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By now, many of you, especially those of you who live or work in New Castle County, are aware that Bloom Energy has been, over the last year or so, collecting fees from Delmarva Power ratepayers but not disclosing the cost to consumers; nowhere on people’s utility bills will you see any surcharge for Bloom Energy, though you have already been paying it. The cost? Over $1 BILLION in subisidies from both Delaware taxpayers and Delmarva Power ratepayers, combined. From the original article:

”      Delmarva and Bloom admitted electric ratepayers would be stuck paying above market prices for power. They said it would be worth it because of claimed economic development benefit of jobs at a new fuel cell factory, offsetting higher future electric prices for conventional power, the avoided cost of buying renewable energy credits, and environmental benefits. Two years down the road our predictions are coming true:

·         The cost will be at least three times expected and could go to a half billion dollars over the twenty year life of the project
·         Overall economic development potential will be one third expected and the Delaware solar industry has been decimated by the offsets in Solar Renewable Energy Credits
·         Environmental benefits would have been eight to ten times higher if a conventional natural gas power plant had been built and electric rates would have gone down instead of up”
Some are trying to argue that CRI and those who oppose the Bloom Energy deal are not giving the company time to develop its business model and hire the workers they promised to do. The problem is not just that they are behind; that would in of itself be the least of the problems. CRI has doubts there is any work going on at all in the plant, and an attempt by the News Journal’s Aaron Nathan to visit the site to inspect the plant was denied. Why would Bloom Energy not want Aaron to visit? It’s not like the facility was off-limits to outsiders. Secretary of DNREC Colin O’Mara was allowed to walk into the plant and announce that Bloom Energy was still on schedule to complete its stated objectives of operating their Delaware plant on schedule. Keep in mind the News Journal editorial board still supports the Bloom Energy deal, so it isn’t like Bloom is showing their facility to a hostile entity.
We hope our elected officials learn a lesson and realize that gambling with taxpayer money, even in the name of “investment in the future” “jobs” and “green energy” is not a smart idea. Had Bloom been required to have competed with other companies for the technology (Fuel Cell Inc. is suing Governor Markell and five members of the Public Service Commission for not giving other companies a chance to bid on the contract) and focused more money and time on building the facility and not lobbying, they may have been able to succeed. Instead, as CRI believes, Bloom will begin construction of their fuel cells in Delaware and then realizing the cost it would need to keep the operation going, will cease operations in Delaware and move them elsewhere.  As Dave wrote in “The Bloom Prophecy”:
“The first 6 megawatts of a 50 megawatt power supply contract with Delmarva Power can come from Bloom’s California manufacturing facility.  We expect Bloom will deliver the first 6 megawatts and then will pull out of the contract and abandon plans to manufacture in Delaware so the funds can be invested in India or elsewhere in Asia.  It makes no economic sense to build a manufacturing plant for one large order for fuel cells to be utilized by Delmarva Power.

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Key Findings:

U.S. small and mid-sized business owners plan to delay hiring new employees or seek new loans amid cautious optimism about the economy, according to the latest findings of the PNC Economic Outlook survey.

Highlights:

Waiting to Hire, Seek Loans
The survey, which gauges the mood and sentiment of small and medium sized business owners, found that only 46 percent expect their sales to increase in the next six months, significantly lower than last spring (58 percent). Profits are also expected to be lower, as only 38 percent expect an increase compared to 43 percent in the spring. Only 23 percent expect to add new employees, lower than in spring (28 percent) but still higher than a year ago (20%).

Housing Rebound to Continue
Building on the dramatic turnaround first seen in PNC’s fall survey, 48 percent expect home prices in their local markets will rise over the coming year compared to 26 percent one year ago. This expected house price rebound is reinforced by sizable house price gains in 2012.

Consumer Spending Supports Price Hikes
One-third plan to raise their selling prices and only five percent intend to cut their prices, signaling potential pricing pressures.

PNC’s chief economist Stuart Hoffman discusses the spring findings of PNC’s biannual survey of U.S. small and mid-sized business owners.

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2013 is already upon us, and three days in things are headed downhill. Congress just passed a bill to respond to the so-called “fiscal cliff” by increasing EVERYONE’S taxes at least a little bit, and a lot if you have a high income (note: if your money comes from investments and assets, such as Warren Buffett, your taxes will be unchanged). More battles will come up on the debt ceiling, automatic defense cuts, and future budget deals (if any come), and no doubt the partisanship will continue.

