During an eventful and occasionally contentious day (Thursday, October 26) of deliberations by the Oklahoma Task Force on State Tax Credits and Economic Incentives, Chairman David Dank contended that transferability of coal, zero emission and wind energy tax credits operate in ways contrary to goals of job creation and economic growth. He was critical of the credits in general, but focused his greatest scrutinty on transferability provisions.
This weeks’ deliberations included a testy exchange, at the end of the morning session, between House Appropriations and Budget Committee Chairman Earl Sears of Bartlesville and state Rep. Mike Reynolds of Oklahoma City.
Dank, an Oklahoma City Republican, said transferability provisions are “a major concern. State policy has apparently created a whole new industry of brokering and buying and selling transferable tax credits, like a big swap meet with millions being traded back and forth.”
Dank stated in prepared comments, and repeated during the course of the day’s give-and-take, that he supports the state’s challenged coal industry. However, he said, the ways the coal credits now operate are “a poster child for just about everything that is wrong with this system.”
Dank outlined his critique of the coal tax credits with these words:
“When these tax credits were first created, we granted a tax credit per ton of coal produced and a larger credit for those who purchased it.
“In 2006, lawmakers passed a bill that took a portion of the purchaser’s tax credit and gave it to the producer. Then lawmakers restored the credit to the purchaser without reducing what had been given to the producer. In the weeks leading up to the end of that 2006 session, supporters of the coal industry formed a political action committee called Friends of Oklahoma Coal.”
In his formal statement and in exchanges with representatives of the coal industry, Chairman Dank said the objective of job retention might better be reached through the Quality Jobs Program or a close cousin to it.
Dank said the coal tax credits amount to at least $10 million a year in lost state tax revenue. The Department of Insurance has found 30 insurance firms purchased $55.9 million in coal credits from 2006 to 2009, offsetting their premium tax liability with the credits.
The high per-job cost of the coal tax credits was covered this summer in stories for Oklahoma Watch by Graham Lee Brewer. Multiple news reports have also documented the jobs retained and small scale industry preserved through use of the coal incentives.
Although he has praised some business incentive programs, offered mixed views of others, and rendered a harsh judgment of a few, Dank said the coal credits, as structured, are particularly troubling:
“These credits are issued with no accountability, no transparency, no auditing and no controls. We have no idea what this money is used for and we see no evidence of any jobs created with it. Again, we have to ask if it is being done to maintain jobs or simply to assure profits.”
In dialogue with a trio of industry officials or advocates, Rep. Dank said he had “no quarrel” with their efforts to represent the industry and secure favorable tax treatment and incentives from government.
However, at one point, Dank reflected that the work “stupid” ought to be stamped on the foreheads of past legislators who created the incentive program and allowed political contributions to be made during the annual legislative sessions (a practice now forbidden).
Defending the varied incentive programs were a trio of businessmen who have participated, both personally and through their companies.
Mike Bergey of Bergey WindPower, based out of Norman, defended the Small Wind Turbine Manufacturing Tax Credit. While asserting the efficacy of the program in the past, and expressing a desire it will be restored next fiscal year (it is now in a moratorium), he told the task force, “Regardless of the outcome, our company is very appreciative of what the Legislature has done to make us competitive in a world-wide market.”
Rep. Reynolds pressed Bergey on personal benefits his wind power manufacturing firm has gained, and his use of transferable credits to lower personal tax burdens. Bergey readily conceded he has gained both through the business and as an individual, pulling down his personal tax debt to zero in some years. He also sketched a high personal tax rate and payments
In discussion of his firm’s involvement both in Oklahoma and China, Bergey stated about 15 percent of his business is done in China; the remainder in the Sooner State.
Reynolds’ questions about Bergey’s personal tax situation drew a rebuff from Rep. Sears, who said be believed the questioning was unprofessional and too personal.
In response to a question from Reynolds, Bergey said he did not find the dialogue offensive, and that he believed openness was a good objective because public money was involved.
In a brief exchange as the morning session broke up, Reynolds said if Sears found his questioning objectionable, the issue should be discussed privately and not publicly.
Sears encouraged Reynolds to come to his office to discuss the matter. Reynolds countered, “No, you come to mine.” Reynolds told he “might try to reprimand you.”
In the afternoon, Clay E. Hartley of Phoenix Coal Sales, a Vinita firm, and Lundy Kiger, a vice presidnet at AES Shady Point, a power plant near the town of Panama, defended coal production incentives and transferable credits.
Exchanges between Kiger and Chairman Dank often included critical back- and-forth, but Dank stressed he did not believe the industry’s behavior had been “illegal or even immoral.” His focus, Dank said, is on the lack of transparency and disclosure in the programs, as well as the use of the transferable credits by insurance companies to lower premium tax liability.
A consistent message by the coal champions was they did not object to intensified scrutiny and transparency, but that their industry should be allowed “play under the same set of rules” as oil and gas firms, who utilize incentives to lower costs and maintain profitability.
Coal advocates asked for “a chance to prove” their industry can retain an important niche in the state’s energy future. They noted Oklahoma coal is “clean” and their market share might increase as federal environmental standards limit the use of “western coal” (largely from Wyoming).
Dank frequently reiterated opposition to coal credits as presently organized, but pointed to other devices as a model for ways in which the industry might be helped more efficiently and with greater transparency.