The Springwater Preservation Committee

Springwater Preservation Committee

HOW WIDGETS GET MADE

By Springwater Bob

While there are many problems and unanswered questions about wind generators the bottom line is that not a single one of these would be built if it were not for the massive government subsidies provided. Without these subsidies, which come out of every taxpayer’s pocket - that’s your pocket and my pocket - these towers make no financial sense. Wind generation of electric power is really not primarily about energy or the environment; it is actually about politics and economics.

How do these subsidies work? Let me try to explain it with a hypothetical case.

The government goes to Joe Rich and says, "Joe, we know you are a pretty clever fellow, and we know you’re an expert at making real widgets, but we also know you can’t sell them for a high enough price to make a profit. We also know that everyone absolutely loves widgets. So we’ve decided to make it possible for you to make widgets at a profit. That will make us all look very good - politically correct - and help us all be reelected, so here’s what we are going to do.

First of all we have passed a law that dictates that certain wholesalers will be required to buy every widget you can make at a going fair market price. In other words we’re going to guarantee you a market for your product. Still we realize you won’t make any profit at the wholesale price, so in addition, we will use the taxpayer’s money to pay you an additional premium - called a production credit - for every widget you make. For a 21,000 widgets per hour factory operating at 30% efficiency that would be an annual payment of about $1,000,000 (21,000 kw x 8760 hours x 30% x $.018).

But listen, it gets even better yet - we’re also going to take some of the taxpayer’s money and give you an outright grant to help you get production started. Just last year the state gave away over 17 million dollars to 4 companies that make widgets.

Not only will we give you these outright grants, but we’ve also written special rules into the tax code to allow you to use accelerated depreciation. So instead of writing off the cost of these machines that make widgets over their 20 - 25 year life expectancy, we will let you write them off over only 6 years and to write off over 50% in the first 2 years. That means if the machine costs you $1.5 million you can deduct $780,000 in the first 2 years. If you are in the 25% tax bracket that means you will save $195,000 in income taxes you won’t have to pay in 2 years. For 14 machines that’s $2,730,000 in 2 years. Since this is money we don’t actually pay out, but rather money we just never collect, the taxpayers will never notice.

Now we think that’s a pretty good deal, but we’re not done yet. In addition to all of the above, we’ve passed a law that says when you set up your widget factories they will be tax exempt for 15 years. Normally, we only do this for industries that create a significant number of new jobs, but we understand that production of widgets is almost totally automated so we’re making an exception in your case. So let’s assume you put a factory in Springwater that costs $20 million and conservatively is assessed for only $15 million. At last years combined tax rate of $30.42 per 1,000 that would be $456,300 per year in taxes not paid.

And then the government said, just to put a little frosting on the cake, we’re going to take some more of the taxpayers money, and we well pay for a massive marketing campaign, with millions for TV time, to convince those same taxpayers that it is their civic duty to purchase all the widgets at a premium price that is higher than they can buy substitute widgets that work just as well. And to top it all off, the governor has ordered all State agencies, including the whole SUNY system, to buy a specified amount of widgets at the premium price so that it will cost taxpayers a little more."

Needless to say, all the politicians reminded Joe that they were sure he would know how to show his appreciation at election time.

HOW WIDGETS GET MADE - PART II

Joe told the government that he would be a fool not to get into the widget business and would have no trouble getting his rich friends to invest with him. After all you would have to be pretty stupid to mess up such a good deal and not end up even richer. But he also told them he saw one huge problem in that most people, while they love and use widgets all the time, won’t want a widget factory in their own back yards; kind of like everyone makes waste, but no one wants to live near a landfill.

But the government said NOT TO WORRY. They said, "we know you can’t build these facilities in lots of places; we don’t even want them on any of the millions of acres of remote land that we, the State, own, and they’re certainly not appropriate for the Adirondack Park or Catskill Preserve. Obviously, it would cause an outright war if we tried to put them in Monroe County or on the Long Island sea shore.

But the government said what you have to do is quietly go into some very rural, sparsely populated areas and get some leases from some major land owners. For example, the government told Joe - You have to go to places like Springwater. The people there may be very nice folks, but you know they really aren’t very sophisticated and don’t have a lot of resources to fight you. They really won’t know how to stop you even if they wanted to, and besides, they still haven’t figured out how to use a comprehensive plan or land use planning to protect their own interests. And besides that, if we offer them a few goodies, like a little in lieu of tax payment, we can use the good old divide and conquer strategy.

Remember Joe, just in the Rochester Metro area there are almost 1 million people who will look at us and think we’re doing a great job of taking care of their need for widgets and will show their appreciation at the polls. If that means making a few people in a few rural areas, like Springwater, very upset and angry, it’s a small and insignificant price to pay.”

Springwater Bob

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