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[MUSIC PLAYING] Welcome Seth Magaziner
back to Brown. He was a Brown undergraduate,
a history major, concentrator in the day,
then went to the School of Management at Yale. What, they don't have core
concentrations anymore? They are core concentrations. Sorry, I always forget. It's very few speakers
who have the confidence to correct their introductions. [LAUGHTER] But that's mostly what you
need to know about Seth. He wins in a landslide. And I don't think anybody has
taken the General Treasurer's Office and done as much
with it in his first year. There's just this long list--
green infrastructure mission. You guys already
know what it is. So rather than going
through a long list and taking up time, let me
just say, the job you've done is wow. It's just exactly what we love
to teach and read about and see not just as public policy
teachers and students, but as citizens of Rhode Island. Seth, thank you for
all you're doing and welcome back to Brown. Thank you. Thank you [INAUDIBLE]. [APPLAUSE] Thank you, everyone. I have no idea how
this thing works, so I'm going to try to
figure it out as I go. But thank you to
Professor Morone, who was a rock star 10 years ago
when I was here and continues to be today. Thank you, Ellen,
for organizing it. I don't where you went. Oh, there you are. And I thank everybody
for coming out. I want to recognize, in
particular, a few people. Brown has been
tremendously helpful to me as a state treasurer not
just in the education I received here, although
that was invaluable, but also a number of
members of my team. I'm joined today by
Kelly Rogers, who's our Deputy Treasurer for
Policy, very much involved in developing the
Infrastructure Bank and a graduate of the masters
program in public policy here at Brown. We've also had a number of
stellar interns from Brown, including Brendan
Scully, who is helping us right now on a range
of issues and, I think, spends more time
working in the office probably than some of
the full-time staff and has been a tremendous
contributor to our work. So I was invited to come
and speak specifically about the Infrastructure
Bank-- what is it, what does it do,
why are we doing it, how did it come about. So I think there's
two parts to this that I'm going to try
to weave together. The first is, I am going to talk
about the policy side of it. What is the Infrastructure Bank? What are we trying
to accomplish? Where is it in the process
of getting up and running? But then I'll also,
for those of you who are interested more in
the political and process side of things, try to
weave in some stories for, politically, how were we
able to get this to happen, what got me
interested in it, how did we get it passed, and
kind of the ins and outs around that. So we have some
slides here that I'm going to follow not
religiously, but it will help keep me on track. So I ran for treasurer
because I saw it as an office where you could impact a whole
wide range of different policy areas. So finance and money kind of
touches everything, right? So if you want to work
on environmental issues, you can do that from
the Treasurer's Office. If you want to
work on education, you can do that from
the Treasurer's office. I wanted to run for treasurer
because I thought that there was tremendous opportunity to do
more than just write the checks and balance the books and really
think creatively about ways that we could use our
position as a financial office to have an impact on
a wide range of areas. So when I ran for
treasurer, I put out a very detailed, for
a campaign document, 20-or-so page-long-- we call it
the blueprint-- the blueprint for Rhode Island. It was kind of a big
list of different ways that we were going to use
the Treasurer's Office to help promote economic
growth and economic justice and a whole range
of different things that aren't typically associated
with state treasurers. And as we were writing
the blueprint back during the campaign, it came up
a conversation, hey, you know, there might be something
to this green finance area. And it wasn't
something that I had a tremendous amount
of experience in, but my brother did. My brother, who is
also Brown graduate, he was working in
the clean energy space out in New York City. And so I called him up and I
said, hey, can you take a look and maybe write a few pages of
this blueprint on green finance for me? And I come from a
family of policy nerds. My father was a policy nerd
in the Clinton White House and worked on health care
and trade and internet policy there. A lot of our dinner
table conversations tend to be very wonky. They were when I was growing
up, and they still are today. And so my father,
myself, my brother, we really love getting into the
nuts and bolts of policy. And so my brother sent me a very
long, detailed, footnoted set of ideas around green finance
to put in the blueprint. Totally unusable as
a campaign document because I couldn't understand
what half of it said. So I remember we, my brother,
we went to a McDonald's next to my campaign office
and we sat down, and he kind of explained it to
me and walked me through it. And that was the
beginning of how I became interested in
using the Treasurer's Office to promote sustainability and
renewable energy and energy efficiency through the
Treasurer's Office. So we put this
blueprint out there. That was one whole section of
it was devoted to green finance. Very few people read it. It was an effective
campaign tool, I would say, because in all of
our commercials and everything, we said, we have a
blueprint for Rhode Island and how we're going to
use the Treasurer's Office to promote economic growth. And people would come up
to me during the campaign all the time and say,
oh, yeah, that's great. You've got a blueprint. No idea what's in it,
but it sounds good. The one person who
did actually read it was President Clinton, also
a policy nerd, right, at heart. He came to campaign for me. And he actually
got out of the car, and he had the blueprint in
hand and it was like underlined and margin notes. And so that was kind
of a neat moment. But then you have that
moment where you're elected for the first time. You take office. You put a great team together. And you realize, all
