Hartford Business Journal

14 Hartford Business Journal • January 8, 2018 • www.HartfordBusiness.com By Matt Pilon mpilon@HartfordBusiness.com F acing the biggest financial threat in its six-year existence, the Connecticut Green Bank will reduce staff, trim deal vol- umes and pursue new revenue streams to keep itself and its mission alive. The quasi-public agency, which arranges and provides loans and guarantees for often-complex financing packages that have spurred renewable energy and ef- ficiency projects across Connecticut, was formed in 2011 and is seen as a pioneer in the green lending space that helped spawn similar organizations in other states. But desperate to close a major budget deficit, state legislators in late October raided from the Green Bank approximately $32.6 million — mostly in ratepayer funds — over two years, which represents more than half of its operating budget. The Green Bank's board of directors vot- ed unanimously Dec. 15 on a restructuring plan to deal with the cuts, which includes prioritizing deals that provide higher returns while pulling back on agreements, including some that have already been ap- proved, that bring in little to no revenue. "We know how hard it is to get an 80 per- cent carbon emissions reduction," said Cathe- rine Smith, commissioner of the Department of Economic and Community Development and chair of the Green Bank's board, refer- ring to the state's legally mandated climate change goals. "This will slow us down." "It just means we're not going to get as much done," she added. The goal is to break even on operations within the next four to seven years (the Green Bank had $34 million in revenue in fiscal 2017 and an operating loss of $5.7 million), and the plan thus far includes no borrowing or asset sales. That will mean a shift in the Green Bank's longtime strategy, from using public money to leverage larger private investments, to using its own limited resources to earn the highest returns possible to support its operations. Among the profitable programs that will remain a focus is its popular C- PACE program, which finances efficiency upgrades in commercial buildings through the owner's property tax bill. Grant and other programs that haven't proven themselves financially viable will be jettisoned, including pilot programs for an- aerobic digesters, combined heat and power plants and microgrids. Board mem- bers will set more precise deal-volume targets this month. The Green Bank is also exploring the formation of a nonprofit en- tity where it could transfer some of its staff and programs, including an initia- tive that provides low- and moderate- income families solar-panel financing. The Department of Energy and Environ- mental Protection has committed $5 mil- lion of its own budget toward that effort. "It's the least we could do to help move the mission forward," DEEP Commissioner Rob Klee said. Forming a 501(c)(3) affiliate could open up new funding streams from foundations and community lenders and it would also serve to bring down costs by more than $1 million a year by eliminating overhead such as pension contributions. While less profitable than some pro- grams, the Green Bank wants to preserve the solar panel financing initiative in underserved markets because it views it as an important and fast-growing part of its mission. At least five of the Green Bank's 50 employees will lose their jobs. As many as 10 more layoffs could occur if the Green Bank isn't able to form the nonprofit entity. Open positions, such as a staff accountant and senior manager, will be eliminated, as will a merit and promotion pool for this fiscal year. Overall, the Green Bank is targeting a $4.6 million (27 percent) cut in expenses by fiscal year 2019, which includes person- nel and sizable reductions in marketing, inspections, program development and other areas. Pride, frustration At the Green Bank's Dec. 15 board meeting, CEO Bryan Garcia said the organization was akin to a strong performing portfolio com- pany whose parent (the state) needs help. He ticked off the Green Bank's accom- plishments since its creation: Spurring more than $900 million in private invest- ment in 234 megawatts worth of clean energy projects using just $175 million of public money as leverage. That work has created more than 5,000 direct jobs and reduced carbon dioxide emissions by 3.7 Energy Deficiency Connecticut's pioneering Green Bank is financially wounded, but has a path forward CT Green Bank's Financial Performance (in 000s) 2017 2016 Change Revenues $33,967 $37,788 $(3,821) Operating Expenses Grant and incentive payments $17,085 $10,645 $6,440 Program administration expenses $16,824 $16,497 $327 General and administrative expenses $5,725 $4,706 $1,019 Total operating expenses $39,634 $31,848 $7,786 Operating income $(5,667) $5,940 $(11,607) Source: CT Green Bank Rob Klee, Commissioner, Department of Energy and Environmental Protection PHOTO | HBJ FILE Green Bank CEO Bryan Garcia and his team are grappling with a major funding cut. Their plan includes reducing staff and expenses and shifting the organization's strategic direction while trying to maintain its clean- energy mission.

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