Delaware has its own problems to deal with: unfunded pension liabilities, out of control Medicaid spending, bad deals with Fisker and Bloom Energy, education performances moving sideways and not up, and taxes such as the gross receipts taxes which harm business growth. These are just a sample of the issues facing the state. While CRI would like to resolve every major issue within the state, that is not very likely.

Therefore CRI will spend 2013 focusing on three elements: improving education standards, discouraging corporate subsidies, and preventing the state from passing any legislation which pushes single-payer healthcare by abolishing private healthcare insurance.

Education reform will be CRI’s top priority in 2013. There is general consensus that the education system as currently structured is not serving the students well, particularly those in areas like Wilmington and Dover, where parents usually do not have the  financial means to send their children off to private schools, and who cannot be guaranteed a slot in the charter schools due to bureaucratic processes. CRI is calling for legislative actions to allow the money to “follow the student”, where parents have options such as Education Savings Accounts (ESA) that give parents the financial opportunity to choose where they want to educate their child. We hope to inform and engage the public and the legislators into some serious action this year that will give students a big victory for their future.

Our second goal is to reduce, if not eliminate, subsidies for preferred businesses and special interest friends of the government. Bloom Energy and Fisker Automotive are two prime examples of the government handing over “subsidies” for “investment” in these companies, meaning hundreds of millions in tax dollars to give to these companies, money we will in reality never receive payback for. There is no industry in Delaware receiving taxpayer money that can be said to be worth the corporate welfare. Our aim is to educate the public and legislators, and push Delaware to either reduce/eliminate current government subsidies to preferred parties, or else to agree to prohibit future government subsidies via “corporate welfare”.

Our third goal will be to discourage the Legislature from passing any bill which bans private health insurance in favor of “single payer” government. While CRI acknowledges the issues in containing healthcare costs, such as Tort reform, allowing insurance to be purchased across state lines, and using means-tested methods to determine who qualifies for Medicare or Medicaid as opposed to just handing it out to anyone who asks, there is no way the government can raise all the taxes needed to pay for this without destroying job opportunities or sending them out of state. Plus, the government will not be able to manage the insurance aspects of healthcare policy without setting up a massive, inefficient bureaucracy, just like they do with everything else.

What do you think? Are there any goals CRI should work for that are no mentioned above?

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DOVER, DE – Cause of Action, a Washington D.C.-based legal advocacy group, has filed suit today in US Federal Court, District of Delaware, against Governor Jack Markell and five members of the Delaware Public Service Commission.

The Caesar Rodney Institute (CRI), a Delaware-based non-partisan think tank, has challenged the merits of utilizing high-cost Solid Oxide Fuel Cells to produce electrical power for sale to ratepayers of Delmarva Power, Delaware’s largest energy utility provider.  CRI was the sole entity opposing the contract between Delmarva Power and Bloom Energy at the Delaware Public Service rate hearings in October of 2011, on the basis the economic impact on Delaware’s economy would be negative because of the contract.  CRI has been concerned about the constitutionality of the contract from the very beginning.

Since CRI and John Nichols, a citizen activist, were not able to convince the Public Service Commission to change its views on either the economic or environmental impact of the permit application, Mr. Nichols decided to take his case to the Coastal Zone Industrial Control Board.  He challenged the permit application on whether Bloom Energy had the right to build its Solid Oxide Fuel Cell technology in lands that were considered protected for wildlife. CRI funded expert testimony as part of Mr. Nichols’ motion to appear the permit decision.

The Board voted to deny Mr. Nichols standing at the hearing, which allowed Bloom Energy to proceed with installation of its Solid Oxide Fuel Cell units in the Coastal Zone.  Mr. Nichols opted to file a lawsuit against Governor Markell and five members of the Public Service Commission, using information CRI provided during testimony.  He was joined by Fuel Cell Energy, Inc., a company which makes fuel cells, and which feels it was denied the opportunity to do business in Delaware because of the government’s decision to not open the bidding process to outside companies.

Caesar Rodney Institute 

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Green Jobs v. Red Tape

By Shaun Fink

As this year unfolds, we will hear a lot of talk about creating new “green” jobs to contribute to our state economy. In advance of the cacophony, let’s examine exactly what we are talking about when we use the term “green” before the word “jobs”. As neat and packaged as the phrase seems to be, there is quite a bit of ambiguity surrounding the definition of green jobs. Generally, jobs related to renewable energy sources, energy efficiency, battery-powered or other alternatively fueled vehicles, and public transportation comprise most of what are currently considered green jobs. Beyond that general scope, however, it starts to get blurry.

