Even as state and local governments struggle to meet higher green energy standards with ever-shrinking budgets, billions of dollars of so-called Qualified Energy Conservation Bonds have gone unused. As of May 3, only about 20 percent of the bonds — roughly $663 million — had been issued, with many states not dipping into their allotments at all. Federal officials still stand behind the program, pointing out that it has no expiration date.
Under the program, the federal government covers up to 70 percent of the applicable tax credit rate as a direct payment to the issuer or as a tax credit to the investor. For eligible localities, it can effectively bring their interest cost down to about 0.5 to 1.5 percent, according to Elizabeth Bellis of the Energy Programs Consortium, a research and policy group that represents state energy officials.
Congress originally authorized $800 million for the program, but eventually increased that to $3.2 billion in 2009 as part of the stimulus act.
Municipalities have found the program difficult to navigate, as it wasn’t always clear how clean energy projects could qualify. For example, localities could sell bonds for projects that reduced energy consumption in public buildings by 20 percent. But some officials were unsure how to calculate the savings, either for individual buildings or the overall group. Another category allowed governments to create “green community” projects, but the program offered little detail on what that meant.
“Guidance from Treasury on a number of outstanding legal questions would help speed up the use of these funds and facilitate projects that have been delayed due to legal uncertainties,” Ms. Bellis said. “These projects have the potential to create thousands of local jobs, update public buildings, develop local green industry and significantly reduce fossil fuel emissions.”