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
bill.

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.

Private Market Shows It Can Promote Green Building

The city of Annapolis, and more recently the state of Maryland, have taken to the idea of legislating green building standards. Since my posts these days are harder to come by than a home victory for the Terps' men's basketball team, let me refresh my position on what the government should be doing:

1. Enforcing contracts and property rights.

2. Providing public goods, whereby 'public good' is a specifically defined economic term.

3. Promoting the free flow of information.

4. Investigating steroids in baseball.

5. Nothing else.

Most other things, if not all other things, can be provided by the private market. Not only can they be provided--they can be provided more efficiently and with better quality. Let's take the case of Green Building.

The Capital today ran an article chronicling a brief history of the growth of the green building industry in Maryland, dating back to when the mention of green building prompted responses like "I don't care what color you paint it".

"We've come a long way", remarked Joe Miedusiewski, keenly summarizing the fact that registered LEED projects have increased 3376% since 2002.

"But wait!", you are probably shouting, "how has Green building managed to grow without the help of government? Heck, they haven't even passed the LEED bills yet."

Well, my friend, the private market industry of green building has provided value to the market:

"Green buildings in general are just environmentally responsible, and also
profitable and healthier places to live and work," she said. Studies show that
inhabitants of green buildings - whether apartment complexes or offices -
experience reduced instances of asthma, take fewer sick days and are more
productive.

"A lot of people have noticed how fresh and clean the building feels,"
Belfiore said. "Kids who used to suffer from allergies don't seem to in this
building. People remark on how fresh the air is, and we've had fewer absences.
[The kids] seem healthier, and that's got to contribute to better learning."

Wow! Ok. So, green buildings save money in the long run because workers are healthier and more productive, plus energy bills are less. So the choice is to buy expensive but healthy green buildings, or cheap and dirty normal buildings. Most people will stick with the old stuff, but gradually the green building will gain ground, as long as it continues to create value. And, once enough rich people use the green construction, the green builders will figure out how to do it more efficiently and it will become more accessible to us normal folk.

Notice that I am a conservative, yet I'm not against the environment. (Notice also that the world needs rich people). Some of you don't understand that this is possible. The point is that the private market can take care of these things. Once the government mandates these standards, green builders will have no incentive to innovate because they will have a guaranteed rate of return.

Now then, let's take care of those steroids.