For example, should jobs in the nuclear industry count as “green”? After all, nuclear plants generate electricity with virtually no air pollution or greenhouse gas. And yet, these positions are rarely considered worthy of such a lofty title. To make matters worse, many so-called green jobs are only considered so occasionally. What about workers who produce steel or cement? Think about this for a moment. Delaware Congressional candidate John Carney was promoting his involvement in the green energy field through a company called DelaWind. What has this business proposed to do? The main product of Carney’s company is supposedly going to be the steel structures that the wind turbines would sit on 12 miles out to sea in our very own offshore wind farm. Steel fabrication now counts as “green”? Well, it does when it is beneficial to do so. Funny how this same industry is considered harmful to the environment when in the process of building a coal-fired power plant.

To further confuse the point, the definition of green can change over time. Remember when ethanol was in high demand? Remember when Governor Minner insisted this was the way of the future? It followed suit that every job associated with this industry was considered green, including the corn production. Now, our environmental friends are having second thoughts about the merits of ethanol as an alternative fuel source, and those jobs are not quite so green anymore.

The truth of the matter is the definition of green jobs is much more a function of political correctness and fads then it is a process of a substantial matrix of well established criteria. In the end, it is a political shell game designed to hide the exorbitant costs involved in re-inventing our economy and way of life to fit some pre-conceived and misguided notion of purity and conformity. And now that federal money is involved, states without a firm sense of economic direction and lacking in fiscal responsibility and accountability are clamoring to eat at the table of Government Subsidy. How do you effectively vie for the money? Simple, label every job possible as “green”. In doing so you increase your take from the federal dole and get to serendipitously claim that you are closing the massive state budget deficit, while all along the only real accomplishment is an ever-increasing dependence on a centralized government for your well-being and sustenance. In case anyone has missed the subtle nuance, Delaware is one of those states. Why are we banking our economic future on government subsidized industries? And why is it being sold to us as job creation?

If this administration was truly concerned with creating jobs, it would step aside and acknowledge that the government is not the solution and cannot be the source of our prosperity. Allow those who own businesses to expand by offering substantial tax incentives for capital expenditures and new job hires. Incentivize entrepreneurs to create new businesses by proposing a system of pro-rated taxation for the early years of a start-up company where the first two years are practically tax free and gradually rise to the standard over a five year period. Help to assuage some of the risk involved in business growth by increasing the positive effect that an economic loss has on a tax return. Exempt certain small businesses from the ballooning costs of workmen’s compensation and do not require short-term disability insurance. These initiatives, or any combination of them, will help stimulate job creation by establishing a more conducive entrepreneurial environment. This will encourage a expansion of the tax base through more and bigger businesses. More business means more tax revenue; and amazingly enough the converse is true, as well. If we want to increase revenue, then let’s encourage growth. Allow the market place to determine where jobs should be created and we will all once again thrive in our communities and the state as a whole. And this time, once jobs are being created and the economy is roaring again, we might want to think about curbing our spending appetites.

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Shaun Fink is Executive Vice President of the Caesar Rodney Institute.

The Caesar Rodney Institute is a 501(c)(3) non-partisan research and educational organization and is committed to being a catalyst for improved performance, accountability, and efficiency in Delaware government.

© Copyright Feb. 16, 2010 by the Caesar Rodney Institute

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Guest Post from Dr. John E. Stapleford, member of the Caesar Rodney Institute’s Board of Directors.

As the state of Delaware enters into budget negotiations for the coming fiscal year, the health of Delaware’spersonal income looms large. The personal income tax provides 35% of the state’s general fund revenues. How has personal income in Delaware been faring and what can we expect over the next few years?

Over the past decade Delaware personal income has been growing at about the same rate as the nation. Since Delaware population growth has exceeded the nation’s, per capita income in Delaware has dropped from 4% above the nation to less than 1% above today. This per capita income convergence is driven by demographics and the changing structure of the state’s economy.

The fastest growing segments of Delaware’s population…African Americans, Latinos and the elderly…all tend to have lower per capita income than average. According to the Delaware Population Consortium these groups will continue to be the fastest growing segments for the long term.

At the same time, wage and salary income growth has fallen behind the nation due to a series of structural hits on the state’s economy. Financial services stopped growing and job cuts in the industry tended to focus on the higher wage positions. Automobile manufacturing disappeared. The chemical industry continued to shrink. Most job growth occurred in the lower wage industries such as retail trade and tourism or in healthcare where wages are average.

Significant shifts have also been taking place in the composition of Delaware’s personal income. Wage and salary income has become moderately less important as a component of personal income and income from dividends, interest and rents has dropped from 21% to 17% of total income. This drop in the contribution of non-earned income is driven by both the demographic changes and by the current recession.

