As Difficult City Budget Approaches, Portland Clean Energy Fund Is Flush

It’s budget time in Portland and, in some bureaus, things are looking rough.

Freshman City Commissioner Rene Gonzalez just slapped a hiring freeze on the fire bureau. Portland Parks & Recreation is removing 243 light poles from 12 city parks. Money is tight, the parks bureau says, so only two parks will get their poles replaced, and that will take 16 months.

As bureaus jockey for dollars for the fiscal year that begins July 1, one very new part of the Bureau of Planning and Sustainability is instead scrambling to spend an embarrassment of riches: the Portland Clean Energy Community Benefits Fund.

For the three fiscal years ending this coming June, PCEF will have raked in $344 million. And although officials are allocating it as fast as they can, they will begin next year with $275 million in the bank—making PCEF one of the largest loosely restricted pots of money in the state.

PCEF emerged from a 2018 ballot measure, charged with cutting climate-altering emissions by funding climate projects that train and employ people of color and benefit low-income neighborhoods.

Back then, the focus was weatherization of existing housing and building clean energy job skills. As passed by voters, PCEF could only make grants to projects led by local nonprofits.

In October, the Portland City Council made big changes to the rules governing PCEF, allowing city agencies and for-profit companies to apply directly for climate contracts. The council also fast-tracked $40 million to plant more trees in Portland and $60 million to make low-income housing projects more energy efficient so they produce fewer emissions—projects shepherded by the parks and housing bureaus, respectively.

Those changes were no secret, and planting trees is a laudable goal. Indeed, the October reforms to PCEF placated some of the fund’s harshest critics. But it has also turned the fund into a keg that other city bureaus can tap.

PCEF is beginning to allocate the fast-tracked money to affordable housing projects like Alder 9 on the eastside, which is getting $3 million from PCEF to install 159 mini-split heat pumps.

New construction must already meet stringent environmental codes—whether subsidized by PCEF or not. Some tax advocates say the fund’s overflow could be better spent—on desperately needed housing, say—if it weren’t walled in by rules created by voters.

John Calhoun, of all-volunteer Tax Fairness Oregon, says PCEF is an advertisement for why tax policy shouldn’t be made through citizen initiatives. And Calhoun isn’t an anti-tax Fox News fan. His organization lobbies to make the rich pay their fair share.

“Dedicated funds are a problem,” Calhoun says. “We don’t have a way to say, ‘We raised more money than we anticipated, let’s use it for something else.’”

Part of the problem is, PCEF continues to have far more money than it ever expected. The measure’s chief petitioners said in their November 2018 Voters’ Pamphlet statement that the proposal “will bring in $30 million every single year to clean energy projects, home energy efficiency weatherization, and green infrastructure.”

Voters approved that concept 65% to 35%. The fund raised money through a 1% surcharge on sales at large retailers, like Walmart and Target, but receipts have been far above expectations.

All that cash has become a lightning rod. It’s piling up in part because PCEF has been hamstrung by startup woes and mistakes. Early on, PCEF gave $11.5 million to a nonprofit led by a woman with a checkered history and had to rescind the grant. Then, the city auditor called out the fund for not adequately tracking and reporting its performance.

To be sure, PCEF is trying to do something new, and hard. There is no other fund like it in the country. Not only is it trying to tackle climate change, but it’s trying to do it while empowering the disadvantaged communities most affected by the crisis.

Sam Baraso, PCEF’s program manager since 2019, has heard all the criticism, and he’s working hard to manage the cash pouring into PCEF.

“We’re either going way too slow, or we’re going way too fast,” Baraso says. “We’ve seen both those arguments come at us within the span of a year.”

To help PCEF get money out the door, the City Council changed what voters approved. The October amendments allow PCEF to contract with city agencies and for-profit enterprises, not just make grants to nonprofits. The city also took control of PCEF’s funding priorities, starting with increasing Portland’s tree canopy and cutting emissions from low-income housing. There are more focus areas to come.

Before the changes, PCEF let grant applicants drive its funding, and its nine-member board of citizen volunteers decided which ones to send along for City Council approval. But that proved to be inefficient, Baraso says, so the council gave PCEF staff the power to approve them. The PCEF committee will instead guide the creation of a five-year climate investment plan that, in turn, will define priorities for grants and contracts.

The result is that PCEF looks more like a city agency and less like a fund guided by citizens, as described in the initiative that created it.

The Voters’ Pamphlet from 2018 read: “Measure creates new Portland Clean Energy Community Benefits Fund Committee; will exclusively recommend to mayor distributions of fund proceeds as grants to private, Oregon nonprofit organizations.”

Whether the October changes that the City Council approved will speed up the spending remains to be seen. When PCEF’s leaders describe why the fund exists, they talk in stark, apocalyptic terms about global warming.

“The climate crisis that is upon us is not a future state,” Donnie Oliveira, director of the Bureau of Planning and Sustainability, told the City Council in October. “It’s here. We keep seeing lost lives, lost livelihoods, and billions of dollars in damages.”

But so far, PCEF has awarded just $130 million. Even much of that money hasn’t been spent yet because it’s tied up in multiyear contracts.

Jillian Schoene, chief of staff to Commissioner Carmen Rubio, who oversees PCEF and spearheaded the changes, says the fast-tracked housing money will start to flow by July 1, with the tree cash coming soon after.

For the rest, it might be a while. PCEF is holding open meetings around town to get input from Portlanders on the climate investment plan. Baraso aims to have a draft plan by May, get more public comment, then take it to the City Council by September. Only then will PCEF put out a third request for grant applications. PCEF gave out $8.6 million in the first round of grants and $118 million in the second.

One—previously venomous—critic is satisfied with PCEF’s new direction. Last March, Andrew Hoan, head of the Portland Business Alliance, excoriated PCEF for its errors and recommended that its spending be halted for the year. The city should use PCEF money instead to fund homeless shelters and build a new firefighter training facility, Hoan said then.

This week, a PBA spokeswoman declined to make Hoan available and instead forwarded glowing October testimony from PBA vice president Jon Isaacs. The changes proposed by Rubio were “transformational,” Isaacs said. “We are now genuinely optimistic about the work ahead to meet our decarbonization goals.”

Isaacs had one request: “more engagement and collaboration with the companies that actually pay the tax. This is a very small number of some of our nation’s largest employers, such as Amazon and Walmart.”

Walmart won’t have to pay the tax for much longer. Last week, without specifying why, the giant retail chain said it would close both its stores within Portland’s city limits, the only two of its 45 stores in Oregon to get the ax.