The Risks and Rewards of Portland’s Clean Energy Fund - CivicWell

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The Risks and Rewards of Portland’s Clean Energy Fund

How can a program that’s designed to break the mold of exclusionary bureaucratic city programs exist within a traditional oversight system?

Climate Change & Energy


July 22, 2022


For the past 40 years, the Community Energy Project (CEP) has helped low-income Portland homeowners make energy-saving adjustments to their homes for free. The organization has often leveraged funding from the city’s housing bureau or the Oregon Department of Energy to do targeted repairs, like upgrading a home’s thermostat or water heater to save on energy consumption. But cost limitations had kept CEP from performing energy-saving retrofits on entire homes—a service that could have a lasting impact on their client’s lives and the environment.

That is, until the city created the Portland Clean Energy Fund (PCEF). In 2021, CEP received an $800,000 grant from PCEF that would allow their team to perform full home retrofits on 20 homes owned by low-income, Black Portlanders in the Albina neighborhood. The upgrades, which will be completed by June, are expected to reduce each home’s energy consumption by an average of 55 percent and lower the homeowner’s utility bills by 38 percent.

“The beauty of PCEF is being able to create and dream up [solutions for] where the funding gaps have been,” said Charity Fain, executive director of CEP. “We’re able to just do so much more in a home.”

Colloquially known as Portland’s version of the federal Green New Deal, PCEF aims to hold major retailers like Walmart or Target operating in Portland accountable for their carbon emissions by charging them a 1 percent business license surcharge. That money is then redistributed to community organizations for green energy projects that reduce carbon emissions, create renewable energy jobs, and benefit low-income communities and people of color who have the least access to resources that mitigate climate change and disproportionately suffer from the effects of climate change. It’s the only known program in the nation that combines this funding model with climate and social equity goals.

“We have people that are going from oil heat tanks to heat pumps—entire levels of technologies passed them by,” Fain said of CEP’s work. “They have been left behind for a long time if they’re still on oil. So we’re leapfrogging over a couple levels of technology where no one tried to reach them.”

The community organizations that created PCEF set out to remove barriers to energy-related funding that have historically kept low-income people and people of color from accessing those benefits. For example, the nonprofit Energy Trust of Oregon has provided monetary incentives for energy efficiency upgrades to Oregonians since 2002, offering discounts on floor insulation or window upgrades that help people save on their heating and cooling bills. However, those discounts are made available through reimbursements, meaning that they are only attainable for people who have enough money to pay for the upgrade upfront. Those people are usually homeowners, who are disproportionately white.

PCEF hopes to change those outcomes by prioritizing grant projects that are led by diverse organizations, providing training on how to apply for grants to help less experienced applicants, and funding clean energy and workforce development projects that specifically benefit “priority communities” including Black, Indigenous, and low-income Portlanders. The projects PCEF funds are usually direct community investments, like creating carbon-sequestering greenspaces, or providing services for free, like CEP’s work.

Courtesy of the Portland Clean Energy Fund

After spending three years hiring staff and fleshing out its structure, the city program is still in its early stages—PCEF’s grant committee distributed its first round of grants totaling $8.6 million to 45 organizations in April 2021 and expects to give out $100 million in grants this year.

But, as the program forges a new path of climate justice and racial equity in Portland, PCEF staff and its founders feel the program is being judged by expectations created for more traditional energy programs that operate through reimbursements instead of upfront community investments. By those metrics, PCEF’s model of giving out millions of dollars to community-based organizations could be interpreted as risky, prompting the question: How can a program that’s designed to break the mold of exclusionary bureaucratic city programs exist within a traditional oversight system?

Bucking Tradition

In early March, the City Auditor’s Office released a report on PCEF’s management structure. According to City Auditor Mary Hull Caballero, the auditor’s office normally waits until a program has been up and running for at least a few years before evaluating the program. However, because PCEF was created by a community-written ballot measure and assigned to a city bureau instead of being developed by a bureau itself, Hull Caballero viewed the program as high risk, warranting an earlier audit.

The PCEF audit centers on the program’s management structure and oversight as defined by the ballot measure, pointing to a need for greater clarity on the exact role of the program’s volunteer grant committee, setting data-driven performance goals, and updating PCEF’s climate goals in city code to align with the city’s own emergency climate declaration that was adopted following the PCEF ballot measure.

Director of Audit Services KC Jones said that the audit’s recommendations are typical for a new program.

“With a new program with a unique setup, [the recommendations are] the sort of stuff that might not jump out to them as something exciting to put in place,” Jones said. “It’s more interesting to give out grants to interesting programs that you think are going to help people. It’s not as exciting to say, ‘This is how our reporting structure is going to work.’”

The audit pointed out concerns that PCEF staff say they were already aware of, but simply addressing in a novel way.

