Portland Clean Energy Fund: Additional steps needed to implement voter-approved program

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Voters approved a tax to create the Portland Clean Energy Fund in 2018 as an ambitious way to tackle climate change and social inequities. This audit found that the program began putting management systems in place but other elements were not yet implemented or needed direction from City Council.
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Voters approved a tax to create the Portland Clean Energy Fund in 2018 as an ambitious way to tackle climate change and social inequities. At the end of the last fiscal year, the tax had generated more than $185 million since its inception. The Portland Clean Energy Fund program in the Bureau of Planning and Sustainability expected to spend $60 million on grants annually to achieve the legislation’s goals.

This audit assessed whether the program put management systems in place to implement the legislation. We found that the program had made progress with some elements, but othe­­­rs were not yet fully implemented or needed direction from City Council. The program:

  • Began developing accountability systems but needs timeframes for completion;
  • Needed guidance from its volunteer committee and decisions by Council on climate goals, capacity building, and expectations for oversight; and
  • Identified challenges in managing the upcoming administrative cost limit because of unpredictable revenues.

Not addressing these elements could jeopardize the City’s ability to meet the legislative intent of the voter-approved program.

Staff and volunteer committee members who manage the program should set timeframes to complete all elements of the legislation and make plans transparent. In areas where goals, responsibilities, or intentions were unclear, Planning and Sustainability management and committee members should seek guidance from Council, propose legislative amendments to City Code where necessary, and refine their systems accordingly.

Initiative petition set path for program

A diverse coalition of community members and nonprofit leaders created the initiative petition for the Portland Clean Energy Fund. During its campaign for voters’ support, the coalition said the program would address an immediate need to reduce greenhouse gas emissions, create clean energy jobs, and benefit underserved communities. Sixty-five percent of voters approved the measure in November 2018.

Some of the program’s benefits are intended to result from projects funded by grants. For example, the legislation – which became City Code after voters approved it – envisioned revenue from the program to pay for projects to deliver climate and equity benefits in the following areas:

Source: Portland Clean Energy Fund legislation
If the project category is:Then it should:And also:
Renewable energy and energy efficiency programsBroaden access to energy efficiency and renewable energyBenefit low-income people and people of color
Clean energy jobs training, apprenticeships, and contractor supportPrioritize entry into union-registered apprentice tradesSupport nonprofit organizations serving economically disadvantaged and underrepresented people in the skilled workforce
Regenerative agriculture and green infrastructureCapture greenhouse gases and support sustainable local food productionFocus on low-income people and communities of color
Future innovationProvide flexibility to fund a project that does not fall under one of the other categoriesProvide an opportunity to further program goals

The program generates money by taxing certain large retailers operating in Portland. Program budgets projected granting $60 million a year beginning Fiscal Year 2021-22.

Revenue generated by the tax outperformed early estimates. City officials expected revenues of $44 million to $61 million annually. Actual revenues were $63 million in Fiscal Year 2019-20 and $116 million in Fiscal Year 2020-21.

A nine-member volunteer committee has some program implementation responsibilities. Committee members must be Portlanders reflecting the City’s racial, ethnic, and economic diversity. At least two members must live east of 82nd Avenue. They must also have expertise in areas that were prioritized in the legislation, such as renewable energy or workforce development. Staff in the Bureau of Planning and Sustainability manage the program’s daily activities.

We assessed whether the program put management systems in place to implement the legislation. We focused on systems outlined in the legislation that would have program-wide benefits. We did not examine individual grant awards.

We found that the program had made progress with some elements, but others were not yet fully implemented or needed direction from City Council. The program:

  • Began developing accountability systems but needs timeframes for completion;
  • Needed guidance from its volunteer committee and decisions by Council on climate goals, capacity building, and expectations for oversight; and
  • Identified challenges in managing the upcoming administrative cost limit because of unpredictable revenues.

Not addressing these elements could jeopardize the City’s ability to meet the legislative intent of the voter-approved program.

During the time period covered by this audit, the program hired staff, recruited Council-appointed volunteers to serve on the committee, engaged the public, and issued its first grant application solicitation and awards. Staff and committee members worked together for more than a year to create the solicitation and recommend projects for funding. They undertook a detailed planning and public engagement process to do so. The program adopted a preliminary performance measurement and reporting system and identified information to collect to prepare a workforce and contractor equity plan.

Finalizing those essential elements should involve consideration of tradeoffs and risks and transparency with Council and the public to ensure the program meets expectations. We address some of the tradeoffs and risks in the following sections, which remain present while the program is issuing tens of millions annually in grants.

