PHOENIX - Oregon Treasurer Ted Wheeler called for an immediate halt to a general obligation bond-financed loan program that is running in the red.
Wheeler sounded the call Thursday in a letter to Gov. Kate Brown after a review of the State Small-Scale Energy Loan Program found a $20 million deficit, that the lacks the necessary cashflow to cover its obligations, and that it will require a taxpayer bailout. The program is funded by state GO debt, and the government will have to cover the gap by diverting money "away from vital public services," Wheeler said.
The program, started in 1981 to promote energy conservation and renewable energy resource development, can loan to individuals, businesses, schools, cities, counties, special districts, state and federal agencies, public corporations, cooperatives, tribes, and non-profits. Projects must be primarily in Oregon.
"The State Energy Loan Program is in trouble," Wheeler wrote. "Public debt is a powerful tool to benefit our state, but it must be utilized wisely and with restraint."
The State Treasury sells state debt on behalf of agencies once it has been authorized, but it is up to the issuing agencies, in this case the Department of Energy, to manage their cashflows and ensure the loans are repaid.
In 2012, due to defaults of large loans made through the SELP, the Wheeler recommended to then-Gov. John Kitzhaber that the state augment the fund's loan-loss reserves to ensure obligations of the fund could still be met. The reserves were not replenished, Wheeler said, and additional large loans have since fallen into default.
"Starting in 2019, cash infusions will be required -- continuing through 2034 -- in order for the SELP program to meet its scheduled debt service obligations," Wheeler's office said in a release. "The current estimate is that the payments would total at least $15.3 million, but the timing and size of necessary augmentation could change if additional outstanding loans become delinquent or uncollectable."
Wheeler told Brown that the program should be frozen pending a full review of its viability. "Governor Brown has concluded that lingering residual issues have interfered with the Department of Energy's ability to focus on Oregon's future energy-related needs," Brown's office said in a statement. "The agency review currently being conducted by the Governor's Office is assessing the Small-Scale Energy Loan Program and, along with the Legislature's recently-formed joint committee, will ensure that these issues are addressed responsibly and carefully. As Governor Brown has said before, while we want to move expeditiously, we must ensure that we do it right."