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Senate committee votes to end tax incentive programs

Rural lawmakers protest the loss of one for rural small businesses
Tulsa World, 5/4/2010

Oklahoma CITY - Desperate for revenues in the face of an $800 million budget gap, the Legislature moved closer Monday to suspending or eliminating some controversial tax incentive programs.

The Senate General Conference Committee on Appropriations voted to eliminate the Rural Small Business and Small Business tax credit programs.

Officials said eliminating the programs would save $31 million, but figures supplied by the Oklahoma Tax Commission and the Office of State Finance show that the two combined actually accounted for $70.5 million in tax credits taken in calendar year 2007, the most recent year for which complete records are available.

Rural legislators objected to the loss of the Rural Small Business program, which accounted for $56.1 million in tax credits in 2007.

"The rural part of the state is the most depressed area economically and has the more trouble recruiting and attracting jobs," said Sen. Kenneth Corn, a candidate for lieutenant governor.

Corn, D-Poteau, and Sen. J. Paul Gumm, D-Durant, said eliminating the program would cost the state a new factory in Atoka that would hire 15 people at $40,000 a year.

"That's a good job in rural Oklahoma," Corn said.

However, many of the projects funded through the rural tax credit program are only marginally rural. The Patriot Golf Course near Owasso, for instance, qualified for the program because it is in Rogers County, as did Advance Research Chemicals of Catoosa.

The rural tax credit program was also used to help finance Quartz Mountain Aerospace, an Altus aviation manufacturer that barely got off the ground.

The tax credit programs have come under increasing criticism for their lack of transparency and accountability. The Tax Commission's chief administrator, Tony Mastin, told a House committee that enterprises that receive the tax credits are not required to create jobs or even stay in business.

"After the actual requirements are met, the Tax Commission does not check into the viability of the business or its benefit, if any, to the state," he said.

Under current law, the two programs require an enterprise to show only that it is Capitalized at a certain level and that at least half of the Capital is invested in order to qualify for the credits.

The credits accrue to investors in the enterprise, not the enterprise itself.

Because investments are typically made through limited liability companies, the names of most individual investors are not public record.

The names of those that actually use the tax credits are listed on the Office of State Finance's website, however.

Rep. Mike Reynolds, R-Oklahoma City, questioned Mastin about an arrangement involving 140 Tulsa Public Schools buses.

The school district agreed in March 2009 to sell the buses to Joe Cooper Ford, which was to convert them to run on compressed natural gas at a cost of $50,880 per vehicle.

The buses were then to be sold to NGV Fleet Leasing of Guthrie, which in turn was to lease them back to the district, which would have an option to buy the buses after five years.

The deal would qualify NGV for federal and state tax credits that, at the time, were said to be about $18,000 per vehicle.

Reynolds, however, said he thinks the amount might be substantially more.

"Why would Tulsa Public Schools do that with buses it already owned?" he asked.

District administrators say the cost of converting the vehicles will be recouped easily over their expected service lives.

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