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Schwarzenegger's Solyndra Subsidy

State gave the company $34.5 million in tax breaks without checking its finances

The U.S Department of Energy wasn't the only government agency to invest heavily in Solyndra, the solar panel manufacturer that filed for bankruptcy earlier this month.

Last November, an obscure state board agreed to give the Fremont-based company a $34.5 million tax break, the largest one handed out under an alternative-energy subsidy law signed by Gov. Arnold Schwarzenegger.

Schwarzenegger attended Solyndra's groundbreaking in September 2009 and declared it a cause for "great celebration."

Schwarzenegger used the event to push for the tax breaks to help clean technology companies buy equipment for "design, manufacture, production, or assembly" operations in California. He said the subsidies would create new jobs for laid-off auto workers at the shuttered NUMMI plant a few miles away.

"This is why we give these tax incentives," Schwarzenegger said, because "Solyndra will be eligible for these tax incentives for this facility right here."

The Legislature approved the tax breaks five months later, in March 2010. Documents provided by the office of state Treasurer Bill Lockyer show Solyndra was the first company to receive a subsidy under the program.

Lockyer chairs the California Alternative Energy and Advanced Transportation Funding Authority, which gave Solyndra its $34.5 million tax break. To date, the board has doled out approximately $100 million, with one-third of the tax breaks going to Solyndra.

In Solyndra's application for the subsidy, its executive vice president, Benjamin Bierman, argued that an exemption from the state sales tax would "create a significant cost-savings that will improve Solyndra's ability to complete with heavily subsidized Chinese manufacturers."

Solyndra shut its doors last month, despite receiving $527 million in federal loan guarantees. When the company declared bankruptcy on Sept. 6, Solyndra again cited Chinese government subsidies, saying it simply could not withstand competition from China.

But the company's financial health was not a concern for state officials, said Lockyer's spokesman, Joe DeAnda. In an interview, DeAnda said the legislation signed by Schwarzenegger doesn't require that state treasurer look into whether a particular company is going to be viable before the state grants a tax break.

"We don’t perform any assessment of the financial viability of a company," DeAnda said. "The program is to encourage this type of technology in California."

"Every company has the potential to fail, especially in these emerging technologies. It's an inherent risk that comes with the territory," DeAnda said.

Spokespeople for the former governor said Schwarzenegger still believes granting tax breaks to solar companies is a good idea. 

"For every Solyndra, there are dozens and dozens of other companies that Schwarzenegger toured that are still profitable," said Adam Mendelson, an advisor to the former governor.

But at least one lawmaker is raising questions about Solyndra's tax breaks. State Sen. Alex Padilla, who wrote the law creating the tax breaks, said he plans to hold hearings into the program's implementation "in the next week or two."

But Padilla, who chairs the state Senate's Energy, Utilities, and Communications Committee, said he remains committed to the subsidy program. 

"Does it raise questions? Absolutely, but it does not lessen my commitment to move in a direction of clean technology and the environmental and energy goals of the legislation," he said.

Solyndra Loan Guarantee Announcement

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