Apparently jealous of the Federal government's ability to distort credit markets, the Colorado legislature has decided to get in on the act. SB-051, which Gov. Ritter signed into law, would extend loans to banks, who would then turn around and loan the money to homeowners and businesses to install solar equipment. The idea is to smooth out the cash flows, eliminating the up-front cost of the system, up to $12,500.
For the homeowner, and especially for the business-owner, for whom the interest and depreciation are deductible, this is a good deal.
For the government and the taxpayer, not so much. There's no fiscal note attached, which means that, in theory, there's no cost to the government. This can't possibly be true, otherwise there would be an obvious arbitrage opportunity for the state. The state can obviously issue debt for lower interest than the banks will lend it out at. The state could do that, split the difference on the interest with the banks.
Why not do this? Because of default risk. You know, people not being able to pay the debt. Which under the terms of the bill will almost always result in subordinated liens against the property, with the taxpayer coming out on the short end of the foreclosure proceedings.
Now, where have we heard this story before?
For the homeowner, and especially for the business-owner, for whom the interest and depreciation are deductible, this is a good deal.
For the government and the taxpayer, not so much. There's no fiscal note attached, which means that, in theory, there's no cost to the government. This can't possibly be true, otherwise there would be an obvious arbitrage opportunity for the state. The state can obviously issue debt for lower interest than the banks will lend it out at. The state could do that, split the difference on the interest with the banks.
Why not do this? Because of default risk. You know, people not being able to pay the debt. Which under the terms of the bill will almost always result in subordinated liens against the property, with the taxpayer coming out on the short end of the foreclosure proceedings.
Now, where have we heard this story before?
