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|September 18-24, 2008
Ballot Issue 1A would generate low-interest loans to help Boulder County homeowners lower their carbon footprint — and their energy bills
by Pamela White
Since Hurricane Ike hit the coast of Texas this past Saturday, gas prices have shot up 18 cents per gallon in many markets. With the Energy Information Administration projecting record-high costs for natural gas, propane and heating oil this winter, families that normally struggle to pay heating bills are swamping the phone lines of government agencies and nonprofits, seeking assistance long before the first snowflake has fallen. Meanwhile, polar bears nudge closer to extinction, Wall Street is in crisis, and a host of health issues related to global warming — from respiratory allergies to the number of Alaskans stung by bees — continue to worsen.
Conditions such as these have not prompted Congress to ratify the Kyoto Protocol, an international agreement set in place on Dec. 11, 1997, in which the United States symbolically agreed to cut greenhouse gas emissions to 7 percent under 1990 levels by 2012. But local governments are searching for ways not only to adhere to the guidelines of Kyoto, but also to move beyond them toward “net-zero” emission of greenhouse gases. And Boulder County is in the forefront of this effort.
On Nov. 4, Boulder County voters will be asked to decide whether Boulder County may issue bonds for $40 million and loan the money to homeowners for improving the energy efficiency of their homes. The loans would be paid back through property taxes just like bonds issued for a special-improvement district. The program is voluntary, so county residents who don’t wish to participate in the program won’t face any tax increase.
The goal of the program is to protect county residents from skyrocketing energy costs and to bring the county closer to compliance with Kyoto by making it possible for people who can’t afford the big up-front expense to buy energy-efficiency and renewable-energy technology for their homes.
“We think this would make it possible for a lot of people to consider making these improvements who can’t afford to do so today,” says County Commissioner Will Toor, one of the driving forces behind Ballot Question 1A.
Keeping up with Kyoto
Toor says he can’t take credit for the concept behind 1A. He first read about it in an online newsletter when the mayor of Berkeley, Calif., introduced the idea.
“I think I got 18 e-mails within an hour with [local] people saying, ‘This is a great idea. Why aren’t we doing this?’” he says. “I read through it, and it was a great idea. We starting looking at it right away.”
The first thing they discovered is that state law would have to change to make such a program possible. They contacted Rep. Alice Madden, D-Boulder, who introduced House Bill 1350, which, among other things, expanded the types of capital improvement projects that counties and municipal districts are permitted to finance through property tax assessments to include energy-efficiency and renewable-energy improvements.
Gov. Bill Ritter, a Democrat, signed the bill into law in June.
Although the idea originated in Berkeley, Boulder may well be the first city to implement the program on a large scale. California law also had to be changed, with Gov. Arnold Schwartzenegger signing a bill allowing this kind of financing one month after Ritter.
From Toor’s point of view, the provisions of 1A make a lot of sense, given the county’s commitment to abide by the Kyoto Protocol.
A 2004 study of the county showed that one of the best ways for the county to make headway in decreasing greenhouse gas emissions would be to improve the energy efficiency of existing buildings. Though bringing buildings in the county up to Kyoto standards would cost an estimated $800 million, the study concluded that doing so would produce savings of $2.5 billion in energy costs over the lifetime of the project.
An inventory of greenhouse-gas emissions, published as part of the Boulder County Consortium of Cities Sustainable Energy Plan (SEP), found that roughly one-third of the county’s emissions come from residential properties.
“We know there are tens of thousands of properties around the county that could benefit from adding solar,” Toor says. “There are lots of older homes that don’t even have basic insulation.”
By insulating older homes and adding renewable-energy technology to those that already have sufficient insulation, the county can achieve a significant drop in emissions with real benefits to individual homeowners.
“It offers a real value to property owners by making their homes more comfortable and reducing their energy bills,” he says. “But the problem is it’s a big barrier to have to come up with that money, so the concept of 1A is to take that barrier away.”
Ballot Issue 1A would enable the county to use its ability to borrow money so that money could be made available at lower interest rates for homeowners who want to go green but simply don’t have cash upfront. The loans would be repaid through property-tax assessments tied to that specific property. Because property taxes are one of the most stable sources of income — the county’s collection rate on property taxes is about 99.6 percent — the county will most likely get interest rates lower than homeowners could find on the market.
“It’s as close as [a lender] can get to a no-risk loan,” Toor says.
Most people pay their property taxes monthly through their mortgages, which would go up. However, at least some of that cost — and possibly all of it — would be offset by lower energy bills.
“In some cases, you’d be saving money from day one,” Toor says.
Those homeowners whose mortgages are paid wouldn’t have to borrow against their home, but would see only the increase in property taxes, with their debt being repaid at a lower interest rate than they could get on a home-equity loan. In addition, the program wouldn’t require participants to pass a credit check in order to receive a loan.
If the homeowner decided to sell the property, the debt would remain with the property tax, not with the homeowner.
“You don’t have to worry about paying it off if you choose to sell the home, because the loan is attached to the property and not the homeowner,” Toor says. “The buyer would assume the higher property tax and the benefits of the more energy-efficient home.”
