Bloomberg News

California Program That Backed Solyndra Will Go On, Sponsor Says

October 20, 2011

Oct. 20 (Bloomberg) -- A California program that set up more than $100 million in tax breaks for companies including now-bankrupt Solyndra LLC will continue with “very minor” changes at most, the program’s sponsor said yesterday.

“To the extent that people are looking at Solyndra and saying that’s why we should end this program, it’s absolutely unjustified,” Senator Alex Padilla, the Pacoima Democrat who sponsored the bill that created the tax breaks, said in an interview. “If there were to be any changes, they would be very minor.”

At a hearing yesterday in Sacramento, state senators and Treasurer Bill Lockyer defended the tax exemptions for advanced- transportation and alternative-energy projects as vital to keeping manufacturing jobs in the state.

Lockyer proposed two changes to the incentives: a “clawback” provision that would let California recoup money if the company leaves the state, and stronger requirements for recipients to report changes to their business plans after they apply for a tax break.

The treasurer spoke against the idea of a “financial viability” test for applicants. The state is ill-equipped to scrutinize the business plans of private companies, he said.

$104 Million

Lockyer is chairman of the state’s Alternative Energy and Advanced Transportation Financing Authority, which has granted sales-tax exemptions valued at $104 million to 33 companies, public agencies and research institutions. Recipients have used about $31.6 million of the breaks so far, with Solyndra accounting for almost 80 percent, state figures show.

The Fremont, California-based maker of solar-power collectors filed for bankruptcy protection on Sept. 6 after receiving $535 million in U.S. loan guarantees from the Energy Department. Congressional committees in Washington are investigating the commitments, and the Federal Bureau of Investigation is probing the company.

State senators are weighing Lockyer’s proposed changes to the 2010 law that set up the tax incentives as well as a cap on a company’s exemptions.

Lockyer, a 70-year-old Democrat, said the incentives have worked well, contrasting them with $43 billion in other tax relief he said California grants businesses for various reasons.

No Questions

“That’s $43 billion that no one asks these kinds of questions about,” Lockyer said. “This is the only one that I’m aware of where someone tries to assess whether the benefits to California outweigh the cost of the tax exemption being provided.”

The authority that grants the tax breaks said it may put new awards on hold while reviewing the Solyndra affair.

None of the nine senators at the hearing proposed repealing the tax breaks yesterday.

Senator Bob Huff, a Diamond Bar Republican, said the state’s tax breaks shouldn’t be compared to the federal program that awarded Solyndra the loan guarantee.

“This program is totally different than giving them grants or loan guarantees,” Huff said during the hearing. “There’s not a whole lot of risk. If they don’t invest, they’re not paying anything anyway.”

Executives from two companies that received state incentives -- San Jose-based Stion Corp. and Fremont-based Solaria Corp. -- spoke in favor of the program. Both closely held companies manufacture solar cells.

Melissa Zucker, vice president of human relations for Solaria, said the incentives helped the company rebuff an offer from Oregon to locate its manufacturing facilities there. Oregon offered $20 million in low-interest loans and a $10 million tax credit, she said. California offered a tax credit valued at $709,800, according to documents from Lockyer’s office.

“California is absolutely where we want to be from an innovation standpoint,” Zucker told state senators. “It is a difficult state, economically, in which to manufacture, as all of you are aware.”

--Editors: Jeffrey Taylor, Larry Liebert

To contact the reporter on this story: James Nash in Sacramento at Jnash24@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net.


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