Shepherds Flat wind farm: What's the cost to taxpayers?

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on March 12, 2011 at 11:00 AM, updated March 12, 2011 at 11:33 AM

The Business Energy Tax Credit started life in the 1970s as a conservation and clean energy incentive, but the chief rationale has become economic development -- namely green jobs.

So just how much does a wind farm job cost taxpayers? The answer depends on the formula, and involves an implicit assumption that the jobs wouldn't exist without the subsidy -- questionable in the case of Oregon's large wind farms.

Either way, the simplest formula is to divide all public subsidies for a project by the number of permanent jobs it creates. For Shepherds Flat, with $1.2 billion in subsidies for 35 permanent jobs, that equation delivers a cost per job of $34 million.

Oregon taxpayers pay a share of the federal subsidies, but for simplicity's sake, consider the cost of the jobs based on the Oregon tax credits alone.

Shepherds Flat is pre-certified for $30 million in state tax credits. At that price, the cost per permanent position is $857,000.

Bob Repine, director of the Oregon Department of Energy, says it's possible that Shepherds Flat might not get final approval for all three tax credits. One tax credit would cost $10 million, or $285,000 a job.

Critics of tax credits like to calculate how long it would take to repay the subsidies from personal income taxes generated by the resulting jobs.

Industry experts estimate that the 35 permanent jobs would pay an average of $50,000 a year in wages. Assume each employee gets an annual raise of 3 percent. On that basis, it would take about 46 years to generate $10 million in tax revenues from the jobs created directly by the project, and 77 years to generate $30 million.

At a minimum, that's double the effective life of the wind turbines for the state subsidies alone.

Economic development officials say such analyses are too simplistic. When they analyze the potential return on an incentive, they factor in a multiplier effect that accounts for all the other jobs created indirectly as workers spend their wages and businesses buy local supplies.

That multiplier would be smaller for a wind farm than say, a manufacturer, as wind farms don't buy as many supplies or raw materials, and the equipment installed is manufactured elsewhere. But in the interest of conservatism, assume that the multiplier effect quadruples the number of permanent jobs created by Shepherds Flat. Then assume that all of the resulting jobs pay $50,000 a year, with 3 percent annual raises, whether it's a grocery store clerk, a truck driver or the manager of a hardware store.

It's an economic development fantasy. But under that scenario, it would still take 19 years to repay $10 million in subsidies for Shepherd's Flat, and 39 years to repay $30 million.

-- Ted Sickinger
