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August 6, 2018

CT Green Bank takes novel approach to preserve clean-energy mission

Photo | Contributed CT Green Bank CEO Bryan Garcia (far left) and DEEP Commissioner Rob Klee (far right) with Kerry O'Neill and Ben Healey. O'Neill and Healey are now heading a new nonprofit, Inclusive Prosperity Capital, which is a Green Bank spinoff entity.
By Matt Pilon

In an unusual move for a state entity, the quasi-public Connecticut Green Bank has spun out a nonprofit to help it carry on several key energy-efficiency programs amid a major funding crunch.

On Aug. 3, a newly registered 501(c)(3) called Inclusive Prosperity Capital (IPC) began operating Green Bank programs that finance solar panel arrays and other energy offerings for low- and middle-income homeowners, multifamily properties, small businesses, schools and nonprofits.

Meanwhile, the Green Bank has retained commercial and industrial clean-energy financing programs such as C-PACE and Small Business Energy Advantage. It will also continue operating the state's solar energy incentive program, which provides up front money to solar buyers that is paid back over time through the generation of clean energy credits.

As part of the transition, which aims to preserve Connecticut's efforts to push the private sector to invest in solar and other forms of clean energy, seven Green Bank employees have become employees of the nonprofit, a move that was vetted and approved by the Office of State Ethics in April.

The nonprofit's formation has been in the works since last year, spurred by the legislature's October decision — a “Halloween nightmare,” as Green Bank CEO Bryan Garcia has called it — to sweep into the general fund approximately $165 million earmarked for clean-energy programs. (Those funds are mainly raised from charges on utility ratepayer bills.)

For the Green Bank, the sweep cut nearly half of its annual operating budget — more than $32 million over two years — forcing it to prioritize programs to ensure its long-term viability.

Garcia said the funding raid, which is being challenged in federal court by energy-efficiency contractors and others, has already hurt the Green Bank's ability to lure outside investment for its programs.

Despite what Garcia describes as a strong balance sheet, a local bank recently turned down the Green Bank for a revolving line of credit, citing concerns about the funding raid.

“So, the nonprofit becomes a way for us to maintain our commitment to the underserved while at the same time attracting private investment in a space we've lost some ground on because of what happened with the sweep,” Garcia said.

He noted that the legislature restored some certainty earlier this year when it passed a law that beefed up contract protections for outside investors in Green Bank projects.

Protecting funds

Garcia said he hopes the nonprofit will help shield clean-energy efforts from potential future raids, and make them less reliant on public funds by raising outside contributions from foundations and other sources.

The Kresge Foundation, for example, has pledged a $10 million guarantee against losses to IPC, to help provide assurances to potential outside donors and investors, Garcia said. The Department of Energy and Environmental Protection (DEEP) is kicking in $6.5 million for programs the nonprofit will oversee, and the Green Bank will cover nonprofit employees' full salaries and benefits for the first few years, and provide other support.

Forming the nonprofit is also a long-term cost-saving move for the Green Bank, shaving benefit contributions and other operating expenses by as much as $1 million by year four, projections show.

Seven staff members officially left Green Bank employment on Aug. 3 to run IPC, though they aren't physically going anywhere. The group will continue to work from the Green Bank's Rocky Hill headquarters.

Kerry O'Neill, who until days ago ran residential energy financing programs at the Green Bank, is now CEO of IPC, while energy finance director Ben Healey will be its president.

“We have made progress but there's so much more work to do,” O'Neill said. “It's really exciting to think we could take this to scale in Connecticut, bring in more investors and really continue this work.”

Some concerns

At a July 27 meeting, the Green Bank's board of directors approved an array of operating agreements paving the way for IPC's launch.

Green Bank board member John Harrity described the nonprofit model as “incredibly innovative and nimble,” and coming at a time when the Trump administration has acted “indifferent or hostile to climate change,” a global problem the Green Bank hopes to address.

“We just have to keep our eyes on that mission, and this [nonprofit] helps us move forward,” Harrity said.

In approving the operating agreements, there was one dissenting vote, from Bettina Bronisz, State Treasurer Denise Nappier's designee on the Green Bank's board.

Bronisz read aloud a statement from Nappier, who called the Green Bank's goals worthy of support, but said her general counsel and outside bond counsel both agreed that the Green Bank had exceeded its legal authority by forming the nonprofit.

“We also have concerns that the funds now earmarked by the state for the Green Bank will be used to partially support the new entity during a transition period without state oversight,” Nappier's statement said.

DEEP Commissioner and Green Bank board member Rob Klee disagreed.

“We have consulted our counsel, which has a different interpretation, and the Bank does have the authority to form a nonprofit,” Klee said.

Kelly Donnelly, a spokeswoman for Gov. Dannel P. Malloy — who decried the legislative funding raid and blamed Republicans for jeopardizing the Bank's standing and growth — said in a statement that the governor is “supportive of any initiative that provides the Connecticut Green Bank with greater fiscal stability and assurances for its continued operation benefiting Connecticut residents.”

Startup Money

Newly formed nonprofit Inclusive Prosperity Capital, which officially launched Aug. 3, will have the following financial resources at its disposal:

• The Green Bank will for three years pay full salary and benefits to its seven former employees who now work for IPC. The Bank will pay 50 percent of those costs the following three years, and will also put up a modest line of credit, office space and marketing support.

• The Department of Energy and Environmental Protection is providing $5 million for low- and moderate-income clean-energy programs and $1.5 million for health and safety work, such as asbestos removal, sometimes needed before energy upgrades. The money comes from utilities settlements and carbon auction administrator fees.

• The Kresge Foundation has pledged a $10 million guarantee to help IPC leverage outside investments.

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