Broaden range of GEMS projects

Before Gov. David Ige proposed using $100 million in Green Energy Market Securitization (GEMS) funds to cool public schools, few knew much about GEMS, the state’s renewable-energy loan program. What we do know is it joins the ranks of a growing list of wasteful government programs that haven’t lived up to their potential.

The $150 million GEMS fund, created through a November 2014 bond sale, has largely sat unused. Unfortunately, ratepayers are still on the hook for paying back the full amount borrowed plus $33 million in interest over the 15-year life of the bonds.

It is reprehensible that thus far GEMS, unable to compete with private companies offering their own financing, has only loaned out $385,000 to consumers purchasing rooftop solar systems. We have to wonder whether the concept of offering green-energy loans to consumers and nonprofits was fully vetted in 2012 and 2013 under former Gov. Neil Abercrombie’s watch — and if the changing marketplace for rooftop solar should have been anticipated.

Regardless, the onus is on the Hawaii Green Infrastructure Authority (HGIA), which oversees GEMS, to turn the program around. Tara Young, HGIA executive director since October, announced last week that the authority is seeking proposals from developers, financiers and other industry participants seeking to use GEMS money for clean-energy projects.

We’re hopeful the request will generate projects that not only draws down the GEMS fund, but moves the state closer to its goal to be completely energy self-sustaining, using 100 percent renewable sources, by 2045.

GEMS was set up by Richard Lim when he was director of the state Department of Business, Economic Development and Tourism. After Ige appointed a new director in December 2014, Lim became interim director of the GEMS program between December 2014 to February 2015 at a salary of $9,583 a month.

Among the startup costs for GEMS, Hawaii residents have paid $1.22 million to Goldman Sachs &Co. and Citigroup Global Markets Inc. for underwriting the bonds; spent $1.7 million on attorneys, accountants and rating agencies; spent another $761,649 to California consultant Renew Financial; and covered about $188,000 in salaries to the executive directors overseeing the program.

The program so far has been a drain on ratepayers as well as taxpayers. Young earns $11,500 per month, and a staff of five full-time employees and one part-time employee collectively earn $414,000 a year.

Some have suggested the state might do better by just paying off the bond and closing up shop. However, there is no mechanism to “prepay” by calling back the bonds and repaying the bondholders.

Further, ratepayers would still continue to pay the $1.13 “Green Infrastructure Fee” on their monthly electricity bill to pay back the bonds. As of July 1, ratepayers have paid about $15 million in principal on the bonds and $6.39 million in interest, which is no small sum.

While Ige’s proposal to borrow $100 million in GEMS money to cool 1,000 of the state’s hottest public school classrooms was deemed an acceptable use of the fund, lawmakers ultimately appropriated that amount from the general fund. Surely there are many other viable projects worthy of GEMS funding, from battery storage to solar farms.

It’s time for the state to start making some serious lemonade out of a major lemon. Ratepayers and taxpayers alike will expect lawmakers to closely scrutinize HGIA’s budget and forward progress as it heads into the next legislative session — and for many years to come.