Hearing on residential energy efficiency draws crowd to state House chamber

Continuing to hear from advocates and critics of state tax policy, the Task Force of the Study of State Tax Credits and Economic Incentives continued its work on (Wednesday, July 10). The panel met in the state House of Representatives’ chamber at the Capitol in Oklahoma City. The chamber was nearly full as the morning session commenced.

Among other things, attendees learned that a Norman workers compensation lawyer and his wife are, thanks to transferability provisions, the largest recipients of the tax credit aimed at promoting construction of energy efficient homes.

The day began with an examination of existing tax credits for construction of energy efficient residential properties. Mike Means of the Oklahoma Homebuilders Association said the existing state credits might justifiably be phased out in future years, as code mandates grow more stringent and sensitive to energy consumption but that now it provides important incentives to builders, and savings for purchasers of new homes.

Means pointed to Department of Energy estimates that increases in energy efficiency in the home industry could in the relatively near-term reduce the need for construction of as many as 600 new power generation facilities, nationwide. Such estimates, he said, should be considered alongside the nation’s projected need for as many as 1,500 new plants over the next 20 years.

The homebuilders’ advocate pointed to the advantages more efficient homes bring to homeowners, including lower operating costs, increased comfort, improved indoor air quality, more durable homes and more disposable income.

Means asserted the program is accountable and transparent. Exemptions are only allowed upon certification by a HERS (Home Energy Rating System) specialist, are limited to homes of 2,000 square feet or less, and come in increments of $2,000 or $4,000, depending on the comparative degree of increased energy efficiency against existing codes.

The energy efficiency credits, which go to homebuilders are transferable and can be purchased, an issue that Chairman David Dank of Oklahoma City and others have pointed to as appearing to undermine a public policy purpose.

State Rep. Mike Reynolds, an Oklahoma City Republican, noted during questions of morning speakers that some of the highest beneficiaries of the credit are now home builders. Reynolds later provided information about top recipients, which include Richard & Sandra Bell ($200,000), Baseys Construction Inc. ($200,000), Keith Thompson ($189,573) and Zachariah and Sonia Eckert ($173,255). Bell is a well-known attorney.

As did other defenders of tax credit programs throughout the day, Means contended the energy efficiency program meets the three criteria for validity identified in a 2010 opinion by former Attorney General Drew Edmondson. In distilled form, that opinion says exemptions must 1. Serve a public purpose, 2. Be supported by adequate consideration, and 3. Have adequate controls and safeguards.

Kelly Parker of Guaranteed Watts Savers Systems spoke on the HERS verification process. Advocates noted the energy efficiency program includes verification by the Tax Commission that the public purpose is met in the construction process.

An interesting development came as Means and Parker engaged in discussion with Reynolds, Dank and other critics of some credit programs. The pair projected 2017 as a year when the development of broader codes might make the Oklahoma tax credit unnecessary.

Secretary of State Glenn Coffee, a member of the task force, later described that as an example of the kind of specificity that could help lawmakers set a firm sunset for such credits.

Appropriations and Budget Chairman Earl Sears, a Bartlesville Republican, drew from the speakers clarification that Oklahoma was the first state to create such a credit, in 2005. Five more states have since added such credits and all, Parker said, are more generous than Oklahoma’s strictures.

Means, in discussion with members of the task force, stressed that consumers (home purchasers) are not fixed in their desires, and that evidence indicates that even increases of $1,000 can drive a buyer away. He said that every incremental increase drives away thousands of potential home buyers.

Dank and others observed that a central question was whether or not taxpayers should, through the credits, pay for the gains in efficiency the more stringent codes bring, or whether those costs should be borne by home buyers.

As the morning session began, Chairman Dank hearkened back to the sometimes contentious hearings on the insurance industry. He said research flowing from the July 15 session he moderated has found that 21 states have state-operated guaranty funds, while 28 do not.

At that earlier day of hearings, the panel spent its morning session examining tax credits for historic building preservation.
 
In addition to Dank, task force members present at today’s hearings included House Budget and Appropriations Committee Chairman Earl Sears of Bartlesville, Auditor & Inspector Gary Jones, Secretary of State Glenn Coffee, and Finance Director Preston Doerflinger.

Dank has consistently stressed to compare Oklahoma accurately to other states, making the point that tax credits and business incentives of all sorts are not “carved in stone” once enacted, and that they vary significantly across the 50 states.

In today’s hearing, Dank made a point, by analogy, to the existence of other generous tax credit programs, including those that reward Oklahomans who choose engineering as a profession. He asked, rhetorically, “What do I saw when Aubrey McClendon, Larry Nichols or Harold Hamm come and say, ‘Hey, what about my petroleum engineers? What about my geologists?’” Dank asked, “Is there a point at which this stops?”

Other members of the task force include state Sen. Mike Mazzei, a Tulsa Republican, Sen. David Meyers, a Ponca City Republican, Democratic House Minority Leader Scott Inman of Del City, Democratic Senate Leader Andrew Rice of Oklahoma City, and Treasurer Ken Miller, a Republican.

Other legislators who are not members of the panel but who attended today’s sessions included Republican state Reps. Mike Reynolds of Oklahoma City, Mike Sanders of Kingfisher, Todd Russ of Cordell and Gus Blackwell of Lavern and Democratic Rep. Emily Virgin of Norman. State Sen. Sean Burrage of Claremore was also present.

Existing authority for the tax credits for residential energy efficiency are found in Title 68, section 2357.46 in state law.

Dank noted the morning hearing was “streamed” on the House website, and would eventually be archived and available for public viewing.