Accountability systems not finalized

The purpose of the voter-approved program was to provide funding and oversight “to ensure that the City of Portland’s Climate Action Plan is implemented in a manner that supports social, economic, and environmental benefits for all Portlanders” and ensures a diverse contractor and workforce pool. To do that, the measure directed the program’s committee to:

  • allocate funds in specified, proportional categories to the extent possible;
  • adopt a performance measurement and reporting system; and
  • adopt a workforce and contractor equity plan with ambitious, measurable goals.

Plan for reporting spending by category complicated by approach chosen
The committee recommended its first portfolio of grants to City Council in April 2021, which Council approved unanimously. The portfolio included awards totaling $8.6 million via 45 grants.

The legislation set ranges to guide the program of the proportion of funding that should go to each category to the extent possible.

Source: Portland Clean Energy Fund legislation
If the funding category is:then it should get:
renewable energy or energy efficiency40-60% of funds
clean energy jobs training, apprenticeships, and contractor support20-25% of funds
regenerative agriculture and green infrastructure10-15% of funds
future innovation5% of funds

The program did not report on whether its activities by grant category were consistent with target proportions in the legislation. The presentation of the recommended grants to Council used descriptions that were a mix of funding category and grant type. The narrative generally stated that small and large grants were distributed within the target funding areas, and planning grants were distributed across all areas.

A tree map illustrating seven grants were allocated to clean energy and totaled $3,090,654. 29 grants were allocated to planning and totaled $2,549,968. Four grants were allocated to workforce and totaled $1,858,206. Four grants were allocated to regenerative agriculture/green infrastructure and totaled $937,312. A small grant addressed two funding categories: clean energy and workforce and the grant totaled $199,260.
Source: Funding allocations reported by Portland Clean Energy Fund to City Council in April 2021. Note: The "Multi" category represents a small grant that addressed two funding categories (clean energy and workforce).

The program planned to report on funding allocations based on a three-year rolling average and anticipated the possibility of funding falling outside of the legislation’s allocation goals in any given year. This approach was noted in draft grant application requirements and scoring guidance issued for public comment in June 2020. Program managers said in an audit interview that reporting by funding categories will be based on actual dollars spent rather than grant award amounts. That means the earliest opportunity to report on initial spending by grantees will be in 2022. In addition, staff explained this accounting is particularly important for the $2.5 million in planning grants which may have variation between anticipated and final funding categories.

Reporting methods were discussed among committee members and staff but had not been finalized or presented to Council. Reporting the average for actual dollars on a rolling three-year basis will make it hard for the program to have the timely financial information it needs to ensure allocations match the proportions called for in the legislation, and to know and advertise how much is available for future grants.

Program planned to use grant information to inform performance goals
The program had not adopted a methodology to measure, track, and report performance – as required by the legislation – but began laying the foundation for it in April 2020. The committee established an evaluation and reporting subcommittee in November 2020 to discuss program metrics as well as grantee outputs and outcomes. Planning and Sustainability’s budget request as submitted in January 2021 stated the program anticipated collecting performance data, including disaggregated demographic information tied to grant investments, to understand and adapt the program. Staff anticipated that the development of its program-level performance measures would occur over the next two-to-three fiscal years.

The committee reviewed a draft list of performance measures in April 2020 that was used to inform grant application questions, scoring criteria, and reporting requirements. For example, staff included greenhouse gas impacts in their early feasibility screening of these inaugural grants. In its presentation seeking Council approval, staff used the metric of “estimated lifetime reduction in greenhouse gas emissions for projects with physical improvements is roughly 11,500 metric tons.” Grantees committed in their grant agreements to being measured by and reporting data for that metric.

All grant recipients have common reporting requirements as well as those that are specific to the type, size, and phase of the grants. For example, a green infrastructure project will need to report on the area of the project in terms of acres or square feet. A regenerative agriculture project will report on the estimated volume of annual harvest. Staff and the committee intended for these reporting requirements to provide the program with meaningful information needed to be accountable to Council and the public. Ensuring that grantees provide valid performance data will be fundamental to the implementation of the program’s goals and its ability to communicate reliable results to Council and the public.

Work in progress for workforce and contractor equity goal setting 
The legislation required the committee to adopt a workforce and contractor equity plan with ambitious, measurable goals for training and hiring people from historically disadvantaged groups. The measure said the committee should consult with appropriate stakeholders as well as incorporate City procurement practices to develop the plan and goals.

Program staff said during meetings with the committee and stakeholders that information was not yet available to set meaningful goals. Staff identified the need for a labor market study designed for the types of projects the program was set up to fund. Existing labor market data were not useful because they were for larger-scale projects than those likely to receive grants from the program.

