Opinion

Tuesday, Aug. 19, 2008

Dan Walters: Solar power tax break has a ray of irony

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The central focus of Sunday's four-hour Assembly debate over the long-stalled state budget was the Democrats' $6.7 billion package of new taxes.

Republicans complained loudly that with California's economy mired in recession, raising taxes would be counterproductive, making the state less hospitable to business and propelling investment elsewhere.

Democrats countered that there's no evidence that California's above-average tax burden has stymied business investment or profits. Assemblyman Mark Leno, D-San Francisco, was especially adamant on that point, citing statistics about the state's robust – until recently – economy.

Leno's floor speech was tinged with irony, however, because he's carrying legislation that would extend a potentially huge property tax exemption for solar power installations on the rationale that without it, energy companies would build vast new solar panel farms in Arizona or Nevada, rather than in the California desert.

To compound the irony, Leno's bill, which won final legislative approval Monday on a 66-2 Assembly vote, is drawing opposition from poverty-stricken Imperial County, which says it stands to lose tens of millions of dollars in property taxes from pending solar projects.

There are as many as 10 such projects in various stages of development in Imperial County, which has year-round sunshine and summer temperatures routinely topping 115 degrees, with investment estimates ranging up to $5 billion.

"At buildout, this could amount to an annual exemption of property taxes to California's poorest county in the range of $30 to $50 million (a year)," county supervisors told Leno in a letter about Assembly Bill 1451.

"We would like to be able to embrace your legislation, but we are not able to support a complete and total exemption from property taxes of this magnitude that will create corresponding new demands for services from the county and our schools," the letter continues.

Leno and his backers, including virtually the entire solar power industry, contend that Imperial County would benefit from construction and the wages of solar power workers – thus mirroring the Republican contention that lower taxes encourage more job-creating business. "It's more than an offset," Leno says. And Imperial, with nearly a quarter of its work force unemployed, could certainly use some new jobs.

Actually, the disputed tax break in Leno's bill is not a new one. It's been in effect for many years but is scheduled to "sunset" next year. Except for a couple of large-scale projects, however, solar power has been pretty much restricted to rooftop installations for homes and business, and the tax break has amounted to just a few million dollars.

That would change, however, if dozens of large-scale projects now being proposed are built, driven by high fuel prices, concerns about global warming and requirements on utilities to make renewable energy a larger portion of their supply portfolios.