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About East Oregonian : E.O. (Pendleton, OR) 1888-current | View Entire Issue (Aug. 28, 2015)
Friday, August 28, 2015 OFF PAGE ONE CREDITS: $703.6M in energy tax credits sold to investors from 2006-2014 Page 8A East Oregonian Continued from 1A cents on the dollar as negoti- ated by Blue Tree Strategies’ client Sky Lakes Medical Center in Klamath Falls. Two other clients, public transit providers in southern Oregon, had arranged to sell their tax credits for 80 cents on the dollar, rather than 95 to 98 cents under a pricing formula required in state law. For Blue Tree Strategies and its clients, the knowledge they could negotiate deeper discounts was a competitive advantage: they could market tax credits that were less expensive and therefore more attractive to buyers. Energy of¿cials’ decisions to allow the lower negotiated prices also meant the tax credits raised less money for the energy ef¿ciency proMects lawmakers wanted to incen- tivize. Close ties Blue Tree Strategies has ties to the Department of Energy going back to at least the start of then-Gov. John Kitzhaber’s third term, when the ¿rm landed a contract with the nonpro¿t Clean Energy Works Oregon to promote the state’s Cool Schools energy retro¿t program to school districts. The consultants also administered grants to supplement the state program. The department runs Cool Schools, which was part of Kitzhaber’s Mob creation platform during his 2010 campaign. It helps schools to install new energy-ef¿cient technology such as lighting and heating, ventilation and cooling systems. Blue Tree Strategies also interacted with the city of Portland, the governor’s of¿ce and Clean Energy Works Oregon even before the Cool Schools contract. Aaron Berg, the compa- ny’s founder and owner, contracted with the city of Portland in 2010 to help launch Clean Energy Works Oregon, which got its start with $20 million in federal economic stimulus money. The Kitzhaber administra- tion was interested in the nonpro¿t’s work and while Berg was Clean Energy Works Oregon’s chief ¿nan- cial adviser, the governor’s business adviser Scott Nelson attended the nonpro¿t’s meetings. Consultants working for Blue Tree Strategies also included Matthew Collier and John Warner, who previously worked at the Portland Devel- opment Commission. Collier and Warner also marketed tax credits through the corpora- tion RDTFM, Inc. Together, Blue Tree Strat- egies and RDTFM, Inc. have lined up more than two dozen tax credit sellers, including several local governments, and approximately 50 buyers since they started brokering tax credits in 2009. Public clients included the Port of Portland, Metro regional government, TriMet transit agency and Columbia and Marion counties. RDTFM, Inc. dissolved in 2014 and the consultants now all work for Blue Tree Strategies. Berg doesn’t characterize Blue Tree Strategies as a maMor broker of Oregon energy tax credits. Nonethe- less, Berg said, the Blue Tree Strategies and RDTFM, Inc. has helped sell approximately $15 million in state energy tax credits as of early August. The Portland Bureau of Transportation alone sold roughly $2 million worth of tax credits through Blue Tree Strategies. Still, Berg said, “we’re not a big player in this.” Berg pointed to ¿gures reported by EO Media Group/Pamplin Media Group Capital Bureau, that $703.6 million in Oregon business energy tax credits were sold to investors from 2006 to 2014. The Department of Energy was also still facilitating tax credit sales during that period. Other tax credit brokers were mostly accounting ¿rms, lawyers and ¿nancial advisers, according to chief ¿nancial of¿cer Anthony Buckley and state records. Local governments and private clients paid the two ¿rms hundreds of thousands of dollars for facilitating the sale of their credits. According to public records, Blue Tree Strategies and RDTFM, Inc. charged a commission of 2 percent to 10 percent on the tax credit sales. Berg said Blue Tree Strategies started to broker tax credit sales after meeting people who were struggling to ¿nd buyers. “We didn’t seek it out,” Berg said. “Our experience in the ‘09, ‘10, ‘11 days was our clients had a problem. And their problem was (Oregon Department of Energy) wasn’t selling their credits for them. But for that problem, we would never be in this business.” Rachel Wray, a spokes- woman for the Department of Energy, said it was dif¿cult for the agency to keep up with demand for buyers after the state expanded the program. The Legislature passed a maMor expansion of the business energy tax credits in 2007 at the urging of then-Gov. Ted Kulongoski. Then, after it became clear the business energy tax credit would cost the state far more in lost revenue than energy of¿cials had promised, lawmakers voted to end that tax credit in 2011. Energy of¿cials shifted their focus away from helping energy proMects ¿nd buyers for their tax credits. Blue Tree makes connection Around the same time, Blue Tree Strategies secured the 16-month $106,000 contract through Clean Energy Works to promote Kitzhaber’s Cool Schools energy retro¿t program and administer supplemental grants to schools. Steph- anie Swanson, director of marketing for Clean Energy Works, said the federal stim- ulus funds carried a require- ment to spend some of the money on proMects that would increase energy ef¿ciency for commercial buildings. Blue Tree Strategies coor- dinated with the state during the Cool Schools proMect and Berg said he consulted with Buckley, the energy agency’s chief ¿nancial of¿cer, about the state’s plans for the program. Part of the Mob was to sign school districts up for the state program: Collier wrote in his resume that he “led an effort to support the success of the Oregon Cool Schools Initiative to help school districts ¿nance the installation of energy ef¿- ciency measures under the (state’s) Small-Scale Energy Loan Program.” Buckley, who oversees the Department of Energy’s tax incentive, energy grant and loan programs, did not respond to questions about when he met Berg and Collier. The negotiated price deals Blue Tree Strategies and its clients pushed the state to allow this year date back to 2014, when Buckley told Blue Tree Strategies the ¿rms’ clients could ignore tax credit price mandates in state law and published rules. Buckley said his interpreta- tion of the law was based on discussions with the Oregon Department of Revenue and Oregon Department of Justice. The energy agency has refused to release a copy of the Department of Justice opinion on the issue. Although Blue Tree Strategies’ clients struck deals based on Buckley’s advice, another Department of Energy employee stood in the way. Joe Colello, who handled tax credits and other renew- able energy and ef¿ciency incentives at the agency, wanted Kaplan or the Depart- ment of Justice to con¿rm the agency could legally process deals that appeared to violate the pricing formula mandated in state law. The Department of Energy was also under increased pressure to take a public position on whether it would allow the deep discounts, because Colello had discussed the issue with a tax auditor at the Depart- ment of Revenue and other brokers had heard rumors the energy agency was allowing the deals. In January, Senior Manager Irina Antonache at the accounting ¿rm Moss Adams emailed Colello to ask if the state was allowing deeper discounts on the tax credit sales than allowed under state rules. 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