Proposition 39 seeks to tax out-of-state companies to pay for energy upgrades

Whenever Allen Young walks into his office at The Met High School, he gets a reminder of his teenage years.

Look up, the principal says at the cozy downtown campus. Pristine wood planks lining the entryway ceiling once lived as bleachers at his alma mater.

"My wife and I both went to Sac High, so our butts graced this stuff," muses Young.

The Met, a Sacramento City Unified charter school, had a $7.5 million renovation last year driven by green energy guidelines. Insulation consists of recycled blue jeans. Countertops were once glass jars. Bathrooms have high-tech "airblade" dryers, and nary a paper towel is found.

Environmentalists say Proposition 39, which hikes California taxes on companies based elsewhere, would help aging schools upgrade their campuses as the Met has.

The initiative provides about a half-billion dollars annually for five years to retrofit schools and government offices, as well as help private building owners access green energy loans. Legislators decide how to spend the money under loose job-creation and cost-benefit guidelines, in consultation with state energy regulators and with review by a "Citizens Oversight Board."

Billionaire hedge-fund manager Tom Steyer has financed most of the campaign with nearly $22 million. Steyer, a prominent donor, spoke at the Democratic National Convention last month on clean energy ideas. His San Francisco-based Farallon Capital Management has a broad range of investments, including oil and alternative energy companies, according to its latest Securities and Exchange Commission filing.

Most Proposition 39 talk has focused on its tax element – a change to the state's corporate tax law requiring most companies to calculate their liability on how much they sell to Californians. It would generate about $1.1 billion annually, half going to green energy projects, half going to the state budget.

Critics say the state already has gobs of money going toward green energy subsidies, and they fear lawmakers will simply raid the funds for other budget purpose.

But environmentalists are thrilled by the prospect, which they say would help cash-strapped schools. They describe public buildings like a drafty old home.

"I see weatherization, improving windows, doors, heating and air cooling systems to be more energy efficient," said Jim Metropulos, a lobbyist with Sierra Club California.

It is hard to quantify how much upgrade potential exists in California's 10,000 schools. A UC Berkeley Center for Cities and Schools report in June estimated that $117 billion in investments are needed for K-12 buildings. But the report also found that California lacks sufficient data and needs better planning.

Clean energy proponents say California must modernize its buildings to help the state meet its strict target of reducing greenhouse gases 25 percent by 2020.

K-12 schools such as the Met have embarked on green energy projects using local bond funds and other district money.

Others have gone the path of homeowners, exploring solar panels to fix electricity costs. The 2,000-student Golden Valley Unified School District in Madera installed $6 million in solar panels on shade structures and unused land this summer with government rebates and a low-interest loan from the California Energy Commission.

Superintendent Andy Alvarado said the district locked in energy costs for two decades at around $385,000 a year – the same cost it was paying to use the grid.

"With the current financial situation in California, and how that has impacted the schools, we're just trying to figure out how to control costs," Alvarado said.

Joe Caves, a veteran writer of environmental initiatives who drafted Proposition 39, said the state could leverage the new money by matching local dollars for green energy upgrades.

Money would not be limited to public buildings. The initiative provides funding for local governments to finance alternative energy projects on private property. Owners would agree to pay for installation through a property tax assessment that stays with the building. Caves said that can encourage short-term property owners to invest in projects that have a long-term payoff.

Still, business groups and anti-tax activists question the need. The state will launch California's first carbon credit auction in November, raising $1 billion from businesses for greenhouse gas reduction. The state Public Utilities Commission also dedicated $3.1 billion from utility customers for energy efficiency in 2010-2012, according to the state legislative research.

"California already raises billions of dollars for energy efficiency programs," said Gino DiCaro, spokesman for the California Manufacturers and Technology Association. "(Prop. 39) is not something that is needed at all, especially when it's a tax increase on manufacturers in California."

CMTA opposes the initiative and established the only No on 39 committee in September. The group reported a mere $45,000 in contributions from three clients who stand to pay more in taxes under Proposition 39: General Motors, International Paper and Kimberly-Clark Corp. But the group has stopped fundraising.

DiCaro emphasized CMTA has greater concerns with the tax change than the energy efficiency spending.

Jon Coupal of the Howard Jarvis Taxpayers Association said the private sector is perfectly capable of energy upgrades when they make financial sense.

"Energy efficiency has been happening for 40,000 years," Coupal said. "From the time they figured out it was better to put a rock under a downed tree and then roll it on dirt."

Coupal believes lawmakers would just use the funds for their own general fund budget spending. "These special funds seem to be a cash cow," he said.

He said local and state school bonds are better sources for such retrofits.

At the Met, which used local bond funds and matching state bond dollars, virtually every fixture was designed to be energy efficient. The 65-year-old school anticipates Leadership in Energy and Environmental Design certification from the U.S. Green Building Council and verification from the Collaborative for High Performance Schools. Young said students helped plan the renovation and prepare applications for certification.

Solar tube lights brighten the school's kitchen. An on-site shower encourages faculty and staff to bike commute, and Young said half of his employees do so. A campus bicycle workshop inspires students to do the same.

Young was dismayed the school once had painted windows bolted shut, blocking natural light and breezes.

"We have something magical now where we actually feel the air," Young said, opening a new window that had adjustable blinds between its dual panes.

• Read more articles by Kevin Yamamura

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