Analysis: As winds blow, and waters flow, the dollars grow … Subsidies erode, but don’t end
Published: May 24th, 2015
OKLAHOMA CITY – The 2015 session of the Oklahoma Legislature ended Friday evening.
The wettest spring in living memory continues, restoring lake levels and ending a drought that has lingered for a decade.
At 23rd and Lincoln Boulevard, House and Senate leaders congratulated themselves on getting to the finish line, crafting a state budget using a combination of nip-and-tucks for most agencies, flat budgets for a few parts of government (including common education), and increased appropriations for a handful of government operations.
Further, a measure signed by Gov. Mary Fallin could (note the word is not “will”), over time, lead to a series of “sunsets” for some of the business subsidies.
The late state Rep. David Dank, R-Oklahoma City, secured a firm place in history with his work, over his entire legislative tenure, to identify by name and with specific data the most egregious of the business tax credits and abatements.
Dank was actually not a foe of all tax credits and incentives. However, he did call, loudly and often, for creation of a method to examine them regularly and with open eyes.
In his final years at the Capitol before his untimely demise this year, Dank’s Exhibit A for bad subsidies was the wind industry’s varied “props” in the form of taxpayers support. He regularly assailed the Ad Valorem tax exemption the wind power industry has enjoyed.
Sen. Mike Mazzei, R-Tulsa, and Rep. Earl Sears, R-Bartlesville, moved into high gear last winter to trim the wind power give-aways. They noted that wind developers qualified for three major subsidies: Zero Emissions Tax Credits, Investment Tax Credits and Ad Valorem Tax Exemptions.
In a January legislative press release, the pair noted, “According to the Oklahoma Tax Commission (OTC), the state’s Ad Valorem reimbursement cost was more than $41 million in 2002. By 2013, the amount increased to more than $64 million, with approximately half resulting from Ad Valorem exemptions for wind farms.”
Mazzei at the time said, “Tax credits are designed to help us create a competitive environment that results in job growth and economic development. In order for us to be good stewards of our limited state resources, it is critical to reassess those subsidies to determine if the benefit justifies the cost. Providing handouts to wind developers for simply operating in Oklahoma is not a sensible approach and should be troubling to our citizens.”
This year, Mazzei and Sears co-sponsored Senate Bill 498, signed by Gov. Fallin last week.
It will phase out the property tax exemption for wind farms.
S.B. 502, from Rep. Sears and Sen. Marty Quinn, declares wind farms ineligible for the state’s existing job creation tax credit. S.B. 502 is less significant than might appear at first glance, because wind farms do not create many jobs.
The property tax exemption (which has triggered a “crimp” in public school financing among other things) will end on January 1, 2017 – but keep in mind there is another legislative session before then.
In the long run, critics of massive business subsidies hope that Sen. Mazzei is correct in his projection that the new provisions will help retain $500 million in government revenue over a 10-year period. Conservatives hope some or all of that might be used to reduce the size of government in the form of tax credit, defenders of the spending status quo want to retain that money to grow government.
Regardless of how the retained revenue might be used, what makes wind subsidy critics uneasy is that industry officials actually cheered enactment of the two measures.
They have made a point to stress with wind advocates that their zero-emission tax credit (AKA the wind production credit) will stay in place at least through a scheduled sunset in 2020.
The North American WindPower website stressed “The Wind Coalition worked closely with legislators and the governor’s office to craft the final agreement.”
At the Capitol, emotions for and against the wind industry run strong – but if you really want to get a reaction, go to Kingfisher County and talk to some of the landowners. We’ll do that in some upcoming reports.
Anticipating what comes next, the wind industry has formed alliances with both other business interests and environmental organizations. (There are some exceptions in the environmentalist movement, including in Osage County, where some activists, including members of the Osage Nation, incline against the wind interests. In some instances, that is due to their long-standing ties to the state’s heritage industry, oil and natural gas.)
Whether the wind-enviro hook-ups are politically sustainable is an open question. They have proven effective in some states, and played a role in the Legislature’s ultimate decision to keep the wind credits in place for the near future.
The strong appeal of the “green power” messaging will likely keep groups like the Sierra Club in the wind industry’s corner. This is not a criticism, but a succinct description of the dynamic.
Unresolved is the “leave me alone” issues that surround property rights. Land owners holding a sweet deal with turbine-builders want the government to stay out of their land leases. But other, adjacent to wind farms in places like Kingfisher, report a variety of aesthetic and actual worries about those swishing turbines.
As for the broader need intensely to study the wisdom of sustaining and growing taxpayer subsidies for business decade after decade, legislation crafted by Senate President Pro Temp Brian Bingman, R-Sapulpa, and Speaker Jeff Hickman, R-Fairview – a new law named in Rep. Dank’s memory – might provide a basis for serious and sustained study of, and sunsets for, other credits and exemptions.
As the winds blow, and the waters flow, the dollars grow – for now.
Time will tell if the Legislature will really step away from en-grained habits – picking winners and losers in the energy marketplace.
One can dream that elected officials will craft a tax system friendlier to taxpayers across the board – to working women and men, businesses large and small.
And then, let individuals decide how best to spend their own money.
NOTE: From time to time, McGuigan will report on wind’s likely place in Oklahoma’s energy future, and the broader issue of taxpayer-financed business subsidies in the Sooner State.