right, we said we're going to do lots of things. Like, are we actually going
to be able to do them? And the other
thing that happened was not only was I fortunate
enough to be elected, but we elected a new
governor, Governor Raimondo, who, in the infrastructure
area, had put out a lot of ideas similar to what
I put out during the campaign. She did it a little differently. Hers, I would say,
on the infrastructure area were broader. She was talking about roads
and bridges and schools and all kinds of things. Mine was little
narrower and deeper, but there was a lot of overlap. So one of the first things
that I did after I took office is got together
with her and said, you know, in this
infrastructure area we seem to be wanting to
do a lot of similar things. Let's work together, and I
think that our office should take the lead-- oh,
well-- on at least one of these infrastructure areas. And I volunteered that green
finance, green infrastructure, would be an area where I
would love for our office to take a lead. She was very happy
to have us do that. And we had a mutual
understanding that, at a gut level, even if we
didn't know all the details yet of how it was going to work,
if you are spending money on projects that will make our
state more energy efficient, helping us save money
on energy costs, there ought to be
able to be a way to finance those
things by bringing private capital to the table. Because if you're creating
financial savings, there ought to be a mechanism to
get the private sector to help fund these projects so that you
don't have to pay for all of it out of the budget,
out of tax revenue. So this was during
the transition period. In coordinating
with the governor, we kind of agreed that
green finance, some sort of a green bank, would
be a major initiative of the Treasurer's
Office in our first year and that we would do our very
best to minimize the impact to the state budget
by maximizing the role of private capital. So we started our work
in January of last year. We had a very tight timetable,
because the legislative session in Rhode Island
starts in January. The budget gets introduced
in the first year of a term no later than March. And so we really only
had two or three months to figure out from scratch
how we were going to do this. I was very fortunate to have
a great team, including Kelly, who has an energy background
in addition to the very valuable Brown diploma. And we, I mean, put in a ton of
time in the first couple months that I was in office on this. We were in on weekends, a lot
of late nights just poring through the information. And we identified a
handful of key metrics that helped us
define the problem. So Rhode Island suffered,
and still continues to, from an above-average
unemployment rate. A lot of Rhode
Islanders out of work. There's a whole bunch
of reasons for that. But to break it
down very simply, we lost 40,000 jobs
during the recession. At the time, last year when
we were working on this, we'd only gained 25,000
of those 40,000 jobs back. As we stand here today, we've
gained back another 7,000. So we're still only about 3/4 of
the way out of the jobs' hole. In comparison, the country
as a whole is more than 100% of the way out of the
jobs' hole nationally. Massachusetts is more than 200%
of the way out of the hole. They've already added
twice as many jobs as they lost during
the recession. So we really lagged. And if you break it
down by industry, we particularly lagged in
the building and construction trades. We lost 11,000 jobs in
the construction trades. At this time last year, we had
gained back fewer than 5,000 of those 11,000 that we lost. And as we stand here
today, a year later, we're still only at about
5,100 jobs regained relative to what we lost. Energy costs. We are at the end of the
line in Rhode Island. We don't produce
oil or gas or coal. We don't have large
rivers for hydropower. So we are at the end of the
supply line, and as a result our energy costs are among
the highest in the country. At this time last year
when we were looking at this, for example,
the price of electricity for commercial customers
in Rhode Island, including Brown University,
was the second highest of any state in the
country after only Hawaii, right, because we're
at the end of the line. And you know, when you
have those challenges, when you have high
unemployment in the building and construction trades,
you have high energy costs, the opportunity
that presents itself is you invest in projects that
will put people back to work, making the state more
energy efficient. So we started by looking
at what was working. And one agency that was
kind of a sleepy agency, but a very important
one, that had existed in Rhode Island for
the last 20 or so years was called the Clean
Water Finance Agency. The Clean Water
Finance Agency, it's been around for about 20
years, and it floats bonds. As a state government
entity, it can float bonds at a very low rate. It's tax-exempt on the
interest to bondholders, so you can issue bonds
at a very low cost. And then the Clean
Water Finance Agency would turn around,
take those proceeds, and lend them to cities and
towns to fix their sewers, to fix their storm drains, for
clean water and drinking water projects. It was low-cost loans
to cities and towns. This agency's been
around for 20 years, AAA-rated, has never
had a single default. Every single loan
that they've made to a city or town
or other borrower has been paid back in full. So that provided us
with a foundation to add some new programs
geared toward energy efficiency and renewable energy. So the proposal was this. Start with the Clean
Water Finance Agency, add some new programs. And we spent a lot of time
looking at other states around the country that
had done green finance. One of the best at
this is actually Connecticut, the Connecticut
Green Bank right next door. We went out to Hartford. We spent some time out
there learning from them. We studied New York. We studied the UK. We studied other states that
were doing things in this area and came up with a couple
of ideas for new programs to add-- one called
the Efficient Buildings Fund and one called