For example, PCEF aims to reduce carbon emissions and increase energy efficiency through its projects, but does not specify the exact metric tons of carbon or number of kilowatt hours of energy it hopes to reduce over a certain time period. There are several hurdles to achieving those metrics, such as the city not having a database on how many Portland homes require minimal energy retrofits like small technology upgrades or how many need major retrofits like roof weatherization and heating system overhauls, and because PCEF is a first-of-its-kind program, there are no other comparable programs in the country that staff can look to for guidance.

To address the lack of these specifics, PCEF staff instead decided to use an “adaptive management” system where the program would use research gathered during the initial grant cycle to then develop specific emission reduction targets for future years. Yet, the audit labels the lack of standard metrics as a major risk that should be addressed more quickly. In response to the audit, PCEF staff and its volunteer grant committee said they will work to more clearly define its performance metrics by July 2022 and set concrete emissions reduction goals in 2023, as well as assess the program’s governance structure and budget requirements over the next year and a half.

“Given PCEF’s origins as a community-led initiative, we have maintained a meticulous dedication to implementing the program as defined in the ballot language,” reads a letter from Commissioner Carmen Rubio, who oversees PCEF, and PCEF staff in response to the audit. “However, no ground-breaking program is perfect out of the gate, and we agree with the recommendations in the audit.”

While PCEF staff welcomed the recommendations of the final audit, they were more critical of the audit’s initial draft, which they were shown last year.

“… no ground-breaking program is perfect out of the gate…” — City Commissioner Carmen Rubio

The first iteration of the audit was ready in summer 2021 and sent to PCEF staff for review and response prior to publication—a standard practice for the auditor’s office which operates under a “no surprises” policy. According to audit documents obtained by the Mercury through a records request, PCEF staff said the first draft of the audit unfairly judged the emerging program against metrics that were used to evaluate fully established programs and misrepresented the progress of the program by not including proper context.

For example, the audit critiqued PCEF’s investment in a grant recipient’s “capacity building,” or an organization’s ability to successfully implement their program by increasing staffing, training, and more. The first version of the audit stated that “capacity building may divert money from projects.” PCEF Program Manager Sam Baraso argued that capacity building was an essential part of their investments, because PCEF is typically working with less experienced organizations that may need help to scale up.

“There is continual lack of recognition that capacity building is an essential component of all types of new/innovate [sic] programming,” Baraso wrote in response to the first draft. “If we ask a builder to build a house for us, should we criticize them for buying hammers?”

The audit was rewritten after receiving feedback from PCEF staff.

The final audit tailored this suggestion to say that the “program needs clarity on capacity building,” noting that PCEF lacks specific language on how capacity building should be implemented.

While the factual findings of the final audit remained the same as the first, the final version of the audit was less critical of the program and removed a recommendation that PCEF pause its grant distribution until it clearly defined its performance metrics. Hull Caballero said the recommendation to pause grant giving was removed after the audit team reviewed some of the subjective assumptions they made about the program—assumptions that were informed by the way city programs usually work.

“To tell a program that is authorized by a voter-approved piece of legislation to stop, once we reassessed our assumptions, that was no longer an appropriate recommendation for us to be making,” Hull Caballero said. “Council can make that decision, the volunteer board can make that decision, but it was not at that point appropriate for us to make that decision because that is a policy choice.”

In an interview with the Mercury, Baraso emphasized PCEF’s agreement with the final audit recommendations, but also spoke more broadly about the struggle of trying to maintain the intention of the program while existing within a traditional oversight system that is accustomed to the status quo.

“When you go into our origin story and what we were designed to do, it inherently means not following the exact playbook that has been taken by other programs and exploring what it means to invest in community in a different way so that we are able to benefit those communities that have not historically benefited,” Baraso said. “It inherently means doing something differently, and yet all of those critiques are pushing us to do those exact same things.”

Inequitable Growing Pains

Both the city auditor and program staff compare PCEF to a start-up company. According to Hull Caballero, it usually takes two to four years before a city program is considered fully established. PCEF is only just entering its second year of grant distribution.

To Baraso and other PCEF supporters, the program has established a strong foundation that it will continue to improve upon as it operates through its early stages. PCEF supporters also argue that the program, which has always been clear on its mission to break tradition in an effort to bring more equity to the green energy field, is now being criticized for breaking tradition. In some ways, the auditors see that too.

“They’re actually doing what the legislation suggests they do, which is to go do something quite different, and now there’s many large reactions to what’s happening,” Hull Caballero said.

