A provision in the latest state budget compromise to take $27.5 million in ratepayer funds from the Connecticut Green Bank would “effectively shut down” the bank, its president, Bryan Garcia, said in an interview Monday.
The $27.5 million is essentially 100 percent of the bank’s funding – most of which comes from a longstanding fee on electric bills. A small portion of its funding comes from proceeds from the Regional Greenhouse Gas Initiative (RGGI).
The bank uses that money to leverage additional funding – an 8-to-1 leverage at the moment – that means for every dollar of public ratepayer money the Green Bank brings in $8 of private capital. But that process cannot happen without the basic funding.
“I don’t think they understand that will close us down,” Garcia said of the budget proposal.
Garcia said that to acquire financing from other financial institutions for the low-interest loans and other financing the bank provides, it must enter into “liquidity covenants,” which assure lending partners that the Green Bank has sufficient money to guarantee they will be paid back. If supporting cash is taken away, those liquidity covenants are violated, leaving the Green Bank effectively in default. The lending institutions can call in the loans, which would normally be paid back over 20 years.
“These financial institutions expect our financial position to be strong enough through the life of that loan,” Garcia explained. “When that financial position is being threatened, we lose the trust that they have with us.”
Garcia said the Green Bank already is having difficulty negotiating financial transactions because of the overall budget situation. Right now it is negotiating a $10 million loan from a bank to help finance low-income loans for energy projects and a $30 million loan from another financial institution to put toward low-interest small business loans.
The bank’s position is being released in a letter signed by the entire Green Bank board, which is headed by Catherine Smith, commissioner of the state Department of Economic and Community Development. The letter also points out that some 2,400 jobs — 800 direct and 1,600 indirect — would be lost if the bank were to close. It would also essentially shut down the state’s entire residential solar program, including those solar programs aimed at low-income individuals, as well as an array of low-interest loan products designed to help finance many different types of clean energy and energy-efficient products.
Ironically the Connecticut Green Bank has become a national as well as an international model for how to finance clean energy implementation.
The letter asks that the funding transfers be reconsidered. “They are not only excessive, and harm Connecticut’s economy by reducing private investment and eliminating jobs that are reducing the energy burden on our households and businesses, but they would effectively end the Connecticut Green Bank,” it states.