the PACE program, Property Assessed Clean Energy. So the Efficient Buildings
Fund is very simple. It is very much like
the existing Clean Water and Drinking Water Funds at
the Clean Water Finance Agency. Low-cost loans to
cities and towns to help them retrofit their
buildings-- their libraries, their schools, their firehouses. And not just
buildings, but a lot of cities are now interested in
replacing their street lights with LED lights. Basically any kind of energy
efficiency or renewable energy project-- low-cost loans
to cities and towns. The second is the PACE program. And this is based
entirely off of something that has been very
successful in Connecticut. It's the same concept. You're providing low-cost
loans for energy efficiency. But instead of loaning
it to cities and towns, you're loaning it to
private property owners, commercial and residential. So let's go a little bit more
in depth into each of these. The Efficient Buildings Fund. Well, yeah. So the Efficient
Buildings Fund, as I said, loans to cities and towns. You can float a
bond, just like we do with the Drinking
Water and the Clean Water programs at Clean Water Finance
to help capitalize this. But you can't really just float
a bond from scratch, right? You usually need to be able to
put up some of your own money as basically equity and as
kind of a loss reserve in order for the bondholders to be
willing to take the risk, right? Especially because
bondholders aren't getting paid very much these
days because rates are so low, the bondholders need
some extra security. And so that was
one challenge was, all right, we need
to pull together at least a few million
dollars in order for us to be able to float our bond. As we started looking around,
we found a few potential sources of funding. And the most interesting
one was we found not one, but two pools of money back from
the old 2009 federal stimulus that had been earmarked for
energy efficiency in Rhode Island and had never been used. Not one, but two
different pools of funding from the 2009 federal stimulus. We found it because
we were looking at how New York had gotten
their Green Bank up and running, and they had used a
lot of federal stimulus money of various types. And we kind of went,
well, how did Rhode Island use its funding? And we couldn't
find anyone who had used-- one, in particular, was
called QECB funding in Rhode Island. Literally, we were calling
up different agencies around the state
like, did you use it? Did you use it? Did you use it? Nobody had. We had checked with
the federal delegation to double and triple check. There was money that
was still available. But we also realized that
if we didn't use it soon, the federal government
was going to come calling and take it back. There was also something called
the Regional Greenhouse Gas Initiative, which essentially
is a series of auctions where power producers who are emitting
more than a certain amount of carbon emissions have to
basically buy and sell credits through an auction
process that raises money for states in the
Northeast and parts of Canada. And that brings in a
few million dollars Rhode Island every year, and
those proceeds were available. Let me talk a little
bit more about PACE. What is it? How does it work? So PACE is a model that
relies almost entirely on private capital. This is a good example of
bringing private funding into an energy
efficiency program. The way it works is banks or
other lenders make the loans. They take the risk. They make the loans
to private borrowers. But what makes it different
than just an ordinary bank loan is that it is structured
as a tax lien on the property. And that's important
for a couple reasons. The first reason is
banks and other lenders like having that extra
security because people are more likely to pay
their tax bills than they are a normal energy
efficiency loan. So it gives them that little
bit of extra security, which makes them comfortable
with offering more flexible terms
on their loans-- lower rates or longer terms. Longer terms on a loan
are especially important because if you can
stretch out the term of the loan long enough,
then your annual payments all become lower. So you can see net
savings right away, right? So you've got the cost
of your debt payment. You got the savings of your
energy bill from the project. You want the savings
in a given year to be larger than
your debt payments. And by stretching out
the term of the loan, it's more likely that you'll
see those savings on a net basis upfront. So banks and other lenders
are more comfortable offering flexible terms
through a tax lien than they are through
a regular loan. The other reason that
it's important to do it through a tax lien is then
if the building is sold and a new owner comes in, the
loan stays with the building. So if you take out a PACE
loan, you fix up your building, you sell and you move to Alaska,
the loan doesn't follow you. The loan stays
with the building, and the new owner, who
inherits the lower energy costs or the higher
property values, also inherits the
responsibility of paying off the balance of the loan. So this is almost
entirely financed through private capital. It's really just the
legal tax lien mechanism that you put in place that
allows the whole thing to work. And then we did create a
small loss reserve, kind of an extra little
bit of risk sharing, with some of the
federal stimulus funds that we found to, again, help
lower the rate of the loans. So these charts
here-- and we can make these available
to anybody who wants them-- just kind of
lays out, as we envisioned, the sources of the
funding for each program. So in the Efficient
Buildings Fund, we're envisioning the first
round being about $20 million worth of projects funded at
the city and town level, most of which will come from a
bond that the Infrastructure Bank will float, the
cost offset somewhat by the federal stimulus funds
and the Regional Greenhouse Gas Initiative proceeds. PACE, again, almost
entirely funded through private capital, as
is the case in Connecticut. But we are putting a
couple million dollars of federal stimulus into
that as well to help lower the cost of the borrowing. All right. So let's back up, and I'll
kind of give a little context. So we scrambled to
figure all this out in about a two-month
time frame from January to March of last year. And we then marched
upstairs with a presentation that looked very much like this
one, Kelly and me and my chief of staff Andrew,
on a snowy Saturday to meet with the governor and
her team and show them this and ask if they would
include it in her budget. Because even though there
was no money from the state budget going into
this, we still felt that including it
in the budget rather than a standalone
legislation would increase the likelihood that
it would get passed, right? We were brand-new
to the State House. I'd never been in
government before. Taking a very complex plan
that most people wouldn't read or understand
and trying to get it passed as a
standalone would have been much more difficult than
getting the governor's support for putting it in her budget
as part of the package. So we marched upstairs. We presented it. She and her team
liked it very much. They especially liked
the fact that we found a way to do all of this
not only with minimal budget impact, but actually no
budget impact at all. So they were happy with that. And then we had kind of a
funny conversation where we said, well, you know, the
Clean Water Finance Agency, it's going to be doing more
than just clean water now. What are we going to call this? And we floated the
idea of calling it a green bank, the
Rhode Island Green Bank, just like the
Connecticut Green Bank. And the governor said,
well, maybe we'll be doing other kinds
of infrastructure besides green infrastructure
in the future through this, so let's call it an
infrastructure bank. And that's why the name is now
the Rhode Island Infrastructure Bank instead of the Clean
Water Finance Agency or the Rhode Island Green
Bank, which it almost was. So what's the
impact going to be? Hard to say with PACE, right,
because with PACE there's no defined pool of capital. We're recruiting private lenders
and private property owners to participate in this program. But we can put
together a rough idea based on what happened
in Connecticut. In Connecticut, they do PACE
for commercial properties only. They don't do it
for residential. But as I said earlier,
in Connecticut, just with commercial PACE, they
average about $20 million of loans a year. So if you figure we're about a
third the size of Connecticut population-wise, then
on top of that we're going to be doing
residential in addition to just commercial, ballpark,
once we're up and running, $4 to $8 million a year of
projects through PACE, I think, seems like a
reasonable estimate. The Efficient Buildings
Fund, we are dealing with a defined pool of capital. This first round, we
think, with the $5 million of stimulus and RGGI
proceeds, that'll allow us to do a bond of
about another $15 million. So call it $20
million altogether for this initial round. And then if you try to
quantify the impact in terms of jobs, in terms of emissions,
or savings, the rule of thumb generally is that, in the
construction industry, every million
dollars you spend is equal to about 20 job-years,
so 20 jobs per year. So in year one, we would
project, based on $20 million of projects from the Efficient
Buildings Fund, another $4 or $5, call it,
from PACE, you're talking about 300 to 400 jobs,
construction jobs, in year one. The potential energy savings
are also significant. A deep energy retrofit to a
building, particularly an older building, can save 15% to
20% of the energy costs to the building. Could be very
substantial, particularly to the cities and
towns where we have a lot of old building stock. Our school buildings are
very old, our libraries, firehouses et cetera. So significant energy savings,
plus the upfront jobs benefit, plus we're reducing
our carbon footprint and doing right by
the environment. We are the Ocean
State, and so I think it's particularly important for
us to be a leader in this area. So it all went largely to plan. The governor did include the
legislation in her budget in March of last year. Our team, and in
particular Kelly, worked very hard with
the House and Senate staff to make sure
they understood what we were trying to do. It was a very complex piece of
legislation to set all of this up. It was about 80 pages
long by the end of it. 80 pages, I guess,
for Washington, DC congressional legislation
is very short. But in Rhode Island, that's
unusually long for a piece of legislation. So very much like
the blueprint, I don't know how many people
actually read it besides us. But the House and the
Senate staff, in particular, spent a lot of time
going through it. Then you got to go
and sell it, right? Especially when it
is a complex thing that not many people
understand, you need to show support
and demonstrate support. So we spent a lot
of time last spring. And I should say
also, politically we were all in on this last year. This was our one big
piece of legislation in our first year in office. We were doing some other
things around transparency and other non-legislative
issues that would prove to be some good
accomplishments for us. But as kind of the new kids on
the block at the State House, showing that we could get a
meaningful piece of legislation passed, like this was our thing. And so if it wasn't
this, then we would have had to wait
a year to try again on something else next year. So we spent a lot of time
recruiting stakeholders to show up and
show their support. The great thing is, like who
could be against this, right? I mean, you've got jobs. You've got lower cost of energy
for businesses and homeowners. And you've got the
environmental benefits. So we divided our stakeholder
outreach into three parts. Essentially, we had the building
trade and labor organizations, who liked the jobs. We had the environmental
organizations who liked the
environmental benefits. And then you had the energy
customers, both the business commercial customers and
also the cities and towns. So this is the
actual list that we used when we had our House and
Senate hearings last spring of all the different
stakeholders who, at that time, had signed letters saying
that they were supportive. It's not every day that you
have the Chamber of Commerce, the AFL-CIO, and the
environmental community all supporting the same
piece of legislation, but those were sort of the
three legs to our stool. And Article 24 was the part
of the budget, the governor's proposed budget, that
we had been included in. We had great turnout at
both our House and Senate hearings, significant support,
no meaningful opposition. So kind of the biggest
moment of suspense was, would we be included in the
House of Representatives version of the budget? Because the way it
works in Rhode Island is the governor
proposes a budget, but it's just a proposal. Then you find out
a couple of days before the budget vote what the
final version from the House looks like. And so we were kind
of on pins and needles until the House
version came out. They did include
our 80-page article almost exactly word for word. For them, it was Article
14 instead of Article 24. And then it passed. It passed in June. It passed not quite unanimously,
but I chalk that up to it was a complex piece of
legislation that was difficult to educate people on. And it was signed
into law in June. So by the way, I
have no idea how long I'm supposed to speak for. How am I doing? You're doing great. OK. 5, 10 minutes. All right. So I'll just briefly touch on
what's happened since then. Because I talked about the
initial oh god moment, which is you get elected,
and you realize you got to figure out
how to actually do all these things that you
promised you were going to do. Then the second one is, great,
we get this thing passed. Now is it going to work, right? Because how embarrassing
would that be? So here's what's happened. So we started in the
summer putting together a working group of
different state agencies that would be involved in
getting these new programs up and running, because it wasn't
just the Clean Water Finance Agency. Now the Infrastructure Bank,
that was going to be involved. You also had our office. You had National Grid,
which is the state's only real electric utility. We've got a second small
one, but the National Grid would have to be a
partner in all this. The state has an Office
of Energy Resources, which kind of broadly oversees
all things energy related. The Commerce
Corporation, the old EDC, was going to have
to be involved. The Department of
Environmental Management was another one
that's not on here, but they were around the
table, the Department of Business Regulation. There was a lot of different
stakeholder agencies that had to be involved
in crafting this. So we started in
the summer having what were initially some
very disorganized meetings with a whole lot of
different policymakers and bureaucrats in the room
trying to figure out how we were going to do all this. And the first step was, any
time you have new programs, you got to develop
rules and regulations for how those programs
are going to operate. So developing the rules and
regulations was first step. We also realized
that we were going to have some kind of
an application process, particularly for the
Efficient Buildings Fund for cities and towns. Is anybody going to apply if
they don't know whether or not this is actually
going to help them? Like, who's going to go through
the trouble of writing up a long application and getting
all your contractors lined up and your Department
of Public Works and whoever else is going to be
involved if you don't actually know whether or not
you're going to save any money on your energy bills? So we realized early on that key
to getting a stimulating demand for these new programs was going
to be providing free energy audits. So the Infrastructure Bank had
a little bit of extra money available. National Grid has a
contractor that they use for energy audits. And so we were able to get
agreement that basically we would provide 50 free energy
audits to cities and towns, paid for, in part, by
the Infrastructure Bank. And the National Grid actually
volunteered to help share that cost, which is a
great example of kind of a good public-private
partnership. We provided the free energy
audits to cities and towns. We opened up the
application period. And for a $20 million round
of funding, we got $60 million worth of applications
from the cities and towns. So the demand has
been really strong. 27 of Rhode Islands
39 communities applied for funding. We're now in the process
of doing some final vetting on the applications. We won't be able
to meet all of them because we don't have the
funding for this first round. But we're finalizing the
list of which projects are going to move forward. And it's a really
good mix of projects that we got through the
application process. It's everything from wind
turbines in West Warwick, to rooftop solar on schools in
Pawtucket, to new streetlights in Woonsocket. It's a really good
mix of different kinds of projects, of different kinds
of borrowing communities, urban and suburban. So it's a really strong
list of applicants. And we're on track to get
this round of funding out the door in June or
July of this year so that we will have shovels
in the ground this summer. And then we'll
turn our attention to figuring out how we're
going to build on the success and put together a second round
for the Efficient Buildings Fund in 2017. For PACE, we ran into,
well, a couple things. First is, for
commercial PACE, we had the benefit, again,
of having Connecticut right next door
who has done this and has the most successful
PACE program in the country. So we can take a lot of
pages out of their playbook. And we partnered with
a third-party firm called Sustainable Real Estate
Solutions to help us get this off the ground, the
same administrator that works with Connecticut
on their PACE program. PACE, more than the
Efficient Buildings Fund, is a departure from what
the Clean Water Finance Agency had done in the past,
because this is the first time that the now Infrastructure
Bank is going to be lending to
private borrowers and not just to
cities and towns. So it's a totally different
type of marketing, a totally different
type of underwriting, a totally different type of
outreach that has to happen, which is why the
decision was made to partner with this firm that
has expertise and can help us think through all of this. As far as the marketing goes,
what they found in Connecticut and what's interesting is
that the best marketing sales force for PACE loans is
building contractors, because they already
have relationships with large building
owners around the state. They're doing other
kinds of work for them. And so they're the
best ones out there to say, hey, by the way, if
you want to do solar panels, there's this great, new,
low-cost way for you to fund it. So one of the
things that's going to be happening in
the next couple months is we're going to be doing a
bunch of information sessions with contractors to teach them
about this, because we feel that here in Rhode
Island, as in Connecticut, they will be the most
effective sales force. And we are on track
for commercial PACE to be launched also this summer. I should say just
briefly before I wrap up, residential PACE has turned out
to be trickier than commercial. And there's a reason
that Connecticut does commercial and not residential. The reason is because
of those tax liens and how do they interact
with mortgages, right? So for commercial PACE, you
can make a PACE lien senior to the mortgage, as long as
the mortgage lender signs off on it, which, believe it or not,
in Connecticut hasn't really been a problem. You can't do that with
residential PACE because of Fannie and
Freddie regulations. So a mortgage lender,
even if the lender, even if the bank that
made the mortgage loan is OK with having that loan
become junior to a PACE loan, if they want to turn around
and sell those loans to Fannie and Freddie, which is where,
what, like 80% of mortgages end up, Fannie and Freddie
right now won't allow that. So that's a snag that we've
hit in residential PACE that we knew about
going in, but we figured that we would legislate it. We would put it on the books. And then we would
join other states in advocating that the federal
government change its policies to allow residential PACE to
move forward more effectively. And if and when the
federal government does make that change, we
will be ready to take action and to get residential
PACE up and running. So I hope that this was helpful. I know a roomful of fellow
nerds when I see one. So this is a little
bit in the weeds. But I wanted to
get across why we did this, the problems
we were trying to solve, how exactly these
new programs are going to work, how we funded them, what
they're going to do. The timeline, it's exciting,
I mean, for us, as newcomers, to see this come from
brainstorming a year ago, to legislation, to
getting it passed, to the implementation process. And now we're so close,
just a month or two away from actually having
people working on projects across the
state is very exciting. And in terms of what comes
next, couple of things. I mean, the first is PACE
ought to be a sustainable system in the long run. The Efficient Buildings
Fund, if we're going to do
additional rounds, we need to find additional
funding, not necessarily a lot. Remember, for this
first round, we were able to take
essentially $5 million of RGGI and federal
stimulus money and use that to raise another
$15 million of capital from bondholders. So if we wanted to
do another $20 or $30 or $40 million
round, we wouldn't need to find $20 or
$30 or $40 million. But finding a way that we can
make the Efficient Buildings Fund sustainable financially
so that we're not every year kind of scrambling to figure
out how we're going to pull the money together is a
big agenda item for us in the coming months. And then back to
that conversation that we had with the
governor and her people about what to name this
agency and this notion that it really can do more
in the future than just water or just alternative energy and
energy efficiency projects. What comes next for the
Infrastructure Bank? And we've already started
to brainstorm and think about other things. One that has come up that
we've been discussing a little is climate change adaptation. As the Ocean State, as a
low-lying, coastal series of communities that are
particularly prone to flooding and vulnerable to extreme
weather events, maybe there are ways that we can use
the Infrastructure Bank to help promote development of-- whether
it's sand dunes or sea walls or other types of
defenses against flooding, is something that we've
started to think about. And I'll just say
kind of provocatively and leave it out there. Continuing with the theme
of bringing private capital to the table, the
insurance industry really ought to
have some incentive to help us with programs that
will protect their investment and guard against extreme
weather events and flooding. So this is still just very much
in the brainstorming phase, and we'll see what comes next. But I do think that there is a
future for the Infrastructure Bank beyond what we
have done already. So I hope this was helpful. I'm glad that I didn't
put anybody to sleep. [INAUDIBLE] But I really appreciate you
all having me here today. [APPLAUSE] [INAUDIBLE] Ellen
has a microphone. I know you don't need the
microphone to hear ourselves, but we're taping this. So speak into the microphone. [INAUDIBLE] No, [INAUDIBLE]
questions behind you. Oh, OK. Hi. Well, I'm not a finance person. So one, I'm just
going to speak back what you just said so I know
that I've understood it right. And then I have-- Could you speak up or speak
into the microphone, please? OK. Thank you. I said that I'll
just speak back what you said so I'm sure that
I understood it right. And the second is that I
do have a couple of queries that I want to ask you. And I'm particularly
interested in this because I come from
India, and I think this is just what
is needed, I think, in different parts of the globe. So the first is, I
don't really understand what a tax lien means. What I've sort of guessed
is that-- I don't know. And I think what it
means-- OK, maybe you could just tell me that. Sure. So it's basically a tax that
is charged by the municipality, because in Rhode Island,
it's the municipalities that charge property taxes. So it would be an
additional tax. You would get a tax bill
from the city of Providence or the city of
Warwick, just like you get on your regular
property tax bill. But then the municipality
would collect that funding and repay it to the
lender of the PACE loan. So it's essentially a
tax on the property, but the municipality
isn't keeping the money. They're just using
it as a mechanism to collect it and
repay the lender. I'm not [INAUDIBLE]. Is the lien only--
or the surcharge only for the residents
of the buildings that have benefited
from the investment or is it a general surcharge
on the entire air space? No, no. It'll be specific
to the property. And actually, I mean,
one of the challenges-- so let me say two things. First, the municipality has
to opt in to this, right? And we've been doing a lot of
outreach with the tax assessors and the tax collectors of
the different municipalities so that they understand
what this would entail. And we're actually
helping them out with some software
and other things to make it very easy
for the municipalities so there's really no cost
or burden for them to do it. And then, yeah, the assessment,
the tax essentially, is just on the property
that has taken out the loan to do the improvement. And one of the challenges with
PACE and with energy efficiency finance in general is that
makes multi-tenant housing very difficult. Because if you
have a multi-tenant unit where the tenants are paying the
heat and electric bills, then the building owner doesn't
really have much incentive to do anything about it. And so when I talk about
looking forward to other things that we might try to
tackle in the future, that's another one that
we're going to look at. I think PACE really
works best when you just have a single occupant
in the building. That's right. And now the question. You said that there
wasn't very much trouble getting the, what do you
call, the legislature to agree to your plan. I find that very
surprising because when I think of the political system,
they won't have other-- they'd say that the same
money or the same plan should actually be
floated for roads, or for replacing
water pipelines, or for other infrastructures
and not this. So my question is,
did this get passed because it was called
the Infrastructure Fund or did it get passed for the
green energy [INAUDIBLE]? Well, I think it
was very important that because we didn't need
any money out of the budget, we weren't competing
with other priorities. So the federal stimulus
funding that we used could only be used
for energy efficiency. That was a federal requirement. The Regional Greenhouse
Gas Initiative proceeds, again, could only be used
for energy efficiency. That was in the law. And so you could argue
that we were competing against other green
or energy efficiency ideas that might be out there. But we weren't competing against
funding for schools or roads or things like that. And so I think that made it
easier to get it through, yeah, yeah. You [INAUDIBLE]? Thank you. I'm involved in
the redevelopment process in Providence
with the I-195 Commission. And I wondered whether, under
any sort of circumstance, the PACE program would be
available for buildings that, if you will, improve
as they're constructed, have a greater level
of improvements for energy efficiency,
than would otherwise be required by code. So the question is whether PACE
could be applied to new-build construction-- Right. --as opposed to just retrofits? Yes. I think it could. I think it depends on the
willingness of-- again, it always depends
on the willingness of the lender to make the loan. But I think in terms
of the regulations that we passed for PACE, it
does allow for PACE loans to be used for
new build as well. I'll give you another one too. The Efficient Buildings Fund, I
said it's for cities and towns. And this first round
of applications we got was entirely from
cities and towns. But in the legislation,
we actually made quasi-public
agencies eligible as well. So I don't know what
impact that could have or what application that could
have for the 195 Commission. But theoretically, the
Commerce Corporation could get access to funding from
a future Efficient Buildings Fund round, just like the
airport or the universities or other quasi-public
agencies of the state. So we can talk
about this offline. OK, that would be great. Yeah. All right. About the Efficient
Building Fund, in theory, there
should be a rate of return on the energy
savings with the efficiency. Is that not a future reliable
source of some revolving fund? At the moment, what is the-- Yeah. So that's a good point. So the question is,
essentially as I understand it, could you make the
Efficient Buildings Fund sustainable by
having it revolve, right, by saying, basically,
after the cities and towns pay the Infrastructure
Bank back, and maybe at a rate higher than
the cost of the bond that funded the
Efficient Buildings Fund, could you use those
excess proceeds to do another round of funding? At the $20 million
level, you can have it revolve to some
extent, but probably not enough for it to become
fully sustainable. So I guess the
answer is half yes. I think that we can
do it to some extent. I mean, the other thing, too, is
we're learning as we go, right? So we don't know how high a
rate we can charge to the cities and towns before they decide
that it's not worth it or before they're able to
find another alternative. So we're kind of trying
to figure that out. But yeah, potentially some of
the Efficient Buildings Fund could revolve over time, and we
could charge cities and towns rates higher than the
Infrastructure Bank's cost of capital potentially. But we're trying
to figure that out. But is the mechanism now
for issuing the loans, monitoring the
payments, and monitoring the savings are quick to be
able to give you some ground information about the-- Oh, yeah. So we have pretty substantial
reporting requirements for the number of jobs,
for the energy savings relative to expectations. So we want to be able to
measure and show the impact as we do these projects, yeah. Ah, yeah. So two quick questions. Almost every time I look at
a state funding opportunity, all of the recipients are white. Slater Fund-- I can
name you all 10. And I always think it's
disgusting in a state 24% people of color that
white folks get all the money. And the white folks
who get all the money are those white folks. Very seldom do any middle-income
white folks get anything, and low-income white
folks don't get anything. So will there be an effort? And then part two
of that, you just talked about construction
firms and the like. Again, will there
be an effort there to invite the Latino and
the black contractors to be real partners,
not a quick moment. Right, absolutely. So couple of things. For the Efficient
Buildings Fund, the Infrastructure Bank doesn't
choose who does the work. It's the cities and towns
of the borrowers who do. But that being said, I'm
very pleased that, I believe, all of Rhode Island's
majority-minority communities applied for Efficient
Buildings Fund funding and are likely to get it. We haven't finalized
the list yet. But Central Falls,
Pawtucket, Providence are all pretty high on
the project priority list. In terms of the contractors,
for PACE, yeah, absolutely. When we're training
contractors and letting them know how PACE works so
that they can be the sales force for PACE loans,
we'll make sure that we work with the
Latino Contractors Association, the
Black Contractors Association,
organizations that I've worked with on other
things in the past to make sure that they're
getting that training too so that they can go out and be
talking about and participating in PACE loans just
like anybody else. The decision of who does
the work for the Efficient Buildings Fund, however, is
made at the municipal level. So I would hope that
our cities and towns do a good job of enforcing
whatever standards they have. I know that that's not
always the case in reality, but we can certainly
encourage them to do so. [INAUDIBLE] Hi. Yeah, I have a very
quick question, which is, what percentage of your
job is devoted to this? And what do you do the other
percentage of your job? Oh, this was supposed
to be a quick one. I would say it's probably 10%
of my job and, I don't know, 25% of Kelly's at this point. 40%. 40%. It ebbs and flows. I mean, back when we were
trying to get it passed, it was obviously
a larger percent. I mean, I would say I
spend 40% of my time on the day-to-day operational
management of the office. I mean, I manage a little
bureaucracy of like 85 people, and we manage a few
different programs. I spent about 40% of my
time on that, 40% of my time on what I would call new
initiatives and new ideas, including the
Infrastructure Bank. And we've got a
bunch of other bills we're trying to get
passed this year that I'll talk about another time. And then 20% of my
time politicking, basically out at events and
ribbon cuttings and that sort of thing. So as far as the
operational part of the job, our office manages a few
significant programs. We manage the state's retirement
system, the pension fund. That's the primary
source of retirement for 60,000 teachers, state
workers, firefighters, police officers
across the state. We manage the CollegeBoundfund,
which is a 529 college savings program that has about a
quarter of a million accounts and $7 billion of
assets under management. It helps to provide
a tax-efficient way for Rhode Islanders and
others to save for college. We manage a Crime Victims
Compensation Fund, an Unclaimed Property program. So we've got a handful of
programmatic things that we do. And then I know I'm
supposed to be quick. So in terms of other
legislation we're working on, very quick, a big
focus of ours right now has been debt management
and debt reform. There are over 100
different entities in Rhode Island with the
authority to issue bonds, often with very
little oversight. And so that's something that
we're spending a lot of time on now is trying to strengthen
the oversight and management of public debt in
the state generally. So that gives you a flavor
of some of what we do. Last question, Sally. Good. All right, if I may,
as for next steps, this ties into the answer that
you just gave to that question as well. I'm wondering if you're
looking to take clean finance across other asset
classes and maybe into the pension fund or
the college fund as well. So actually, we already are. We've done a couple things. So in the CollegeBoundfund--
and just a real quick primer. So 49 states around the
country offer 529 plans like the CollegeBoundfund. But you can market
them nationally, so all the states
compete with each other. Of the quarter million accounts
that we have, more than 90% are from out of state. There are twice as
many Californians with Rhode Island
CollegeBoundfund accounts as there are Rhode Islanders. We did add a fossil fuel
free investment option to the CollegeBoundfund. It works like a
401(k), where you go in and you can kind of pick from
a bunch of different options, each participant can. So we were the first
state in the country, I believe, to offer that. And I think that
it's something that will help us maintain a
good competitive advantage relative to our
competitor states. And then we also
have a similar option in the pension system,
the defined contribution part of the pension
system, which is one where the cities
and towns-- I'm sorry, cities and towns-- the
members of the pension system have the opportunity
to make that choice. And then real quick, the
other thing that we're doing is we're suing some companies. There are some
fossil fuel companies out there, specifically BP
and Plains All American, that had pipeline spills,
where they represented to their investors and to others
that they were doing everything that they were
supposed to be doing to maintain these pipelines. They, in fact, were not. They had two significant
spills, one in California and one in Alaska. The stock prices dropped. Shareholders lost
money, including us. And so we're taking legal action
with the aim of recouping some of those losses,
but also, I think, sending a message,
frankly, that not just in the energy industry,
but all of our companies should be doing the
responsible thing and not making
misrepresentations to their shareholders. So there's a lot of different
ways from this office that I think you can have an
impact on environmental policy. So that's just a few of the
things that we're doing. Nice. I can tell I've run over. So thank you, everyone. Thank you. Have a good day. [APPLAUSE]