Breaking tradition isn’t appealing for those invested in the status quo. Following the release of the final audit, the Portland Business Alliance (PBA)—a lobbying group representing more than one hundred Portland businesses—issued a statement calling for a freeze on the $100 million in grant funding PCEF plans to distribute this year and an independent investigation into the program’s management and oversight. The statement claimed that PCEF’s “mismanagement of historic amounts of funding is precisely why the City’s credibility with voters is at an all-time low.”

Hull Caballero said the PBA overstated the findings of the audit in its statement. A PBA representative declined an interview with the Mercury, stating that their position had already been laid out in their statement on the audit.

The statement didn’t come as a shock to PCEF staff and supporters—PBA campaigned against PCEF as a ballot measure, claiming that the cost of the business tax would be passed on to consumers. Marcus Mundy, the executive director of Coalition of Communities of Color which campaigned in support of PCEF, sees PBA’s opposition to the program as large businesses being unwilling to accept responsibility for contributing to climate change through their business practices.

“The PBA is driven by its membership, and some of the PBA’s large members don’t want to pay this tax,” said Mundy. “So, of the thousands of rules and administrative laws in Portland, they focused on [PCEF] just because the money is focused on things they don’t want to particularly own as being responsible for regionally, which is addressing some climate change and energy-related issues and redressing some contracting issues with communities of color. That’s not something they are comfortable living with on a day-to-day basis.”

Portland City Commissioner Jo Ann Hardesty, who played an instrumental role in advancing PCEF from a ballot measure to city code, also saw the statement as PBA’s members trying to shirk responsibility.

“For [PBA] to use the first ever audit of a new program to call for repeal just reinforces that this is an idea they never supported,” Hardesty said in a statement. “They are trying to prevent our wealthiest corporations from contributing just a small portion of their profits to invest in the self determination of BIPOC communities and to create new green jobs.”

A recent opinion from the Oregonian Editorial Board echoed the PBA’s call for PCEF to pause its grant giving process until the audit recommendations are in place. The president of the Oregonian Media Group serves as the chair of the PBA’s board of directors.

“Executing such a flawed program with a stunning amount of new tax money to give away is a recipe for abject failure,” the editorial board wrote.

The editorial board specifically singled out a PCEF grant awarded to SEIU Local 49, a workers union representing over 15,000 Oregonians. SEIU Local 49 was awarded $148,373 in 2021 to establish a Green Janitor Education Program in Portland and train 50 janitors. The program was originally developed in Los Angeles in 2014 and offers a 30-hour training on green cleaning practices, water and waste reduction, and workplace health and safety. In Los Angeles, buildings whose custodial staff participated in the training reduced their energy use by an average 5.6 percent and about 80 percent of training participants reported implementing some of the energy saving techniques they learned in their own homes.

A Green Janitor Education Program training session. Courtesy of SEIU LOCAL 49

The Oregonian Editorial Board called the SEIU Local 49 project a “bewildering grant,” implying that the program did not have clear climate impacts or metrics that would track success. The union has pushed back on this critique.

“Sometimes when folks picture investments in transitioning to a new green economy, they picture flashy equipment purchases,” said Scott Cheesewright, an organizer with SEIU Local 49 who oversees the program, “not something that is simple and effective, like investing in frontline communities who are—like janitors—immigrants, people of color, working class people with low incomes and investing in workplace development to recruit folks in the jobs they already have to promote energy efficiency.”

Cheesewright believes the Green Janitor Education Program is exactly the kind of project PCEF was created to support, noting that the first training session served 22 janitors who were originally from 13 different countries and was conducted in four different languages.

To Baraso, the PBA statement and criticism of the Green Janitor Education Program are another in a long line of finger-wagging from PCEF critics.

“There’s always been this undertone that this ballot measure designed and led by majority community of color groups—and then subsequently implemented by a majority people of color group within the city to benefit majority people of color and low income folks—is getting this underlying critique or undertone of ‘They don’t know what they’re doing,’ which at its core feels very racist,” Baraso, who is Black, said.

Over the past year, PCEF has been questioned on not moving money out the door fast enough. In October 2021, the program’s funding reached $169 million while approximately $9 million had been distributed to organizations for clean energy projects. PCEF staff attributed the large amount of money in its coffers to the fact that PCEF started collecting on the surcharge before it had a system in place to distribute the money, and it intentionally distributed a smaller amount of money its first year as a way to work out the kinks of its grant evaluation process.

Mundy said this was a responsible decision on PCEF’s part.

“[The funds are] not just sitting there,” Mundy said. “It’s earmarked for the things that the measure was meant to address. They are doling it out appropriately with proper scrutiny and oversight.”

PCEF has also been questioned when it does execute grant funding. In December, an Oregonian investigation revealed that PCEF awarded a $11.5 million grant to an energy nonprofit whose executive director had a history of financial crimes. Diversifying Energy, led by Linda Woodley, was chosen to coordinate the purchase of 15,000 heat pumps and cooling units to be distributed to vulnerable Portlanders to mitigate the impacts of future heatwaves. The Oregonian discovered that Woodley may have fabricated her previous work experience and had previously spent time in prison for fraud. PCEF staff could not verify some of Woodley’s previous work experience and City Council moved to revoke the grant at the recommendation of program staff.

