LIHU‘E — Arguing that financial limitations stand in the way of a green energy future, state leaders are proposing a bond program that would loan home- and business-owners up to $50 million to cover up-front costs of solar hot water
LIHU‘E — Arguing that financial limitations stand in the way of a green energy future, state leaders are proposing a bond program that would loan home- and business-owners up to $50 million to cover up-front costs of solar hot water heaters, small wind systems and other energy-efficiency improvements.
Last month, the Lingle-Aiona administration and House Energy and Environmental Protection Committee Chair Hermina Morita put forward nearly identical bills inspired by the Hawai‘i Clean Energy Initiative, which calls for 70 percent of the state’s energy usage to be green by 2030 but does not really address the hefty up-front costs that prevent many residents from installing clean energy technologies.
“Not that many of us have that kind of money lying around,” Lt. Gov. James “Duke” Aiona said Friday in an interview at The Garden Island office between meetings with Kaua‘i County Council Chair Bill “Kaipo” Asing and Mayor Bernard Carvalho Jr.
A typical energy audit might yield recommendations for $10,000, $15,000 or even $20,000 in improvements to a home or small business, Aiona said, and loans from a traditional lender could have high interest rates if the applicant even qualifies.
For those reasons, many home- and business-owners “won’t even think about” going green even if it would be financially advantageous in the long run, he said.
Hawai‘i Clean Energy Investment Bonds could give people a “visual, tangible” idea of how to achieve sustainable practices and would diminish “economic barriers” by stretching a low-interest loan (possibly 5 to 6 percent) over a lengthy term (up to 20 years), Aiona said.
The bond program, if passed into law, would also allow clean energy installers to draw directly from the state’s replenishable $50 million bond fund and would allow borrowers to repay the debt gradually through higher real property tax assessments paid to the counties and funneled to the state.
“Out of sight, out of mind,” Aiona said.
State Department of Business, Economic Development and Tourism Director Ted Liu, who accompanied Aiona on his visit to the island Friday, said the lower rates and longer term give consumers a better deal and would allow the low-income segment of the community that is least credit-worthy to afford high-technology retrofitting.
“This will put folks who don’t have the capacity to borrow this much money in a position to do so,” Liu said, noting that the program could serve as a social policy, although that is not its main driver. The program is about “connecting the policy to the people, connecting the policy to the houses, and connecting the policy to the small businesses,” Liu said.
Aiona said it would encompass dual ideals of energy security and social consciousness, and would create jobs and stimulate the economy to boot. Loans would be made available for solar hot water, photovoltaic, small wind, biogas, insulation, windows, skylights and reflective roofs, among other technologies. Energy-efficient appliances like washing machines, dryers and dishwashers would not qualify.
Liu said the program is “not a blank check” and would involve a third-party administrator — possibly Kaua‘i Island Utility Cooperative or another organization with the ability to market the program to consumers — that would ensure applicants are not “overleveraged” with defaults on their credit history or a failure to pay property taxes.
Administrators, which will be determined via a formal request for proposals process, will need to “strike the right balance between broad penetration and the state’s interest in getting paid back,” Liu said.
Collaboration with counties
While the bond program would be initiated and funded by the state, a “partnership” with the counties is critical because the Hawai‘i Constitution gives the counties — and only the counties — the authority to levy property taxes, a necessary component of the program, Aiona said.
He said the state and county governments will not make money on the program, but administrative costs associated with implementing it would be worked into the interest rates and the property tax assessments.
The counties could implement a similar program on their own without involvement from the state, but the state has a higher debt capacity and is willing to take on the liability, giving the counties benefits in the form of clean air and green jobs without any risk, Aiona said.
After sitting with Asing and County Clerk Peter Nakamura earlier in the day, Aiona visited with Carvalho and county Office of Economic Development Director George Costa Friday afternoon.
“This is their first review of it so it’s too early to say whether or not it will work for Kaua‘i,” Executive Assistant Beth Tokioka said via e-mail when asked about the meeting. “They both felt the concept seems great and will be looking into the details on what it would take to implement it here.
“The mayor will also be discussing it with the other mayors. We understand there must be enabling legislation at the state level so we’ll be following that closely as well,” Tokioka wrote. “Again, a lot of the details need to be fleshed out but it’s worth pursuing.”
Attempts to reach Asing were unsuccessful as of press time.
2 bills enter,
1 bill survives
While Aiona, who is running for governor this year, has touted the program in visits to the Neighbor Islands, House Bill 2531, introduced by Speaker Calvin Say at the request of the Lingle-Aiona administration, will likely not make it out of committee.
The bill was sent to the House Energy and Environmental Protection Committee, where Morita has already held a hearing on a nearly identical proposal that she personally introduced — House Bill 2643. She said Monday that the only substantive difference between the two is the name of the bond, adding that she hopes to amend and pass her version of the bill today and that she is not moving the administration’s bill at all.
“One of the barriers to renewable energy is the financial part, so we’re looking at creative ways to finance projects,” she said Friday. “The concept is good, but the mechanics are how to make it work. … The devil’s in the details.”
She said support from the counties is necessary.
“By the end of the session, I’d like to see some buy-in from the counties, otherwise why go through this exercise?” Morita said.
The amendments she hopes are approved today would replace the proposed general obligation bond with a reimbursable or revenue bond linked directly to repayment via property assessment fees, she said.
“Rather than being a general debt of the state, there’s a direct nexus to the program” if the bill is amended in that vein, she said. “I don’t believe we’re justified in using general obligation bonds given the debt situation.”
‘Negative’ debt outlook
Last week, bond rating agency Moody’s Investors Service downgraded its outlook on the state’s general obligation bond rating from “stable” to “negative” in light of, among other factors, “Hawai‘i’s vulnerability to further downward revenue revisions given the uncertainty surrounding the timing and strength of the economic recovery and its impact on the state’s vital tourism sector,” according to a report from Moody’s.
The agency affirmed the state’s rating on its $4.7 billion in outstanding bonds at “Aa2,” the third-best of 21 possible ratings and defined as “judged to be of high quality” and “subject to very low credit risk.”
Aiona said the state’s bond rating is “pretty good,” and Liu acknowledged the state’s woes when he said a bond would be issued rather than money taken directly from state coffers because “there are lots of kids on the street today” — a nod to the budget shortfalls that led to furlough Fridays for state education employees.
Both Aiona and Liu said they did not anticipate any difficulty attracting investors for a bond float.
For more information, visit www.hawaiicleanenergyinitiative.org, www.capitol.hawaii.gov and www.hawaii.gov/ltgov.
• Michael Levine, assistant news editor, can be reached at 245-3681 (ext. 252) or mlevine@kauaipubco.com.
