Qualified Energy Conservation Bonds (QECBs) were first authorized by Congress in October 2008. At that time Congress allowed a maximum of $800,000 in QECB volume cap nationwide. In the February 2009 American Recovery and Reinvestment Act (ARRA or Recovery Act), Congress increased the QECB volume cap to $3.2 million. The total allocation for the state of Washington is $67,944,000 in QECB issuing authority.
Q. Who is eligible for this Recovery Act program and what can this financing be used for?
A. A broad array of “green” projects may be financed with QECBs, which are a type of tax credit bond. At least 70% of each allocation of bond issuing authority created by this program must be used for governmental purposes. Up to 30% may be issued as private activity bonds, which are bonds that benefit businesses or individuals. A jurisdiction with an allocation of QECB authority may designate an authorized issuer to issue a QECB for a project within the jurisdiction (e.g. an EDC, IDC, or state issuer may issue on behalf of a city of county).
Eligible project types include:
Type I – Capital expenditures incurred for purposes of
- Reducing energy consumption in publicly owned buildings by at least 20%.
- Implementing green community programs.
- Rural development involving the production of electricity from renewable energy resources.
- Any facility eligible for the production tax credit under Section 45 of the Internal Revenue Code.
Type II – Expenditures with respect to research facilities and research grants to support research in
- Development of cellulosic ethanol or nonfossil fuels.
- Technologies for the capture and sequestration of carbon dioxide produced through the use of fossil fuels.
- Increasing the efficiency of existing technologies for producing non-fossil fuels.
- Automobile battery technologies and other technologies to reduce fossil fuel consumption in transportation.
- Technologies to reduce energy use in buildings.
Type III – Mass commuting facilities and related facilities that reduce the consumption of energy, including expenditures to reduce pollution from vehicles used for mass commuting.
Type IV – Demonstration projects designed to promote commercialization of—
- Green building technology.
- Conversion of agricultural waste for use in the production of fuel or otherwise.
- Advanced battery manufacturing technologies.
- Technologies to reduce peak use of electricity.
- Technologies for the capture and sequestration of carbon dioxide emitted from combusting fossil fuels in order to produce electricity.
Type V – Public education campaigns to promote energy efficiency (other than movies, concerts and other events held primarily for entertainment purposes).
Important Note: This program allocates the authority to issue bonds and sell tax credits to bond or tax credit investors in order to finance energy conservation projects; it is not a direct funding program that allocates public dollars.
Q. How much authority is available?
A. Washington state’s share of the QECB total is $67,944,000, which has been divided among large jurisdictions (municipalities and counties with populations greater than 100,000) and tribes within the state based on population (see QECB Formula Allocations). If a jurisdiction does not expect to use its entire allocation, unused authority may be reallocated to the state to be used by the state or to be reallocated to other local jurisdictions. The state has approximately $9.8 million it will allocate directly to projects on a competitive basis.
Q. Where, how and when do I apply for bond issuing authority?
A. Commerce is actively working on creating an allocation process by which the counties and municipalities will access their QECB issuing authority. Counties and large municipalities may create their own processes for projects within their jurisdictions. Individual project developers will need to work with their local jurisdiction or with a state issuer to arrange for the bond issuance. Under the federal regulations, this bond issuing authority may be allocated and used until the state’s limit is reached.
Q. What is the Department of Commerce’s role in distributing the authority?
A. Commerce will administer the division of the state’s allocation among the jurisdictions within the state, and will monitor the percentages of governmental and private projects as well as the total bond issuing authority used to ensure the state does not exceed the limit of its allocation. Commerce will conduct a competitive process to allocate the $9.8 million state allocation along with any reallocated authority from large cities and counties.
Q. Are there any other rules or obligations I need to know about?
A. Specific federal tax regulations apply to projects financed under this program. Bond issuers will need the advice of qualified bond counsel and tax counsel in order to ensure the project and the bond issuance are in compliance with all applicable federal bond and tax regulations.
Federal Davis-Bacon prevailing wage rules apply to projects financed with QECBs.
Commerce is in the process of establishing procedures and timelines to distribute the formula and competitive allocations, and will be adopting rules to facilitate that process.
Q. I still have questions, who do I contact to get more information?