year tax agreement calls for a yearly payment of $100,000 to be split among Frontier [School District], the Town of Hamburg and the county — $38,500 annually for Frontier, $20,000 for the county and $41,500 for the Town of Hamburg.

While wrangling over the PILOT was an obstacle to the expansion of the Steel Winds project, there have been numerous other holdups, including the lack of financing (thanks Great Recession!) and the high price of wind power relative to fossil fuels.

I report a lot of economic development stories and since I began working in Buffalo I haven’t covered a single project being built entirely with private money. The absence of investment capital (remember, Great Recession) means projects are even more dependent on municipal, state and federal generosity.

According to a spokesman from First Wind, construction on the new round of windmills is set to start by the end of the year. Running at full capacity, the turbines have the potential to churn out 2.5 megawatts of power a year. With the average American household using around 10,000 kW a year, each new turbine at the site (if we pretend the wind is blowing constantly year round) can provide power for 700-800 homes.

Power (and profits) generated by wind are unpredictable by nature. One could argue the PILOT locks in a steady stream of cash to the schools and local governments involved in the latest Steel Winds deal.

A hundred grand a year is a lot of money, but I’m curious to know how much the local entities could have netted if the project was taxed under normal circumstances. But then again, (based on my reporting experience) this kind of deal could become the new norm. And I’m not talking about Norm (Polanski).

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WBFO/Western New York reporter for the Innovation Trail.