Editor’s note: This post originally appeared at Sustainable Industries Journal. For permission to reprint, contact them.
Over a hundred years ago a bunch of men with peculiar facial hair gathered together to sort out a constitution for a brand new state. Some people wanted to call it Columbia, but others prevailed. The new state would be called Washington after the first American president. Of the many decisions this room full of men made one still affects business and energy efficiency to this day: the constitutional ban on the lending of public funds and credit.
Washington, unlike Oregon, has yet to amend its century old founding document to allow the lending of public credit for energy efficiencies, something that has put the state behind the times in promoting retrofits in the residential and commercial sectors. It might be time to change that.
Interestingly, it took less than a year—from late 1888 until November of 1889—for the federal government to pass an enabling act for Washington state to form, for delegates to be selected, and for a constitution drafted, approved, and signed off by then President Harrison. Washington’s constitution was drafted and approved in about six weeks during the summer of 1889. It’s remarkable, certainly by today’s standards, for almost any document to get processed so fast—and this was a new constitution.
But one thing did not slip by the watchful eye of the delegates. Railroads were getting away with lots of public money. There had been too many cases of local and state governments falling all over themselves trying to woo the railroads to run their lines or terminate in their communities. In those days the railroad was like the internet. If you didn’t have it you might as well just declare municipal bankruptcy—or so it seemed. Many communities were willing to spend all of their credit and cash to lure the railroads. When the systems didn’t pan out and failed, the local government could be stuck with massive, insupportable debt taken on for the railroad.
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The delegates weren’t about to let that happen, so they prohibited the lending of public credit to private entities by the state and local government in Article VIII of the state constitution. While their focus was the huge problems created by communities trying to seduce railroads, their actions still have implications today. Now at first, it would make sense that state and local government not give out cash or make loans simply to lure businesses to locate in Washington. Those businesses could fail and leave the state and local government on the hook for years.
But what about energy efficiencies? A recent McKinstry study found that if businesses and homeowners took advantage of potential efficiencies in buildings and equipment across the US that they could save $1.2 trillion by 2020, prevent 1.1 gigatons of green house gases annually (over the same period) and create 1.7 million new jobs. Doesn’t state and local government have a profound interest in taking advantage of these savings? What if all these benefits came from building new highways or providing tax breaks for companies moving into the area?
Jobs are at the heart of almost every policy argument, but strangely, in Washington amending the constitution is still seen as too big a lift. Never mind that Oregon—a state with founders also worried about railroads—amended their constitution 30 years ago and that Washington has amended it’s constitution dozens of times since the document was ratified.
Why is this important to business? One needs to look no further than some retrofits recently funded by a grant program managed by the Environmental Protection Agency to support industrial retrofits. The grant funded the retrofits for boats, trucks and trains, things that we don’t typically think of when we consider green jobs and energy efficiencies. The grant totals more than $16 million over several years. Now imagine if those grants were loans and businesses could get affordable money to implement larger scale retrofits to save money, create jobs, and reduce carbon emissions.
But why wouldn’t companies just undertake retrofits on their own? After all if there is money to be saved that would help profits. True, but if a company is facing tough times and uncertainty, it’s unlikely it would spend its cash on efficiencies that would deliver savings later on down the road. In an economy that is increasingly all about just survival local industrial businesses are likely to stand pat until things improve.
To encourage many more retrofits like the ones funded through the EPA program, the state could allocate dollars or credit now to create an affordable loan. The job creation would be immediate, and the energy savings could last decades. To ensure that the retrofits that will truly generate real savings, local government could require that projects conform to the principles of performance contracting so that loans get paid back.
The other argument against an amendment essentially is that it’s too hard. But consider an example from 40 years ago. Port employees wanted to be able to wine and dine potential clients of the Port of Seattle. The fact that it was unconstitutional didn’t stop them. The ports pushed a proposal through the legislature and onto a vote of the people in 1966 to amend the constitution in the name of economic development.
Maybe allowing ports the ability to buy dinner for a potential client is a good idea, but compared to allowing loans for retrofits it simply pales in terms of benefit to the public. The money saved and the jobs created ought to be motivation enough. And remember it took the founders of the State six weeks to put the constitution together.