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Why state and local governments should review statutes governing financing of infrastructure projects and add explicit language to include conservation measures

Resource conservation gets recognized as a supply – in one state….

In 1987, the Supreme Court of Washington decided a case in favor of the city of Tacoma, which validated the city’s Electrical Energy Conservation Ordinance. In that case, the electric utility operated by the City of Tacoma paid for installation of conservation devices in commercial and residential structures, and the ordinance was challenged on the grounds that the conservation measures were not authorized by statute, and further, that the program violated the state constitutional gift clause. In an opinion validating the ordinance, the Supreme Court of Washington held that although the individual powers granted to the city with respect to providing power and light did not include conservation explicitly, “in the world of electric utility professionals, an investment in conservation is considered the equivalent of purchasing electricity or of purchasing an electric generating facility.”[i] While this early judicial recognition of the importance of treating conservation measures as equivalent to supply set the stage for statutory amendments and refinements, most state and local governments have not yet made the leap to adopting explicit statutory language that defines supply as including conservation. Why does this matter?

Limited legal frameworks remain – in many states…

Most state laws dictating how local governments can spend their money were put in place at a time when the primary solution to meeting growing utility resource needs was to construct large centralized new facilities. However, as resources have dwindled and technology has become more advanced, conservation efforts have become more vital to utilities and individuals as a means of reducing demand and maintaining adequate supply for an entire customer base. While from a practical standpoint, like the Washington Supreme Court stated, anybody in the world of utility professionals knows that investing in conservation is the same as investing in a supply increasing facility, most state statutes have not caught up.

In a recent project here at the Environmental Finance Center, we looked at the legal and policy framework within which a regional water utility in Florida might be able to bond finance small scale conservation investments that would be installed and owned by private property owners. These “distributed infrastructure projects” could include installation of soil moisture sensors for irrigation systems, water efficient washing machines or dishwashers, or other such distributed water conserving devices. An evaluation of Florida’s legal framework, however, revealed statutory definitions under which conservation measures such as these don’t fit nicely and are not explicitly authorized. For example, calling 1,000 water efficient washing machines “facilities for the production and transmission of water” may be a stretch, and could potentially bring about a legal challenge. Although this doesn’t necessarily preclude entities, such as a regional water utility in Florida, from being able to bond finance such projects, clarifying language in the statutes of all states would give local governments a much clearer legal path to go about funding conservation efforts.

How can statutes be amended or refined – in all states… 

To address the issue of limited statutory definitions, state and local governments need to add in terminology that unquestionably covers what they seek to finance, with respect to conservation measures or distributed infrastructure projects. As an example, the City of Philadelphia has elected to address its major stormwater problems through the use of “green infrastructure” on both public and private properties. To ensure that water and stormwater rates could be used to finance “green infrastructure” projects, the city explicitly included the term “green infrastructure” into its governing language.

Alternatively, statutes could be amended to allow for financing of a general term to encompass conservation measures, such as “resource management.” In such a scenario, to avoid any confusion, “resource management” would likely need to be further defined to include conservation or efficiency efforts or projects.

Another way in which states are ensuring that distributed infrastructure projects in the energy or water sectors can be funded the same as traditional infrastructure projects is by including language that more specifically defines efficiency or conservation projects as supplying or producing a resource. As an example, as part of the legislation governing its Central Valley Project, California statutes highlight the amount of water necessary to meet regional demands, and provide explicitly that a portion of the water requirements “may be economically met by water conservation and reclamation projects which produce substantial quantities of additional usable water for use in areas of the state with inadequate local supplies.”[ii] As another example, in its Water Code, Texas defines “conservation” as “the development of water resources”; and “those practices, techniques, and technologies that will reduce the consumption of water, reduce the loss or waste of water, improve the efficiency in the use of water, or increase the recycling and reuse of water so that a water supply is made available for future or alternative uses.”[iii]

This type of language that explicitly states that a conservation project is one that will increase supply would help local governments or other entities utilize financing for conservation projects even under statutes that are somewhat outdated and limited. Rather than needing to list out every possible project or technology that an entity might want to fund, all such conservation efforts could be permissibly funded under the definition of “supply.” The clearer the better – the more directly state and local laws communicate the principle articulated above by the Washington Supreme Court, the easier it will be for governments to have broad potential to fund conservation projects.

How have you seen state or local government entities treating conservation projects as equivalent to traditional supply projects?

Erin Riggs is a legal advisor to the EFC. She is a graduate of the University of Florida’s Levin College of Law where she pursued a law degree with a specialization in Environmental and Land Use issues.

[i] City of Tacoma v. Taxpayers of City of Tacoma, 108 Wash.2d 679, 692 (Wash 1987).

[ii] Cal. Water Code Ann. §11951(f).

[iii] Texas Water Code §15.001(9).

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