Editorial: Oregon should fund teachers, not energy loans

Published Feb 27, 2013 at 04:00AM

When Oregon government tried to pick winners, it picked some skunks.

In 2009, there was a default on a $20 million loan to Cascade Grain for a biofuel facility near Clatskanie.

In 2012, there was a default on a $14 million loan to Peak Sun, a solar manufacturer near Albany.

Those loans both came from Oregon’s state energy loan program called SELP. And now there is a bill in the Legislature and money in Gov. John Kitzhaber’s budget to reinvigorate the program.

Is that a good idea?

Not the way House Bill 2344 is written.

“The goal is to protect and put a firewall up against any intrusion or any risk to having the general fund to front additional monies to SELP,” Anthony Buckley, division administrator of Energy Development Services Division at the state’s Department of Energy, told a state legislative committee.

But the bill doesn’t do that.

The bill gives the department more authority to do public-private partnerships. In fact, the bill’s language gives the Energy Department’s director a kind of a legislative blank check to “adopt any rules or take any other action” to carry out the loan projects.

That needs to be changed. Buckley says there are bill amendments in the works.

The SELP program has been around for about 30 years. It wouldn’t be fair to characterize SELP based only on two high-profile defaults.

The program promotes energy conservation and development of renewable energy. It has lent $580 million in 882 loans over its history.

One of those loans was $17 million for Central Oregon Irrigation District’s Juniper Ridge hydroelectric project. It’s a 2.5-mile canal-piping project with a 5 megawatt hydro generator, completed in 2010.

In its 30 years, SELP has had a total of eight loan defaults, and it currently has four others with problems, Buckley told us. The recent problems prompted concern from the state’s Debt Policy Commission.

The commission issues reports every year, and this year the report emphasized that even as the SELP program has tightened its loan standards the program could need as much as $25 million from the state in order to meet its debts.

The first question is if SELP has learned from its high-profile mistakes.

Buckley, who came into the program about two years ago, says it has. He admits SELP lent money to projects it should not have.

In the Cascade Grain project, for instance, SELP lent money for construction costs. That meant the state was lending money before there was a revenue stream to pay it back. Buckley says the program would not lend for construction costs now and has taken other steps to be more conservative.

One problem, he says, is that the SELP program strayed from its niche mission toward aggressively helping to create new industry. He wants the program to get back to its niche and promote small-scale projects, such as helping schools become more energy efficient.

There are also deeper questions about investing in SELP.

Buckley says SELP is stepping back from loans for construction costs on business projects, though it would consider other loans to private businesses.

Should Oregon be doing that? We know Oregon provides incentives and targeted benefits to businesses in many ways. But shouldn’t it look to make investments to improve the business climate overall or hire teachers for struggling schools, instead of handpicking who wins?