Nov 01

Investigation by The Oregonian reveals state officials deliberately low-balled the cost of green subsidies; program ended up costing 40 times more than unsuspecting lawmakers were told

By Editor Gov. Kulongoski, green jobs, The Oregonian Comments Off on Investigation by The Oregonian reveals state officials deliberately low-balled the cost of green subsidies; program ended up costing 40 times more than unsuspecting lawmakers were told

Harry Esteve of The Oregonian reports:

State officials deliberately underestimated the cost of Gov. Ted Kulongoski’s plan to lure green energy companies to Oregon with big taxpayer subsidies, resulting in a program that cost 40 times more than unsuspecting lawmakers were told, an investigation by The Oregonian shows.

Records also show that the program, a favorite of Kulongoski’s known as the Business Energy Tax Credit, has given millions of dollars to failed companies while voters are being asked to raise income taxes because the state budget doesn’t have enough to pay for schools and other programs.

The incentives are now under intense scrutiny at the Oregon Department of Energy, which is scrambling to curb their skyrocketing costs.

What’s the Business Energy Tax Credit?

A renewable energy company can receive a credit on its Oregon taxes worth half the cost of building a new facility, up to a limit of $10 million, or $20 million for solar manufacturers.

The credits are better than tax deductions — $1 of tax credit means $1 less paid in taxes. If a company has little or no tax liability, the credits can be sold at a discount to another Oregon taxpayer.

Energy officials were worried about the impact on the state budget in 2006, when Kulongoski and his staff proposed a dramatic boost in tax breaks to woo wind and solar companies to Oregon — upping the subsidies from a high of $3.5 million per project to as much as $20 million.

According to documents obtained under Oregon’s public records law, agency officials estimated in a Nov. 16, 2006, spreadsheet that expanding the tax credits would cost taxpayers an additional $13 million in 2007-09. But after a series of scratch-outs and scribbled notes, a new spreadsheet pared the cost to $1.8 million. And when energy officials handed their final estimate to the Legislature in February 2007, they pegged the added cost at just $1.2 million for the first two years and $4.1 million for 2009-11.

The higher estimates were never shown to lawmakers. Current and former energy staffers acknowledged a clear attempt to minimize the cost of the subsidies.

“I remember that discussion. Everyone was saying, yes, this is going to be a huge (budget) hit,” recalled Charles Stephens, a former analyst for the Energy Department who left in 2006. “The governor’s office was saying, ‘No, we need a smaller number.'”

Dave Barker, an analyst who is still with the agency, told The Oregonian that the initial cost estimates started high but got lower after he was told by his superiors to plug in smaller figures.

“What I would hear pretty consistently was, ‘We want to keep it conservative,'” Barker said.

The official estimates turned out to be absurdly low. In 2007-09, the business tax credit cost the state $68 million, of which about $40 million can be attributed to the bigger subsidies. The latest estimate for 2009-11 puts the tab for subsidies at $167 million in lost revenue, which is projected to grow to $243 million for 2011-13 — about what Oregon spends now from its general fund on the entire state police budget.

Is this about a sincere and urgent need to “save the planet”? Or to lower the earth’s temperature a fraction of a degree? Heck no, it’s just part of Gov. Kulongoski’s selfish and opportunistic effort to build his green legacy:

The program has become the centerpiece of Kulongoski’s legacy-making effort to turn Oregon into a center for environmentally friendly industry.

Read it all at The Oregonian.

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