By: Mark Glennon*
Now, here’s a clever way for special interests to game the system: Rig up a scheme so when a customer buys your product, the price will be run through the property tax system. That way, you can get your cash up front, avoid credit risk and let taxpayers worry about all the hassles of long term financing, value assessment and credit.
That’s the latest layer of never ending handouts that would go to makers of green energy products under House Bill 2831, the Property Assessed Clean Energy Act now pending in the Illinois General Assembly.
Here’s how it would work: Let’s say you’re like many Illinois farmers now being contacted by solar equipment companies that want you to make electricity to sell. They’ll install solar panels on your land and split with you the cash proceeds of electricity, which gets sold back into the grid. A local unit of government will sell bonds to pay for the equipment up front. The property tax assessor will separately assess the value of the installation and add that to your property tax bill. The bonds will get repaid out of the additional property tax or whatever other sources the local government chooses.
“Sweet,” the guys who sell renewable energy hardware must be saying.
It wouldn’t be limited to solar panels. Pretty much every energy-saving device or material would be covered, from storm windows to wind turbines. Or how about a charging station for your Tesla that the federal government separately subsidized? No problem.
The bill would create a whole new level of bureaucracy at the local government level — just what Illinois needs. Skim through the bill and you’ll see the parts about designating the required “Pace” areas, assessment procedures, bond issuance, certifications required, etc.
Objections to this bill should be obvious.
• What happens if the renewable equipment becomes obsolete, or the company responsible for maintaining it goes under, or subsidies for renewable energy go away making the electrical production uncompetitive? The landowner will be stuck with a property tax lien on his land and it would be very difficult to return the land to another use.
• Why should green capital projects alone get the benefit of this mechanism? Are there no circumstances where other projects would be more important? Maybe a farmer badly needs new irrigation equipment or a barn. Maybe other landowners need flood control or paving. I accept the virtues of renewable energy. I really do. But other things sometimes have more virtue.
• Most importantly, what does it cost and is it worth it? The bill basically lets renewable equipment makers outsource their whole financing department to taxpayers. Renewables already benefit from countless federal and state subsidies, mandates and incentives. In Illinois, costs for that don’t matter, though it’s in the billions, as we’ve written here repeatedly. The check is blank if it’s green. Those costs are mostly born by energy consumers, and energy cost is very, very regressive — trivial for the rich but a big deal for the poor.
Meanwhile, natural gas largely produced in the Midwest becomes a better and better alternative than subsidized competitors. A ten-year chart of natural gas prices is on the right.
The bill passed the Revenue and Finance Committee and is on to a second reading in the House. It has bipartisan sponsorship.
I have reached out to the Republican sponsors for comment and will update this if I hear from them. (I won’t bother asking two Democratic sponsors in my area — Robyn Gabel and Laura Fine. I asked them before about cost of a green initiative they sponsored and they had no clue.)
But I did talk to one lawmaker who is on the ball. She always is. Rep. Jeanne Ives is opposed and said this:
This bill distorts the energy market, pushes rate increases for the average consumer, maligns the property tax system, and creates unfunded mandates on county treasurers and assessors who handle property tax bills and assessments.
And she was right to add this: “I can’t keep up with all the garbage bills going around down here.”
As we wrote earlier this week, the Illinois General Assembly is out of control and worse than ever.
*Mark Glennon is founder of Wirepoints. Opinions expressed are his own.
Correction 4/23/17: The original version of this article included, as a criticism, unfairness to mortgage holders because they would be subordinated to the property tax lien created by the financing. However, the bill also requires the consent of mortgage holders, so that criticism was deleted. If they do consent they will be subordinated.
Update 4/23/17: I spoke Rep. Mike Fortner (R-West Chicago), one of the sponsors. It’s his view that the bill is just an extension of the concept of “special service areas, which are common.” Those are similar arranges frequently entered into with property developers. He also felt strongly that no additional administrative burdens would be places on local assessors and other administrators because they are used to making special, particular assessments for those areas.
I respectfully disagree. Special service areas are typically used for infrastructure improvements to newly developed properties, such as sidewalks and other features common on developed land. This bill, however, pertains to particular equipment for a landowner to make money and lower its own energy costs. And it seems evident that at least some additional burden would be placed on local governments.
These PACE loans, as they are called, are generating lots of controversy around the country, and are considered by some to be predatory lending. At least one class action lawsuit is filed and Congress is looking at a bill to address abuses.