Part 3 Of Green Finance--Bumming Money From Your Uncle (Sam)

In Part 3 of GBLB's green finance series (find Part 1 on Top 10 Rules of Green Finance here and Part 2 on Alternative Green Financing Mechanisms here), I will address government incentives and other programs.  I will also highlight some factors that may make green incentives go from rare bird to endangered species. 

As always,  I am not a finance professional, and the goal of these posts is simply to give a high-level overview of government incentives.  As with all financial decisions, please consult your financial professional and attorney for advice specific to your project. 

The Good News About Government Incentives

  1. Programs are available at almost all levels of government--The Federal government offers grants, tax breaks, loan guarantees and technical assistance for green building and renewable energy components of commercial, residential and industrial projects.  The Office of Energy Efficiency and Renewable Energy has a pretty user friendly site. States also run incentive programs, and many states have renewable energy credit trading programs (also known as RECs or green tags or SRECs, etc.) which enable producers of renewable energy to get an extra stream of income from their property. For special groups, like Native American Tribes and Veterans, additional resources are available.
  2. Some programs come from unusual sources--Not all green building and renewable energy incentives come from government.  Utilities sponsor a lot of programs for both commerical and residential projects (for example, see the programs available from PECO here).  Some non profits and even faith-based organizations are providing green incentives.  A loyal Twitter follower highlighted this program by the Jewish Free Loan Association (available to those of any faith) that provides interest free loans of up to $5000 for energy efficient upgrades for homes and small businesses in the Los Angeles area.
  3. Don't neglect technical assistance programs-- One of the most underutilized incentive is technical assistance. Of course, homeowners and businesses can access technical assistance programs, but also municipalities, small businesses  and Native American Tribes can get thousands of dollars in technical assistance for free or reduced cost.  For example, in New York Con Edison provides small businesses with a free energy audit. This can ensure you maximize the benefit of your green project both environmentally and financially. 

And The Bad News

  1. The new House is seeking to cut almost all Federal green incentives--According to Green Building Chronicle,The Republican Study Group, made up of more than 100 GOP House members, is targeting the wholesale elimination of funding for:

• Department of Energy Grants to States for Weatherization, $530 million annually;

• EPA’s Energy Star Program, $52 million annually; and

• federal office space acquisitions (which have helped the government build a market for LEED-certified buildings), $864 million annually.

Just to be clear, in a bill seeking $2.5 TRILLION in cuts, these total savings would account for .14% of the savings.

  1. States and municipalities are strapped for cash--Like the Federal government, states and municipalities are strapped for cash, and may cut their green incentives to provide things like trash pick up and police.  
  2. Some programs are not worth the effort to apply--All programs require paperwork, verification and in some cases, prevailing wage rates.  Sometimes the benefit is not worth the hassle.  
  3. Some programs reward green bling rather than cost effective green improvements--Some programs reward the installation of renewable energy components or other "green bling" as opposed to better  insulation or new windows.  It is key to do a cost benefit analysis of any proposed green project to ensure that it has the greatest return on investment.

For more information, the DSIRE database of Federal and state renewable energy and energy efficiency programs is always useful, and be sure to check your state and local environmental departments and local utilities.

The Role of Special Districts In Creating Green Regions

Of the 87,900 government units in the United States as of June 30, 2002, 35,356 are special purpose local government entities. 

According to the Census, special purpose entities are defined as 

[I]ndependent, special purpose government units (other than
school districts). They exist as separate entities, have substantial fiscal independence, and have administrative independence from general purpose governments or function for multiple governments.

The number of special purpose entities is the fastest growing government class, with the number of special district governments rising nearly three-fold, from 12,340 in 1952 to 35,356 in 2002. 

Many of these special purpose entities touch green building considerations in some way

Almost one-fifth of all special district governments perform a natural resources function, including such activities as drainage and flood control, irrigation, and soil and water conservation. The next most frequent function performed by such units is fire protection, followed by water supply, and housing and community development.

Despite the growth in power and importance of these special purpose entities, very little attention has been paid to how to "green" the functions under their authority. Moreover, there is clearly a great need to integrate the efforts of entities in charge of water, housing, development (not to mention transit agencies) with the overall efforts of traditional government units to incentivize green buildig practices.  Finally, as the census definition recognizes, these entities are often independent from traditional government entities with their own fiscal allocations.  Often their jurisdictions overlap (and are sometimes at odds with) traditional government entities.

If we can effectively harness the power of these special purpose entities to assist in the greening of our communities, it will be a great point of leverage.  Particularly where these entities form an intergovernmental function, there is an opportunity to create green regions, not just green communities.