Some thoughts about how the climate resilience investment tax credit (CRITC) might actually work.
We have thought about the CRITC initially for New York City and New York State but the platform could easily be expanded nationally and even internationally.
Traditionally, investment tax credits are generally true investments in things like rehabilitating historic structures into commercial rental property that are held at least five years (25% ITC). The motion picture industry enjoys a 30% ITC when they use New York City for their film shoots. And, there are renewable energy tax credits to employ wind, solar and other renewal energy technologies (30% for residential structures at the Federal Level) and 25% for residential New York State renewal energy tax credits (with a maximum of $5000 ITC for Solar installations).
Our vision for the NRF is somewhat different.
We see the NRF as a funding mechanism to help funding gaps for government approved climate resilience programs. For example, recently, funding dried up for the USGS to monitor New York City’s water quality which costs about $3 million per year. If no other funding arises (or only partial funding is available), the NRF could fund this very important monitoring to ensure that NYC’s residents and visitors have acceptable quality drinking water.
In the USGS (U.S. Geological Service) instance, a Federal agency needs funding to help New York City monitor its drinking water quality. There is no overt economic payback to monitoring drinking water except that without clean drinking water, residents and visitors suffer immeasurably from a quality of life standpoint, which eventually affects a particular region economically, especially in the long run.
We see the NRF as being used for grant situations (or what we call zero return equity situations) where there is an enormous “quality of life” benefit and a preventive measure to reduce future capital requirements for events related to climate change.
We are proposing a 100% CRITC at a Federal level of taxation, which means that for every dollar invested in the NRF, the Federal Government would reduce the taxpayer’s tax liability by one dollar. We have heard that for every dollar the Federal Government spends on viable climate resilience efforts, they save four dollars in future climate change events!
At the New York State level, we are proposing a 50% CRITC, which means that for every dollar invested in the NRF, the State Government would reduce the taxpayer’s tax liability by 50 cents. At the New York City government level, we are proposing a 25% CRITC, which means that for every dollar invested in the NRF, the New York City Government would reduce the taxpayer’s tax liability by 25 cents.
All in all, for every dollar invested we are proposing that New York City residents receive a $1.75 CRITC. Some people we have spoken to think that NYC should bear a higher percentage of the CRITC as they are receiving the most benefit. There has also been some advice given that the CRITC should not exceed 100% of the amount of money invested. Legislators have to realize that the more attractive the CRITC is, from a tax perspective, the more money will flow into the NRF for climate resilience programs.
Finally, there is the “multiplier effect” which simply stated indicates that the more money that is spent on climate resilience, 1) the more green jobs will be created, 2) the more disposable income taxpayers will have to spend on goods and services unrelated to climate resilience and that results in 3) a significant benefit to our overall economy.
This is why we need the seed money to do the economic environmental impact statement to study the CRITC at various levels that will probably range from a low of 25% to a high of 175%.
Once again, the more feedback we get about how people feel about the CRITC, the easier it will be to convince Legislators to enact some sort of CRITC.