Woodley sued the city in early March, alleging that PCEF staff did not give her enough time to provide contact information for the people who could verify her work experience and that the city destroyed her career by stripping her organization of the grant.

Following the incident, PCEF staff developed an additional risk assessment system for grant applicants that will require additional work references and risk mitigation processes for organizations with less experience or who pitch projects that are larger than they have worked on before.

According to the city auditor, the public saga is a perfect example of how the risk of innovation conflicts with traditional government processes.

Risk vs Reward

Because PCEF intends to partner with organizations that have been historically excluded from the green energy sector, the program intentionally did not include background checks in its grant review process. People of color are disproportionately represented in the criminal justice system and previous convictions often restrict someone’s career and business opportunities.

Hull Caballero sees PCEF’s commitment to not check grantees’ backgrounds as a risk factor.

“That’s where the innovative program and a different way of looking at things is bumping up against the traditional way that the government likes to work,” Hull Caballero said. “They were willing to take a big risk by not looking at the backgrounds of their grantees so what happened [with Woodley] could happen and they seem to be okay with that. You can tell by the reaction of the Council that Council has a much lower risk tolerance.”

Hull Caballero believes that in order to find a comparable middle ground, PCEF will need to become more conservative with its risks while City Council will have to become more tolerant of risk in order to achieve the program’s goals.

“That’s where the innovative program and a different way of looking at things is bumping up against the traditional way that the government likes to work.” — City Auditor Mary Hull Caballero

To Fain of Community Energy Project (CEP), nothing about the program feels risky and, as a grantee, the reporting and accountability requirements are comparable to the processes used by traditional grant programs. CEP’s PCEF grant proposal was 30 pages long and took multiple CEP staff members several weeks to gather all of the information, data, and projections required for the application. PCEF’s quarterly reporting requirement is also typical within the industry, according to Fain.

The key differences Fain sees within PCEF are the high levels of collaboration PCEF staff have maintained throughout the program’s development, ranging from requesting feedback on the grant application process to make it clearer, to the way PCEF asks for community-generated grant ideas as opposed to presenting government projects and asking organizations to bid for it. It’s something she wants to see adopted by other funding agencies.

“A lot of times, even with the best of intentions, the [traditional] stakeholder process is someone at the government level or foundation level who’s created a program, and it’s cooked,” Fain said. “Then they bring it to a community and they kind of ask for your feedback and maybe they do something with it. Often they don’t. It’s often a box to tick to say you had community involvement. [PCEF] is not like that, it has literally been community involvement at every step along the way.”

Fain was heartened to see that feedback CEP provided after the first application cycle was incorporated in the second grant application cycle this year. To Fain, the inclusion of community feedback, like how to clarify language in the application, is evidence that PCEF staff care about lowering barriers to get investments into the community—something that Fain believes is missing from the conversation around PCEF.

“There are goals around greenhouse gas reductions and absolutely that is what our work is centered on, but we can’t forget the people and the lived experience of the person in that house,” Fain said about CEP’s energy upgrade work. “It goes beyond just the greenhouse gas savings. What impact does it make for the complete community to see this kind of change? What are those non-energy benefits, like health benefits? Asthma goes down, ER visits go down.”

In moments where traditional oversight systems seem to conflict with PCEF’s mission, Baraso says it’s the program staff’s job to find a solution that doesn’t compromise the intention of the program.

According to Baraso, the new risk assessment process for grant applicants prompted by Woodley’s case is not intended to weed out inexperienced organizations, but rather “right-size” the grant projects to the grant applicants’ experience level and set them—and PCEF—up for success. The compromise requires PCEF staff and grant committee to do a bit more “hand holding” than a traditional grant program, but it maintains the program’s intention of investing in groups that are historically underrepresented in the green energy field while satisfying City Council’s call for more in-depth grant evaluation.

Baraso believes that, eventually, the success of PCEF’s projects will speak for themselves. In the meantime, Baraso hopes people stop conflating the program’s deviations from the norm with failure.

“It’s when we’ve retrofitted all these homes of low-income Black homeowners and have preserved their ability to stay in those neighborhoods and help them reduce their bills and help them have an asset that they can pass onto the next generation,” Baraso said about the program’s future success. “It’s when we planted trees in a heat island area and, in some years down the road, helping keep that area cooler as those trees mature. It’s making sure that we have the space in the meanwhile to implement the program in the will of the voters.”

Originally published in the Portland Mercury; reprinted with permission.