State Senator Bob Huff

Sen. Bob Huff
Created: 12/10/2011 06:07:36 AM PST

I do believe that California can take positive steps to help lure new business and jobs to California. I also believe we pass some bad laws in California that do exactly the opposite. Our regulatory climate is nothing to brag about. California is routinely ranked as one of the worst states to do business in, which tells me that we can do a much better job.

The question is, however, can California go too far in providing incentives for companies to locate here? What happens when these companies, like Solyndra, go bankrupt? Is it right to invest California tax dollars in a firm that suddenly goes belly up? Should our taxpayers get stuck with the bill?

That’s the question we faced during a recent informational hearing held by the Senate Committee on Governance and Finance, of which I am vice chair. It’s no secret that Solyndra defaulted on a massive federal loan when the company went bankrupt. What is lesser known is that the firm had also taken advantage of some generous state tax breaks that were awarded under Senate Bill 71.

The legislation, signed into law by Gov. Schwarzenegger last year, created the California Alternative Energy and Advanced Transportation Financing Authority. The measure was designed to push California to the forefront in developing alternative energy. It passed the state Legislature with overwhelming bipartisan support.

Since its passage, about $104 million in sales tax exemptions have been approved for 33 different applicants. That included the now failed Fremont solar start-up Solyndra, which received $25 million in state sales tax breaks.

The ultimate question on everyone’s mind is, are we literally rolling the dice (and using house money, no less) on clean energy companies like Solyndra? The answer from state Treasurer Bill Lockyer under committee questioning was, not surprisingly, yes.

These are risky investments according to the state treasurer. But to put it into context, nearly 70 percent of all new companies do not survive past the eight-year mark. He correctly points out that while this investment is a risky one, not investing in these companies, and watching them build factories and create new jobs elsewhere, is an even a riskier move.

I believe our investment in SB 71 is worthwhile. Awarding state sales tax breaks is far less risky than awarding loan guarantees and job credits like the federal government provided. What SB 71 does, and correctly so, is create a business- and job-friendly atmosphere for business start-ups to locate in California.

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