The question is what do Warren Buffet, California Insurance Commissioner Dave Jones and your insurance premium all have in common? The answer probable will not surprise you, because it all has to do with money.
When Proposition 103 was passed by the voters in California, one of the features of this ballot measure was the formation of a separate entity known as the California Organized Investment Network. This organization is operated by the California Department of Insurance and its sole purpose is to sell tax breaks to insurance companies, banks and other financial institutions.
The California Organized Investment Network (COIN) will in return for a donation of not less than $50,000 grant the writer of that check a tax break for 20% of the amount given. The money is then to be directed to communities and individuals in this state that are not served, or underserved by the major financial institutions.
The purpose for the formation of COIN I do not argue with, however, when financial organizations that are supposed to be subject to the very state government office they are buying tax breaks from, a conflict of interest situation may exist.
As an example, I reported recently on the financial investment of 12 insurance companies in the construction of a solar farm known as Topaz Farms. The report of this investment was made last week by Insurance Commissioner Dave Jones. This solar facility is located in San Luis Obispo County. The 12 insurance companies gave a total of $681 million dollars to this project. Topaz Farms was the entity the investment went to through the oversight of COIN. As a result of the investment of these 12 insurance companies and 5 others that did not wish to be named, a tax receipt void of $136,200,000 was created for the citizens of California to fill.
Besides the tax break offered by the State of California, the purchase of Topaz Farms by Warren Buffett for an estimated $1.9 billion may have served as an incentive to the insurance CEO’s to invest with the hope of a return. In addition to the investment return, I know they also wanted to take advantage of the tax break that you and I will need to compensate for.
Another interesting fact to consider as we say good bye to our insurance premium payments, and they find their way into Warren Buffett’s pocket, is that the Topaz facility will probable be eligible to receive another tax payer donated gift in the form of 30% of the necessary construction cost to build the plant and place all of those solar panels in the hills surrounding San Luis Obispo.
The construction cost gift will be the result of the U.S. Treasury Departments 1603 program. The owner of the Topaz facility will receive this 30% bonus regardless of the Topaz earnings, or their tax bill. Topaz can also count on a contract already signed with PG&E which will purchase the solar power output from Topaz for the next 25 years.
Once again I would really appreciate it if the California Attorney General would seriously look at the investment made by these insurance companies in Topaz Farms, and just why it was done at this time when our state can ill afford to be giving away tax breaks; especially when our own Governor has sponsored a Tax Initiative for the next election.