There are still decisions to make with regard to what kind of improvements the program will cover, how exactly it will be administered and how administrative costs will be paid.
“In the spirit of having the people who participate being the ones who are paying for it, we intend to roll [administrative costs] into the loans, but there’s nothing that legally requires that to be the case,” he says. “It’s possible that we would end up covering the administrative costs for people below some income threshold.”
Small changes, big benefits
If Ballot Issue 1A should pass, cities located in Boulder County would have to decide whether they want to opt in to the special improvement district in order for their residents to benefit. At this point, only three cities haven’t yet joined in: Lyons, Erie and Ward.
“Lyons probably will,” Tour says. “They haven’t gotten around to considering it yet. Erie is a bit leery because it’s divided between Weld and Boulder counties, and some folks are reluctant to opt into something that won’t benefit all of their residents. With Ward we just haven’t been able to get a hold of anyone yet.”
In the end, Toor expects that about 99 percent of the homes in Boulder County will be eligible to participate.
But $40 million is a drop in the bucket compared to the cost of refitting 99 percent of the homes in Boulder County. If 2,000 households borrow $20,000 each, that’s $40 million right there.
“It’s just a way of getting started on the bonding program,” Toor says. “What we have out there authorizes $40 million of bonding, and it essentially allows the program to start so that we can see how successful it is. If it is successful, we can go back to the voters and ask for greater bonding authority. We thought it was important to have a proof of concept at this relatively modest scale before going out with anything really large.”
Toor says there will almost certainly be a limit on how much an individual homeowner can borrow, but he’s not certain yet what that will be.
This is where wise policy-making comes into play.
Boulder architect Jim Logan has been hard at work on the Boulder Energy Project, studying the city of Boulder’s energy usage in an effort to determine what needs to happen to bring Boulder’s carbon footprint down to “net zero.” He says that substantial energy savings can be achieved through relatively small investments.
“We think from our research that we could reduce the carbon emissions of residential housing in the city to about half of what it is for about $2,000 a dwelling unit,” he says.
For $100, residents can replace all of their incandescent bulbs with compact fluorescent bulbs, an investment that will quickly pay for itself and which has substantial environmental benefits. The energy required to power a 100-watt incandescent bulb for 10 hours causes two pounds of CO2 to be released into the atmosphere. But consumers can get the same amount of light from a compact fluorescent bulb for one-third the amount of CO2 — and at a considerable cost savings over time because the bulbs last much longer.
For a greater investment, households can replace old appliances that aren’t energy efficient, most notably refrigerators that are more than 10 years old.
Older homes need insulation, caulking and sealing, which are relatively inexpensive but which have a big impact on energy consumption.
“If we had a SWAT-team approach where you came to the building and you have $2,000 credit and you could have them come in and seal it up, change the light bulbs, insulate the attic and do whatever they could do, we think you could cut the energy usage in half, especially for older houses,” Logan says. “These modest energy-conservation measures are the low-hanging fruit. If you’re going to go further, we think you need $20,000 to $30,000 per unit to make it really efficient, and at that point it becomes more cost effective to buy renewables.”
At about $2,000 per home, that $40 million could benefit 20,000 households.
Logan believes that any effort to reduce greenhouse gas emissions in Boulder needs to take into account one very important fact: a large number of dwellings in the city are rentals. Any program that fails to take rental properties into account isn’t going to result in the level of change that is needed to comply with Kyoto.
“What I’m trying to do is to get everyone to shift their thinking a little bit out of that ‘everybody lives in a single-family house that’s owned,’ because it’s really not true,” he says. “We have to find ways to deal with condos and apartments… And I think those become really important policy decisions.”
Logan’s firm, Jim Logan Architects, has endorsed Ballot Issue 1A
“Most of these changes will pay for themselves in a year or two,” he says. “You’ll save money really quickly. These things will save you money. They don’t cost you money; they save you money. There’s just an up-front investment, and so 1A provides the means for people to fund the upfront investment. “
Toor agrees that to make the program work well, each property would need to be assessed in terms of its specific energy-efficiency needs. For that reason, the county might require potential participants to have a residential energy audit so that they’ll get objective information about which improvements would benefit them — and the environment — the most.
“People tend to want to eat their solar dessert before they have their energy-efficiency vegetables,” Toor says. “When you look at it for most houses, the first chunk of money you spend should be on upgrading the efficiency because it’s more cost effective and it reduces the size of the solar system you need so that it reduces your total cost. It really makes sense for people to do smart combinations of efficiency and solar. I think what we will try to do is make sure people have that information available, and we will encourage them to make smart decisions.”
Though 1A has garnered widespread support, Ralph Shnelvar, a libertarian, says that 1A is a terrible idea for starters because it encourages people without adequate income or credit to borrow money. He believes that increased property taxes will force more families into foreclosure.
He also thinks that lenders will be less willing to give loans for homes in Boulder County because they know that in cases of foreclosure the county will get its money first and those higher property taxes could mean that there’s less money left over for them.