As a result, the program has been using a preliminary approach since January 2020 while it obtains the information it needs for defining goals. That approach includes gathering information from grant applications and scoring criteria that, as noted earlier, was developed by staff and committee members using a public engagement process that reflected a variety of stakeholders and a public comment period.

Notably, templates for workforce and contractor equity agreements called for in the legislation were tailored to the different types of grants and projects and informed by the public and committee feedback as well as a review of accepted practices. They covered a variety of complex technical areas, such as thresholds for when prevailing wage rates would be required.

Staff said all grantees agreed in writing to provide the baseline information needed for performance measurement, such as disaggregated demographic data about the workforce and contractors used for funded projects. The program also planned and budgeted for a labor market study to be conducted this Fiscal Year 2021-22 to supplement the information reported by grantees. As noted earlier, Planning and Sustainability anticipated that the development of the program’s performance measures – including those related to workforce and contractor equity – would occur over the next two-to-three fiscal years.

Program needs guidance on climate goals, capacity building, and oversight

While the initiative petition set the path for implementation, additional guidance from the committee and decisions by Council are needed for core aspects of the program. That is because the legislation referenced since-expired climate system criteria, provided limited direction about capacity building, and did not specify who was responsible for oversight. Similar to other areas we report on in this audit, addressing each of these elements involves consideration of tradeoffs and risks and transparency with Council and the public to ensure the program meets expectations.

Funding categories take precedence as Climate Action Plan has expired
The legislation tied goals for the program to the City’s Climate Action Plan, but it expired in 2020. The Climate Action Plan set a vision for Portland’s local climate strategies and included 20 objectives and 247 action items. The Bureau of Planning and Sustainability, which developed the Climate Action Plan, did not anticipate a new plan to be finished for several years.

Staff said that in lieu of the Climate Action Plan, they used Council’s 2020 climate emergency declaration for guidance. Council adopted the declaration about a year and a half after voters approved the measure. In part, Council’s declaration:

  • Set new goals for reducing carbon emissions to 50 percent below 1990 levels by 2030 and reaching net-zero emissions by 2050; and
  • Directed Planning and Sustainability to launch an equity-focused climate justice initiative in partnership with other governments and members of the public.

The Portland Clean Energy Fund’s related City Code has not been amended with this replacement criteria, which left the program to determine for itself how to contribute to the City’s updated climate strategy. This is particularly important for the committee whose legislative responsibilities to evaluate the program’s effectiveness and recommend changes to Council refer to the Climate Action Plan, not the emergency declaration.

The program needs to understand Council’s perspective on how the legislation’s funding categories fit into the City’s climate emergency declaration. Without Council’s input, the City could miss opportunities for the program to prioritize within its funding categories to help effectively achieve those goals most relevant to Portland’s climate emergency declaration.

Program needs clarity on capacity building 
Community organizations may need help building their capacity to compete for grants and deliver the outcomes the legislation intended. Examples of capacity building activities include pay for employees, financial records management, staff training, and technology investments.

The legislation referenced the importance of capacity building and allowed the committee to consider it in funding decisions but did not elaborate on how it should be implemented. As a result of public input, the committee’s adopted guiding principles for the design and implementation of the program included capacity building in its “community powered” principle.

The program paid for a variety of capacity building activities during the audit period without a working definition of which activities should qualify as such. The program offered translation and interpretation services as well technical assistance – such as grant writing and budgeting workshops – to help lower the barriers to entry for organizations interested in receiving project grants from the program. The inaugural grants awarded in April 2021 may also include capacity building components, depending on the grantee and proposed project.

There was more capacity building guidance and strategy tied to the smaller-scale portfolio of grants. The committee recommended in June 2020, and Council approved, competitive grants of up to $5,000 to help smaller nonprofit organizations – particularly those that serve communities of color – build their internal capacity and prepare for future grant opportunities. The initial allocation of $200,000 for Application Support Grants expanded in April 2021 to $400,000 with the creation of an ongoing Mini-Grant Program for projects and activities that can include capacity building.

While the legislation prioritized funding individuals, communities, and organizations that have been historically under-resourced, greater clarity about capacity building could help the committee ensure it is considered in its grant recommendations. In addition, clarity of purpose could help determine whether the program should establish performance goals to achieve better outcomes consistent with its adopted “community powered” guiding principle.

No oversight body specified; responsibility ultimately remains with Council 
An effective oversight body looks after a program’s operations as well as scrutinizes and questions management’s activities. Unlike other voter-approved programs, the legislation that created the Portland Clean Energy Fund did not assign its committee of volunteers with oversight responsibilities. Rather, the “oversight structure” for the program is the legislation itself.

