Tuesday, June 02, 2009

New Taxpayer Watchdog Marks New Golden Hydrant

"(Tax)Man Bites, according to (Watch)Dog".

The Hennepin County Public Works building in Medina has a new $900,000 set of solar panels. Instead of being truly green, they're just another line item in the red for taxpayers. They're advertised to save only $15,000 per year in energy costs. So, by a simple value estimate, they should pay for themselves in 60 years, by about 2070. This is a Math Problem.

Jeff Johnson, the new conservative member of the Hennepin County Board of Commissioners (map) has identified this "Solar Silliness" as another "Golden Hydrant" for his "Hennepin County Taxpayer Watchdog" website. He quotes a civil servant as indicating that the project isn't "all about the bottom line". Sounds like someone spending OPM!!*

Commissioner Johnson's simplified value estimate for the solar panels ignores a few factors making them even costlier. The most significant factors are (1) likely increases in energy saving, (2) money opportunity costs (mostly inflation and interest for spending OPM* prematurely), (3) depreciation, and (4) insurance.† The money costs (2) and (3) will amply cancel the energy savings (1), as time has always shown and will undoubtedly show again, i.e. energy commodity prices match inflation over the long term.

That leaves depreciation (3) as probably the most significant factor to refine the estimate of the total value of the solar panels. Having no warranty for the panels in hand, we must rely on conservative industry estimates for "solar panel lifetime" of 30 years. It's easy math ($900,000 costs minus $450,000 savings) to see that in 30 years the taxpayer will still be about $450,000 in the red for this set of worn-out solar panels.

Finally, what fool would give Hennepin County a good deal on (4) insurance for a depreciating asset that will be worthless half-way to break-even? Only the taxpayer ... or a civil servant spending OPM.*

*OPM: "Other People's Money"
† Thanks to our own SD44 Co-Chair Glyde Burdick, Jr.

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