SAN FRANCISCO — Oregon Gov. John Kitzhaber is banging the drum for a program to boost energy efficiency in schools, possibly paid for with bonds backed by the cost savings.
The initial push for energy efficiency in schools could cost between $50 million to $100 million in the first two years and could lead to larger efforts for public, commercial and industrial buildings, an official familiar with the governor’s initial proposal said.
One way to finance the school upgrades could be so-called energy savings bonds. The bonds would establish a revenue stream based on energy savings, and that revenue stream would be used for debt service.
The proposal would have energy companies establish the amount of savings that could then be monetized.
The governor will likely roll out the energy bond legislation in about a week, an official said, though it is still early in the process.
“We are in the soup right now and there should be a proposal that more closely reflects the governor’s version here pretty soon,” said Ian Greenfield, a spokesman for the governor.
“There is some money for [school energy efficiency], but there is a lot of potential for add-ons as this becomes more tangible,” he said.
Some bond proposals are already on the table, as Kitzhaber hopes to get the program going by this summer.
The legislature’s House Education Committee heard testimony Monday on a slew of bills tied to the program, including HB 2888, which would allow bonds issued through the Oregon Department of Energy to pay for loans and matching grants for school upgrades.
The proposal so far does not include a price tag.
“We have not done the analysis, and as of yet we have not determined what are the costs and consequences around this proposal,” Bob Repine, director of the Department of Energy, told the Education Committee.
The department has already identified $100 million of retrofits that could be done to schools.
“There are different stages,” Greenfield said. “There is the stuff you can do, like changing the light bulbs, we will do early on, then there are the longer-term things, like biomass boilers.”
The state has already given the green light to $2 million for an energy audit of 500 schools. It expects around $9 million for the school program, mainly from the federal qualified energy conservation bond program, in order to get the project started this summer. QECB bonds are qualified tax-credit debt authorized in 2008 that can be used by states or localities to fund energy projects.
Retrofitting and improving school energy efficiency was a major staple of Kitzhaber’s election platform. He was elected in November.
Oregon spends $10 billion every year on energy, with 85% of that amount leaving the state.
It costs anywhere from 25 cents to $2.20 per square foot to provide energy for the state’s 90 million square feet of public school buildings, according to the governor’s office.
“We know that we can reduce our use of scarce energy,” Rep. Jefferson Smith, D-Portland, the sponsor of HB 2888, told the Education Committee. “We know we spend a lot of money on energy.”
Oregon is not the first state to try to use such an innovative bonding strategy to help pay for energy efficiency.
Last year, voters shot down a referendum in neighboring Washington that would have authorized $500 million of bonds, paid for by a tax on bottled water, to fund energy-efficiency projects in schools.
In 2008, the California Department of Transportation got authority to issue $20 million of clean renewable energy bonds to pay for a project that would be cost-effective.
The bonds were slated to finance photovoltaic solar panels in 70 of the department’s buildings, saving taxpayers an estimated $1.5 million annually in energy costs.
Kitzhaber’s plan for energy bonds comes after a proposal in his biennial budget that would reduce general obligation issuance supported by the general fund to $200 million from the $1 billion issued during fiscal 2010 and 2011. Fiscal 2011 ends June 30.
The authority for the proposed energy bonds — which are called Article XI-P bonds — could not be found in the governor’s budget.
Kitzhaber’s budget proposes a $1.2 billion, or 8%, spending increase to $14.5 billion, up from the current two-year budget of $13.5 billion.
Kitzhaber proposed a combined bond-authority ceiling for GO and revenue bonds of $4.69 billion in the biennial budget — $1.46 billion of GOs and $3.23 billion of revenue bonds.
Most of the increased issuance would come from double-barreled GOs — bonds that are structured to be repaid from another revenue source, but also carry the state’s full faith-and-credit pledge — rather than GOs only backed by the general fund.
Oregon had $4.5 billion of outstanding general obligation debt as of June 30, 2010. Its outstanding bonded indebtedness, including both GO and direct revenue bonds but excluding certificates of participation, was $9.3 billion, according to the governor’s budget.
