Tyler Mulligan is a School of Government faculty member.
Have leaders in your community been using words like “green economy” and “green jobs?” What role can a local government play in enhancing the local green economy and creating some green jobs? This post explores one possible role: local governments could enact a comprehensive local program around energy efficiency and renewable energy. I’ll propose the outlines of such a program at the end of this post.
What got me thinking was an informative blog post written by my faculty colleague Kara Millonzi. Kara writes about new ways for a North Carolina local government to directly finance energy efficiency initiatives and renewable energy projects—even when those projects are affixed to private property. These energy projects could range from installing solar electric panels, to upgrading lighting, to adding or improving insulation, to installing more efficient heating and cooling systems, to installing reflective roofs.
The new financing mechanisms don’t necessarily involve exhausting a local government’s general fund. One mechanism is a revolving loan fund, which requires an initial infusion of funds but should be self-sustaining over time. The other relies on the newly-enacted special assessment authority, which permits local governments to pay for energy projects by imposing assessments on improved property. When local governments use these mechanisms for the benefit of private property (as opposed to public property), Kara reminds us that we need to ensure that the expenditures serve a public purpose to avoid a constitutional problem.
The public purpose concern probably doesn’t apply, however, when this activity is undertaken as a community development program (“principally for the benefit of low- and moderate-income persons”). Community development expenditures are authorized by G.S. 160A-456, and they include expenditures on private property such as rehabilitation, direct repair, and restoration or preservation of older neighborhoods. Similar expenditures have been upheld by the North Carolina Supreme Court as having a valid public purpose. See, e.g., Martin v. North Carolina Housing Corp., 277 N.C. 29 (1970) (finding a public purpose in NC Housing Finance Agency’s financing of new construction or rehabilitation of residential housing for sale or rental to low-income households). Accordingly, programs for energy efficiency improvements and installation of renewable energy sources should not pose a constitutional problem when applied to housing for low- and moderate-income persons.
If a local government were to employ its new authority for financing energy projects, it would nicely complement other similar programs. The federal Weatherization Assistance Program provides up to $6500 for insulation and energy-related repairs to renters and homeowners earning less than 200% of the federal poverty level. North Carolina’s program received a big boost (to the tune of $132 million) from the American Recovery and Reinvestment Act of 2009 (ARRA). Households of any income level with federal tax liability can take advantage of federal energy efficiency tax credits, as Kara mentions in her post. The North Carolina Renewable Energy Tax Credit may also apply.
Given all of these different funding sources, can a local government synthesize these into a single, comprehensive initiative? I think it can be done. Imagine a program, for example, in which households apply to the local government for energy efficiency assistance. Depending on income, applicants might qualify for one of the following:
1. Households earning up to 200% poverty level: North Carolina’s Weatherization Assistance Program.
2. Households of low- or moderate-income: Energy project loans from a local government revolving loan fund, or perhaps grants for households with lower incomes. A sliding scale system could be employed to offer a higher proportion of grants to low-income individuals or for those in certain distressed areas. The program could supplement the Weatherization Assistance Program for qualifying households.
3. Moderate-income or higher: Energy project loans from a local government revolving loan fund for projects qualifying for federal energy efficiency tax credits. Keep in mind, however, that when expenditures are made for households with higher incomes, the program can no longer be considered a community development program for the benefit of low- and moderate-income households. That means Kara’s concern about the public purpose of the expenditures resurfaces, so review her recommendations about describing the public benefits of energy efficiency and renewable energy.
4. New residential developments: Special assessment to finance the installation of renewable energy sources. See Kara’s post for the details. New construction won’t have a community development purpose (unless it primarily benefits low- or moderate-income households), so here again, consider Kara’s recommendation about describing the public benefits.
This imagined program is obviously missing a lot of details, and it doesn’t consider other potential funding sources such as Energy Efficiency and Conservation Block Grants. It is meant only to draw the outlines of a possible program.
So would such a program create green jobs? It’s difficult to say, but someone has to make the energy-efficient improvements and install the renewable energy equipment. Check with your local community college on its green job training program to determine whether local workers are ready to handle these projects.
Would it create other jobs? The theory is that energy-efficient housing would result in household savings that translates into greater disposable income for residents. The hope is that some of the disposable income would be spent locally. Factor in the economic multipliers, and the result could be a healthier local economy.
Are any North Carolina local governments attempting something along these lines?