Subsidies

• Author: Michael Curley
• Pages: 31-35

31

Chapter 4—Subsidies

Grants and subsidies are the same thing: they are gifts. A grant is

generally a one-time event. Subsidies are generally ongoing, or at

least pay for ongoing events. Subsidies have a long history in envi-

ronmental nance.

When people think of subsidies, they usually think of helping the poor

pay for things they can’t aord. Right? Well, in t he environmental infra-

structure business, being poor has nothing to do with subsidies . . . most of

the time.

ere are four basic types of subsidies and two major distinctions. e types

of subsidies are: (1) general; (2) supply-based; (3) targeted; or (4) demand-

based. e distinctions are: (1) community; and (2) individual. Here are

some examples.

First is the case of Loudoun County, Virginia—right outside of Washing-

ton, D.C. Currently, it is the richest county in the country. It has the highest

MHI. eir median was $125,900 in 2017. at was the median. at means

that 50% of the households earned more than $125,900.

In 2013, t he Virginia CWSRF made a $7.3 million loan to Loudoun

County at a subsidized rate of 1%. Why would anyone subsidize t he richest

county in America? If Virginia had made a 3% loan instead of a 1% loan, it

would have saved $86,143 a year. It could have instead used this money to

pay o bonds of $1.584 million for clean water projects for poor people in

other places in Virginia, like A ppalachia. Instead, Virginia gave a subsidized

1% loan to a county where over 180,000 people enjoy annua l ea rnings of

more than $125,000 a year.

e Loudoun County loan is an example of a general, supply-based sub-

sidy to a community.

In one of my earlier books, I described a second type of subsidy. Bor-

rowing cha racters from singer/songwriter John Cougar Mellencamp, I told

a fanciful story about “Jack a nd Diane, doin’ the best they ca n.” ey lived

in a western state where there was a $300 statewide tax credit for installing a

new clean-burning wood stove. is tax credit was as big a waste of money as

the Loudoun County loan. Jack and Diane lived in a double-wide trailer in a

valley in the mountains that was a “non-attainment area” for air quality pur-