Monday, November 3, 2008

O-33-08: More Than Meets The Eye, But Maybe Not An Eyesore

When I first read O-33-08, my reaction was one of total confusion. I went so far as to ask for clarification from the sponsor of the bill, and found out that the effect of the bill will be much more than its language would suggest.

Let's compare. Here's the entirety of the bill:
A program is hereby established to encourage energy efficiency
improvements and or renewable energy production within the city.

City property owners who privately finance energy efficiency improvements
and or renewable energy production equipment, have the option to voluntarily
attach up to 100% of the privately finance amount to the subject's property tax

The Director of Finance is authorized, at the request of a City property
owner, to add up to 100% of the privately financed amount, amortized over a
specific number of years to the property's tax bill.

All policies governing management of the program shall be determined by the
Director of the Department of Neighborhoods and Environmental Programs in
collaboration with the Director of Finance. All fees collected under this
program shall be remitted to the financier along with remittance details.

At first glance, this seemed to say that people can voluntarily pay more taxes, a proposition that did not make sense to me, because I am rational. So, I asked Alderman Arnett (who is sponsoring the bill along with Shropshire and the Mayor) to explain this mystery.

Much to my disappointment, the program in fact does not call for people to voluntarily pay more taxes. Rather, any person borrowing money to invest in some green-related home improvements (bill is very vague on what qualifies) can employ the city as a middle man. Instead of taking and paying back a bank loan, the borrower can pay back the city with to-be-determined loan terms. The city will collect the money along with the property tax bill, and the city will pay the bank.

The bank involved in this arrangement is First Commerce. For them, it's a good deal as long as they are willing to make the loan in the first place--if so, they earn the interest and the city collects the money for them.

So, is it a good idea in general? Well, I would say it isn't horrible. I don't particularly like the idea of the city getting involved in such matters. If banks are willing to loan money to the private sector, let them deal with the logistics. On the other hand, the program just might work. The city has expertise in collecting taxes, and their ability to collect the money would probably not be any worse than a bank's. And as long as the city's loan terms (in the form of amortized property taxes) are more favorable than the bank's loan terms, the program benefits the citizen as well. Moreover, this bill came up for public hearing without opposition from other banks, which means that they are either unconcerned about a loss in business or unconvinced that the loans will be profitable--neither of which puts the city at risk.

I wouldn't mind if this program got a chance.

No comments: