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Energy is about to get cleaner in Portland, and low-income households and people of color traditionally left outside of the green city ecosystem will be involved.

City voters in November 2018 approved an initiative to create the Portland Clean Energy Community Benefits Fund (PCEF). It鈥檚 to be capitalized with a 1 percent tax surcharge on the gross receipts of companies with $500,000 in sales in Portland and $1 billion nationwide. A PCEF management team is in place and a committee is being assembled to advise City Council on issuing the grants. Two-thirds of votes cast were in favor of PCEF, revealing its popularity.

Rules for governing PCEF are being developed, with plans calling for the city to begin accepting grant applications in summer 2020. Between 40 and 60 percent of the grant money is to be spent on clean energy projects, 20-25 percent on workforce development, 10-15 percent on green infrastructure and 5 percent on innovative projects that meet city climate goals while generating social and economic benefits. Clean energy projects include home weatherization, efficient HVAC and appliances, and rooftop solar. Both residential and commercial properties are eligible for grants.

Funds can be awarded to only qualified nonprofits, but the nonprofits can pass the money through to private entities for approved projects. Plans call for between $7 million and $10 million to be available for the first funding round. Between $54 million and $71 million is projected to be available annually thereafter, depending on health of the economy and whether exemptions are granted for certain businesses.

A principal goal of PCEF is to engage low-income households and people of color. Engagement will take various forms, from upgrading energy efficiency in homes and buildings to job training and apprenticeships for disadvantaged workers.

PCEF鈥檚 future looks bright, but some obstacles will need to be overcome.

One is the threat of lawsuits. Supporters of the initiative that created PCEF emphasized the tax surcharge would fall primarily on big retailers. Think of Target and Home Depot, as well as banks. But it now appears that other types of businesses 鈥� including construction contractors, refuse haulers and insurers 鈥� will pay as well. Citing violation of the Constitution鈥檚 Commerce Clause, groups representing these industries may sue in federal court to enjoin PCEF in part or its entirety.

Several businesses are seeking exemptions from the tax surcharge, and how City Council deals with these may determine whether lawsuits are filed.

Another challenge involves how investor-owners of properties 鈥� particularly multifamily buildings 鈥� will engage with PCEF. It鈥檚 no secret that owners and managers of residential rental properties in Portland are in a sour mood following enactment of rent control laws by the city and state. The initiative passed by voters prohibits landlords from using improvements funded by PCEF as the basis for raising rents. Assuming there will be some kind of matching funds requirement for income-generating properties, landlords wonder how they鈥檙e expected to recoup their costs if they can鈥檛 raise rents. Improving the efficiency of rentals housing low-income households is a primary objective of PCEF, and most of these units are investor-owned. The Portland City Council and staff will need to figure out how to engage the investor-owners.

A third area of concern arose earlier this year when it was learned that a group of former and current city and state officials, including former City Commissioner Erik Sten, were working with local businesspeople on a plan to tap PCEF grants to leverage as much as $150 million in private investment. The money would be used to acquire, rehabilitate (by improving energy efficiency) and finance construction of affordable housing in Portland. Fred Meyer Memorial Trust might also be involved. In return for PCEF funding, the group would commit to keep future rent increases modest.

As The Oregonian reported, close ties between the involved parties has fed concerns that the group will have an 鈥渦nfair leg up鈥� in competing for PCEF grants. There is also the aforementioned prohibition on basing rent increases on improvements funded by PCEF. While there is nothing untoward about the plan, it again points to issues that will need to be ironed out.

In seeking to bind climate action with social equity at a scale of $54 million to $71 million annually, PCEF appears to represent a first in the nation. Portland鈥檚 experience will be watched closely by those who may want to emulate it. PCEF鈥檚 upside is tremendous, but there are still some curves to be navigated.

Matt Slavin founded M.I. Slavin to provide consulting in project management, strategic planning, research and communications. Contact him at 503-619-5601 or [email protected].