The growth area in Delaware personal income over the past decade has been transfer payments. As a proportion of personal income transfer payments have jumped from about 12% to almost 17%. This shift is found across the nation, but is occurring more rapidly in Delaware. The two major components of transfer payments, medical benefits and social security, have been rising considerably faster than the nation.

About 46 cents out of every dollar of transfer payments to Delaware is for medical benefits, split between Medicare and Medicaid. Between 1998 and 2008 medical benefit transfer payments have risen almost one and a half times faster in Delaware than throughout the U.S. The growth has been especially disproportionate in Medicaid. This means that Delaware strongest performing industry, healthcare, is very dependent upon any regulatory changes coming out of Congress.

Social security payments account for almost 37 cents of every dollar of Delaware transfer payments. Not surprisingly given the rapid migration of seniors into southern Delaware, this component of transfer income has been increasing 25% faster than the nation. Despite the recession, unemployment compensation is only a minor part of total transfer payments.

Because of demographic and economic trends, the moderate performance of Delaware personal income will continue over the near term. As reflected in the December, 2009 estimates from DEFAC, wage and salary income will bounce back slowly over the next few fiscal years. The growing contribution of transfer payments limits state personal income tax revenue and shifts some portion of control for the state’s economic future to Washington, D.C. With the first wave of the baby boomers reaching 65 years old this year, even without sustained in-migration the elderly population in Delaware will soar. Finally, in keeping with the small business focus of the DEDO, nonfarm proprietors’ income will continue to grow in importance.

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A bipartisan group of state representatives has sponsored House Resolution #32 supporting the Army Corps of Engineers Channel Deepening Project. It’s primary sponsor is Rep. J. Johnson. Representatives Brady, Keeley, D. Short and D.P. Williams are additional sponsors. It is co-sponsored by Representatives BriggsKing, Carey, Hocker, Lee and Longhurst.

WHEREAS, the Port of Wilmington is a valuable economic engine for the State of Delaware’s interstate and international commerce, annually serving more than 400 vessels with an import/export tonnage exceeding 4 million tons; and

WHEREAS, the Delaware River Main Channel Deepening Project (the “Project”) is a proposed United States Army Corps of Engineers project to increase the depth of (by dredging) the Delaware River’s main shipping channel from 40 to 45 feet; and

WHEREAS, in the shipping industry, the trend is to build larger ships to accommodate more cargo, and larger ships require more “draft” or deeper water to safely navigate; and

WHEREAS, deepening the Delaware River’s main channel would allow larger vessels to safely navigate and dock at ports along the River, including the Port of Wilmington; and

WHEREAS, the Port of Wilmington is geographically “blessed” by virtue of its location between larger markets and proximity to rail and highway transportation facilities; and

WHEREAS, a deeper channel would encourage existing shippers to continue using the Port of Wilmington and also permit the Port of Wilmington to compete for expanded commercial shipments, resulting in additional jobs in and around the Port; and

WHEREAS, it has been estimated that the Project could inject over $500 million annually into the local and regional economy; and

WHEREAS, it has been estimated that the Project would create and support a total of 6,000 direct and indirect jobs in the State, with 44% of those employed residing in New Castle County and 36% residing in the City of Wilmington; and

WHEREAS, it has been estimated that the Project would lead to more than $212 million in total revenues for Delaware businesses and more than $22 million in annual State and local taxes; and

WHEREAS, the United States Army Corps of Engineers has designed the Project to be environmentally sensitive by using advanced technology to monitor and protect Delaware’s wildlife and restricting dredging activities at times when particular wildlife species mate and spawn; and

WHEREAS, the State of Delaware would also reap the benefits of beach replenishment and creation of new wetlands from the Project; and

WHEREAS, the House of Representatives recognizes economic benefits of the Project and considers the proposed dredging of the Delaware River’s main shipping channel to be essential to maintaining and expanding the Port of Wilmington’s commercial business.

NOW, THEREFORE:

BE IT RESOLVED that the House of Representatives of the 145th General Assembly of the State of Delaware hereby expresses its support for the Delaware River Main Channel Deepening Project and encourages the Governor, Lieutenant Governor and Department of Natural Resources and Environmental Control to support this important economic development project.

BE IT FURTHER RESOLVED that upon passage a suitably prepared and duly authenticated copy of this resolution be forwarded to the Governor, Lieutenant Governor and Secretary of the Department of Natural Resources and Environmental Control.

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