| Do
Wolverine’s Economic Numbers Add Up? |
Contact
Tom Karas, Michigan
Energy Alternatives, 231-590-8164
Jim Dulzo, Michigan
Land Use Institute, 231-941-6584, ext 18 |
On
May 3, 2008, Wolverine Power Co-op released a preliminary study by
Anderson Economic Group predicting how the proposed Roger City coal
plant would affect local tax and employment revenues. But according
to an analysis by Tom Sanzillo of T.R. Rose Associates, AEG omitted a
number of considerations that it used when it studied a proposed
Midland plant, as well as Mr. Sanzillo’s previous analysis that
conservatively predicts the new Wolverine plant would double the
electric rates of its local affiliate, Presque Isle Electric &
Gas. All other data, below, comes from PIE&G annual reports.
1.
Will the economic benefit to Rogers City and the four-county area
exceed the cost of rate increases to PIE&G customers to pay for
the plant? The
math doesn’t look good:
Project
annual property taxes $13,097,000
100
Plant jobs @ $50k ea. + 5,000,000
133
Misc. jobs @ $30k ea. + 3,990,000
Total
revenue to local area $22,087,000
Increased
cost of electricity to Presque Isle Electric and Gas Co-op members, based on Sanzillo
December ’07 prediction of a doubling of current rate to .18
per kilowatt hour, which Wolverine has neither mentioned nor
disputed:
Total PIE&G KwH sales (2006
figure) 254,742,600
Increased cost/Kwh x
.09/KwH $21,169,111
2.
Is it possible that the AEG Rogers City study overstates tax
benefits? Yes.
The
AEG Rogers City study omits three important tax factors.
First, it omits the tax exemption allowed by Michigan PA 451 for pollution
control equipment. AEG’s Midland study said the tax reduction
would be around $2.2 million dollars for that somewhat larger plant.
Second,
it says nothing about tax reductions caused by municipal ownership of
any equity share of the Rogers City plant, ownership that Wolverine
may be discussing in ongoing negotiations.
Third, while AEG’s Rogers City study states that Wolverine expects a
Michigan PA 198 tax exemption of 50 percent for its city and township
tax bill, it ignores the probable $500,000 reduction in its
calculation.
Bottom
Line: The first and
third points alone could cut tax revenues to as little as
approximately $19, 500,000 annually—$3 million less than
projected.
3.
What else could reduce the economic benefit portrayed in the study?
Lots of
things…
Other
considerations missing from AEG’s Rogers City study—and
that were in AEG’s Midland study—are the new costs to
local governments to expand services to new residents and to provide,
expand, and maintain infrastructure for plant operation; and
customized employment projections.
One
example: 120 semi-truck rounds trips per day, 365 days a year,
delivering the “woody bio-mass” Wolverine now wants to
bring in along county roads, will dramatically increase Presque
Isle’s road construction, expansion, and maintenance budgets.
Another
example: Will Wolverine’s Rogers City plant actually employ 100
people? Although the plant is 20 percent smaller and projected to be
30 percent cheaper than the Midland proposal, AEG’s Wolverine
report uses Midland’s employment numbers.
Conclusion: AEG’s Wolverine report exaggerates the positive impact of the
proposed Rogers City coal plan by ignoring several highly credible
tax deductions, the big electric rate increase the plant’s
financing will require, and the increased cost to local governments
of facilitating plant personnel and operations. The study also
exaggerates the number of new jobs the plant operation will require
by using the same figures as a significantly larger plant.
Will
AEG and Wolverine correct or explain these discrepancies in the final
version of this economic impact study? Without some additional,
game-changing numbers that we are unaware of, it is clear that
residents will pay out more money than a new coal plant in Rogers
City will bring to the community.
Reference:
Link to Dec. 12, 2007 T.R. Rose report by Tom Sanzillo on electricity
costs:
http://mlui.org/downloads/much5.pdf
Link
to May 10, 2008 T.R. Rose report by Tom Sanzillo on economic
benefits: http://mlui.org/downloads/sanzilloreport.pdf
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