We are disappointed that Sen. Pete Pirsch changed his vote in the Legislature’s Revenue Committee on LB 104 from Present Not Voting last night to Yea late this morning.
LB 104, legislation introduced by Sen. Steve Lathrop, expands tax benefits under the Nebraska Advantage Act to renewable energy projects.
The Legislature’s Fiscal Office reports LB 104 will cost over $5 million annually. Sen. Pirsch was the key committee vote for a bill that will expand a costly special tax status to renewable energy projects which have a limited impact on job creation. The Bipartisan Policy Center’s Issue Brief ‘Reassessing Renewable Energy Subsidies’ concludes that tax incentives, such as proposed by LB 104, would not be successful in attracting new renewable energy investments:
“Tax-based project investment is rigid and hampers the ability of markets to create securities that would deepen the market and widen the pool of potential investors…Furthermore; each tax equity investment is structured to meet the individual tax strategy and appetite of the originating investor. This limits the fungibility that is necessary for the formation of a viable market”
Additionally from the Bipartisan Policy Center:
“Moreover, the recent recession has reduced this pool even further: the number of tax equity providers declined from approximately 20 in 2007 to 13 in 2008 and only 11 in 2009. The associated decline in overall tax equity financing provided to renewable energy projects was equally dramatic, falling from $6.1 billion in 2007 to $3.4 billion in 2008 and $1.2 billion in 2009.”
The number of companies with the resources to invest in renewable energy projects has diminished greatly. The limited ability to attract investors is the basis of our contention that LB 104 will not be successful in attracting new investment to Nebraska.
It can also be prohibitively expensive to expand the Nebraska Advantage Act as proposed by LB 104. Just recently the Legislature’s Performance Audit Committee released a report that said the Nebraska Advantage Act and other tax-benefit programs were ‘too vague’ and did not utilize a purposeful cost-benefit analysis. The report went on to say that the Performance Audit Committee did not have enough evidence to determine whether the Nebraska Advantage Act was effective at promoting job creation.
The report was clear that significant sums of money have been invested through the Nebraska Advantage Act and yet the evidence is inconclusive as to whether the program is effective. LB 104 does nothing to provide clarity to the evaluation metrics of the Nebraska Advantage Act, and provides no substantive metrics of its own to demonstrate that this new tax benefit is responsible for the creation of new jobs.
LB 104 will create added pressure on an already tight state budget in order to give special tax treatment to an industry that is unlikely to make significant investments at this time.