Because a new owner would have to assume those higher taxes when the house is sold, participants might find it harder to sell their houses and when those houses do sell, they might sell for less than the owner had hoped.
Shnelvar also believes the environmental benefits are unclear and doesn’t think the county should spend money meeting the requirements of the Kyoto Protocol.
“For me, the question becomes from a pure societal point of view — society being defined as the entire Earth — is it cheaper to comply with Kyoto, or is it cheaper to adapt to the effects that global warming maybe has?”
He prefers to take the latter approach.
Shnelvar says he also worries about the county’s credit rating. He doesn’t want to see it suffer — or see taxpayers faced with higher interest rates in the future — in order to get insulation into homes.
“This is an example of what seems on the surface a really good idea, but just shows the level of economic incompetence of the current county commissioners,” he says
But Toor says that the bonds are intended to be true revenue bonds, backed up by the revenue stream of property taxes and not the county’s good credit.
“It will not have an impact of the general credit rating of the county,” he says.
And although loaning money to people who would have trouble getting a loan from the private sector might seem like taking a risk both on the part of the homeowner and the county, Toor says the intent is to save people money.
“As with anything where someone chooses to participate in something where there’s a financial outlay, people are going to need to think about it before they do it,” he says. “It’s not for everybody. And so we certainly will want to make sure when we roll this out that we’re providing complete and accurate information about payment, the type of improvements that are best, and what the monthly savings will be.”
Proponents of 1A say that pumping money into energy-efficiency and renewable-energy technology is one of the smartest things the county can do.
“Ultimately 1A equals jobs for Boulder County, and I’m not talking municipal jobs,” says Neal Lurie, director of marketing and communications for the Boulder-based American Solar Energy Society (ASES). “I’m taking private-sector jobs. More specifically 1A equals green-collar jobs.”
Much of the $40 million that would be spent would go to local businesses that insulate, seal homes and install solar panels, injecting that money directly into the county’s economy. At the same time, every dime saved on energy would also stay in the community rather than being sent to a big utility company. The investment of $40 million could quickly pay for itself, with all of the savings staying right here in Boulder County, helping the local economy.
“When we create policies to encourage and increase the use of renewable energy and energy efficiency, we ultimately stimulate the economy in some of the hottest growth sectors that exist today,” Lurie says. “Solar energy is growing by 40 percent plus per year on a national basis, and Colorado has really positioned itself as a green-collar job leader.”
A national green-collar job assessment performed by ASES this year shows that there are currently 8.5 million green-collar jobs in the United States, and those jobs related to renewable energy and energy efficiency. According to the study, the potential is to generate as many as 40 million green-collar jobs across the nation by the year 2030.
“That’s only going to happen with appropriate policies and leadership,” Lurie says. “The first key step to make that happen is to be able to have policies similar to what we have with Boulder County Ballot Issue 1A.”
Lurie says that 1A could put Boulder County in an ideal position to attract renewable-energy companies.
“All of these organizations look to locate their national, regional and local headquarters in places where there’s a ready market,” Lurie says. “So this is going to position the communities in Boulder County in a very positive way to attract these jobs.”
Eriks Brollis, co-owner and director of external affairs at Boulder’s Namaste Solar, says that Ballot Issue 1A is a great way to help residents pay the high up-front cost of improvements on their homes. Because many families will see a net benefit on their own cash flow, the economy of the entire county benefits, he says.
In addition, Ballot Issue 1A would help break us away from dependence on fossil fuel and big utilities.
“What we’re used to — the existing paradigm as far as energy — is that we buy energy from a distant source, from a central power plant or wherever it might be,” he says. “That utility may or may not be located here and contributing back into the local economy. So what this does is create mini power-generation facilities all around, and it also creates the businesses to service those panels and install them. This allows this paradigm to shift in a direction that gives more customer choice. It’s kind of an organic way of deregulating. You’re giving that customer a choice as to whether they want to purchase electricity from the utility or whether they’d like to produce their own electricity and work with the utility through net metering to use the grid as a storage mechanism.”
Brollis says this is especially true with Xcel’s new Smart Grid, currently being installed in Boulder, the first city in the country to benefit from such technology on a large scale. Smart Grid will allow energy-savvy consumers to go online and see where their electricity is coming from — coal, wind or solar. It then enables consumers to decide whether they want to buy electricity now — for doing laundry, for example — or whether the dirty clothes can wait until Xcel is using more wind energy.
Smart Grid, combined with more energy-efficient and solar-powered homes, may well help the city to lower its carbon footprint significantly, he says.
Both Ballot Issue 1A and Smart Grid are generating a great deal of national interest. If Smart Grid succeeds in Boulder, other cities may turn to their utility companies and demand the same sort of technology.
And if Ballot Issue 1A passes and succeeds in both lowering the county’s carbon emissions and in stimulating green-collar jobs and the local economy, city and county governments, both in Colorado and around the nation, may move to create similar programs.
“Lots of cities are watching,” says Toor. “If it’s successful here, we may see an explosion of these on the ballot next year.”
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