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Comptroller: Industry-wooing incentives too costly

AUSTIN, Texas – Texans are paying too much to attract major economic development projects, particularly farms of wind-powered electric generators, according to a study by the office of Texas Comptroller Susan Combs.

A state law allows school districts to provide tax incentives to recruit such projects. Those breaks have helped the state to attract industries with significant employment, Combs wrote, but it has also been “increasingly used to over-incentivize projects that create few or no jobs.”

About two-thirds of the 98 projects that have won the tax breaks are the so-called “wind farms,” the Austin American-Statesman reported in Sunday’s editions. Sixty-three such projects have received tax breaks averaging almost $1.6 million each, compared to just more than $166,000 per manufacturing project and just more than $51,000 per research and development project, according to the comptroller’s report.

The report shows that the cost per job is 40 times what the state spends on projects that earn grants from the governor’s Texas Enterprise Fund. It also states that wind farms are getting a disproportionate share of tax benefits – about 38 percent of the total tax benefits awarded, despite having just about 25 percent of the capital investment and 8 percent of the 6,239 jobs promised, according to the American-Statesman.

Future agreements relating to renewable-energy projects should be more proportional between tax benefits and jobs and capital investment, the comptroller’s report urged. Combs, who submitted her report to state leaders last week, also urged that the program be focused more tightly on job creation than tax incentives to private industries.

Under the state law that authorized the school property tax breaks, the state must cover about $400 million in revenue lost by Texas school districts because of the program over the next two years.

The program is just one of a constellation of economic development incentive programs the Legislature was expected to scrutinize when lawmakers convene in Austin next month, faced with a state revenue shortfall of $24 billion. Also expected to be spotlighted were the Enterprise Fund and the Texas Emerging Technology Fund, both pet programs of newly re-elected Gov. Rick Perry.

Wind power industry promoters warn that cutting back on the program will mean fewer jobs created in Texas.

“The whole theory is that we’re leaving money on the table,” said Greg Wortham, executive director of the industry group Texas Wind Energy Clearinghouse. “We’re not. We’re going to be leaving jobs outside of Texas.”

Wortham is mayor of Sweetwater, the West Texas city that has become a hub for wind-powered energy. He contends that the program creates far more jobs indirectly than directly and, therefore, were not weighed in the comptroller’s report.

“These are real Texas jobs – welders and truck drivers – and (royalty) money to farmers and ranchers” on whose land the wind turbines stand, he said.

Said Russell Smith, executive director of the Texas Renewable Energy Industries Association, “If they are going to change the law in a way that hurts renewable energy, we’re not going to be happy.”

But state Rep. Lois Kolkhorst welcomed the report. “The (job) numbers are exactly what I feared,” she told the American-Statesman.

“I’m all for green jobs, but not at such high costs. We have to prove that these green jobs don’t rely too much on taxpayer subsidies,” she said.

Most of the affected school districts, however, have negotiated deals with the renewable energy companies to share the tax savings. Most wind farm developers return up to 40 percent of the tax break to districts, the newspaper reported.

Combs recommends doing away with these side deals, saying the money sometimes prompts school district officials to make incentive deals not always in the state’s best interests, the newspaper reported.

[rest of article available at source]