Thursday, 24 November 2011

Why does (part of) CBC hate wind? Part 4

Ontario wind power faces test over property values
CBC News
October 4, 2011
Dave Seglins and John Nicol

For the article, click here.

Actually, CBC covered this issue pretty fairly.  

CBC's article begins with the case of the Kenneys who are appealing the tax assessment on their Wolfe Island property, arguing that the wind turbines on the island have devalued their property value.

The article then includes evidence from both sides of the argument.  It also points out that the only case of a successful appeal of property near a wind facility was for a transformer, not a wind turbine.

The nearest wind turbine was over 4 km. away.  The transformers were tested every quarter for a year or so and found to be in compliance.  However, the Assessment Review Board granted the reduction because nobody from the municipality, developer or MPAC really showed up to defend the case properly.  The testimony hinged on evidence that the transformer could be heard via a telephone conversation!  Haven't you heard a hum on your telephone just from your house wiring?  However, I don't fault CBC too much for missing that information.  It would have required quite a bit of digging.

What was missing in the CBC coverage was an opportunity to dig a little deeper in a couple of areas.

Property value increases

CBC rightfully mention that property values increase for the properties that have turbines on them.  That's because the turbine brings a very predictable, long term cash flow to the property.  That cash flow acts just like a bond.  There have been a number of cases where these properties have changed hands and the premium easily exceeded $100, 000 per turbine.

What CBC missed was the implication of distributing some of the royalty money to neighbours.  This especially makes sense with the larger turbines, where the placement of the turbine turns into a lottery for the landowners.  Under the current scheme, one landowner wins big and the others get to look at the turbine and the landowner's new truck as he drives off for his winter vacation (that image is actually not so far off reality).

A modest increase in the royalty for a turbine and a broader sharing of the royalty would go a long way to building better relations between neighbours.  The royalty stream received by the neighbour would also mitigate any potential property devaluation.  In the early years of the lease, it might even increase the value since there would be a longer stream of cash flow.  

There have been a few experiments with this concept.  South Australia requires some form of agreement with a neighbour if they live within 1 km of the turbine (SA is pretty sparsely populated so it wouldn't mean quite as much as in Ontario).  Denmark has a more cumbersome approach that requires an independent property value assessment followed by one time compensation to a neighbouring landowner.  Wisconsin considered legislation that would have compensated landowners within 0.5 mile of a turbine, but that initiative is now in limbo.  Lee County, Illinois is looking at a hybrid of these ideas.

Ontario is currently reviewing its Feed-in-Tariff (FIT) program.  CBC missed a terrific opportunity to raise the issue in their coverage.

Who's to blame?

Secondly, CBC didn't explore the question, "What if there is a property devaluation?  Who caused it?"

To answer that question, they'd have to go back over five years and take a look at property values surrounding early wind farms.  This analysis was done for Melancthon, Wolfe Island and a number of other projects by independent appraisers and one graduate thesis from the University of Guelph.  They found that there was no discernible property devaluation caused by the proximity to wind turbines.

That analysis probably holds true today, largely because there have not been a lot of transactions near wind farms.  However, anecdotal interviews with real estate agents suggest that the buying public is concerned about buying near wind farms.

How did that concern arise?  It would have been useful for the CBC to review its own coverage of the wind "issue" over the last five years.  It would have found sensational headlines backed up by emotional interviews with a few anti-wind activists and then a nod to a CanWEA or wind developer spokesperson.  CBC isn't alone, of course.  The same story has been played out in other television networks, local radio station, national and local newspapers and internet blogs.

It would have been useful for the CBC to interview a few property buyers who walked away from a potential bid and ask them this sequence of questions (with anticipated answers):

Why did you pass on buying?  Well, we were worried about noise and long term property values.

How did you form those opinions?  We watched TV, listened to the radio and read about these issues in the newspapers and magazines.

Do you know anyone who has lived near turbiines?  Well, no...

Then, CBC could go the those news outlets and ask them about their sources (or just analyse what CBC had reported).  They would have found a consistent group of anti-wind activists effectively pushing their agenda.  Just like what was shown earlier in Parts 1, 2 and 3 of this blog sequence.

So, what would be the root cause of the property devaluation?  As is typically the case: rumour, fear and the madness of crowds.  In this case, amplified by the Press looking for an easy headline.

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