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Archive for October, 2010

Gambling with Tax Dollars

Recently, Lieutenant Governor Matt Denn and DEDO announced a new revolving loan fund designed to “make loans…to businesses that cannot otherwise obtain capital.”  Put in a more straightforward way, the state is going to be loaning tax dollars to businesses that cannot borrow money.

 

This raises a few elementary questions.  First, why are these targeted businesses unable to obtain capital?  The answer is simple once you understand the intent behind the new fund.  The industry at risk is that of the emerging green technology.  Businesses in this industry cannot obtain capital because they have not proven to be able to produce a profit worthy of investment.  Costs remain too high and demand is still too low.

 

If investors and lenders will not take a risk on this industry, why should Delaware taxpayers be asked to do so?  The obvious answer is that we are doing our conscientious best to position this state to be a national leader in the green movement.  This is an admirable goal; very few would argue with the benefits of energy efficiency, conservation and renewability.  One might, however, be able to debate the issue on the grounds of a cost to benefit ratio.

 

Secretary of Delaware’s Department of Natural Resources and Environmental Control, Colin O’Mara, was correct when he questioned the cost of a newly proposed power line to run in the Atlantic Ocean from New York to Virginia.  This project is being hailed by its supporters as necessary to the success of off shore energy production.  However, Secretary O’Mara correctly asked the question concerning the cost to benefit ratio in a recent News Journal article.

 

That same standard needs to be applied in this situation because tax dollars are being used to fund an industry that cannot pass a market test.  The costs are currently too high compared to the benefit.  Why are tax dollars being used to gamble on an industry that cannot survive in the marketplace?

 

In a robust and vibrant economy, this could be seen as a sensible move.  After all, the money is given in the form of a loan and not a grant.  And, ideally Delaware would be a great place to focus the emergence of the green technology industry for many reasons.

 

Unfortunately, this is anything but a robust or vibrant economy and there are hundreds of existing businesses that would benefit immensely from a little more DEDO attention; businesses that have passed the market test and are looking to expand.  At a time such as this, taxpayer dollars should be used in the most efficient and prudent manner.  All efforts should be taken to help ensure that investments be made with an expectation of a decent rate of return.

 

Let’s start helping those businesses that have survived and even grown in this weak economy.  They want to hire more people.  They want to build new buildings.  They want to invest in their communities.  They are the future of Delaware’s economy.

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