While not explicitly charged with oversight, the language in the legislation assigned the program’s committee more responsibilities as well as a different relationship to Council and staff than similar City advisory bodies. The Fund also differs from the City’s other voter-approved programs because it was created by an initiative petition rather than a Council-developed referral to the ballot.

Many of the additional responsibilities assigned to the committee would otherwise be performed by City staff. We compared the powers and responsibilities of advisory bodies for other voter-approved City programs: Arts Tax, Children’s Levy, Fixing Our Streets, and Housing Bond. Unlike them, the Fund’s committee has the unique authority to hire its own staff.

The combination of two of the committee’s primary responsibilities as identified in the legislation requires it to objectively evaluate its own work, which may make it difficult for members to be skeptical of their decisions, provide criticism, or correct problems. The two responsibilities are 1) to make funding recommendations to the Mayor and Council, and 2) to evaluate the effectiveness of the program in achieving the goals of the legislation. The committee is expected to help design, implement, and oversee core elements of grantmaking – which is why it is publicly referenced as a “grant committee” – but is also responsible for the evaluation of those activities.

Without clear oversight responsibilities assigned to the committee, Council remains ultimately responsible for decisions even though the legislation also created unique checks on Council’s governance of the program. The Mayor and Council are supposed to appoint the committee’s nominees unless there is a good cause not to. Council also is required by the legislation to explain its actions if Council rejects the committee’s grantmaking recommendations. The legislation says Council “shall provide the Committee with a written explanation of the decision,” and Council’s reasoning is to be posted to the program’s webpage.

The volunteer committee deserves credit for its activities to date. The workload for the inaugural group of unpaid volunteers was substantial, including attending night meetings, scoring applications, and serving on subcommittees. Program staff said they were working with the volunteers to make committee responsibilities less time-intensive.

Staff viewed the committee and Council as sharing oversight of the program. The committee was responsible for initial deliberations while Council made final decisions. Based on a report by one of the chief petitioners, the legislation envisioned the program’s governance model to include community leadership to ensure equity was integrated in the program’s implementation. In a 2019 audit, we reported on the tradeoffs that exist when volunteer committees are tasked with oversight. It will be important for Council to monitor whether the Fund’s legislation is working as intended, responsibilities are exercised as assigned, and new inequities are not introduced.

Cost cap, variable revenue challenge program planning

The program used two types of cost categories: programmatic and administrative. The legislation capped the amount the program should spend on administrative costs to 5 percent of tax revenues, but excluded tax collection and audit costs from this limit. The initiative petition scheduled the administrative cap to take effect in 2021. Delays in hiring and committee appointments prompted Council to revise the legislation and extend the implementation of the cost cap to July 2022.

Costs should be clarified
Administrative costs for organizations vary based on the number and amounts of grants awarded, staffing, and other factors. Because there is no industry benchmark for the amount an administrative cap should be or what costs should count against it, management has discretion in deciding which costs it categorizes as administrative. There are tradeoffs with that discretion because a dollar spent on administrative costs is a dollar not spent directly on programmatic grants or activities to achieve the organization’s goals.

Staffing is categorized as an administrative cost in the legislation, but other types of costs may be harder to identify as programmatic or administrative. For example, in the absence of legislative guidance, the program classified capacity-building activities, trainings for grant applicants, the labor market study, and project quality assurance services as programmatic rather than administrative costs. The program requested more than $1 million in its budget for these types of costs Fiscal Year 2021-22. Staff members said they planned to seek an opinion from financial auditors about whether their classification of these costs was appropriate. Without a transparent categorization of costs, the program’s reputation is at risk should Council or the public question its accounting for and compliance with the administrative cost cap.

Budgeting with unpredictable revenue was difficult
Effective program management involves marrying available budget and project opportunities to achieve programmatic goals. Predicting how much revenue the tax would generate was difficult because it was new and implemented while Covid-19 was impacting the economy. Because the sum available for administrative costs is a percentage of revenue, it will be a challenge to manage the program’s potentially volatile operating budget from one year to the next, especially if there is a sharp economic downturn.

There are two issues that made budgeting difficult for the program. The first is the difference between estimated and actual revenues, and the second is the timing of when actual revenues are available to spend.

The Revenue Division in the Office of Management and Finance originally estimated annual tax receipts of $54 million to $71 million. The estimates were adjusted downward in December 2019 to $44 million to $61 million after Council approved changes about how large retailers were taxed. Actual revenues were $63 million in Fiscal Year 2019-20 and $116 million in Fiscal Year 2020-21. There was a sharp increase in revenues at the end of the most recent fiscal year because retailers paying the tax outperformed projections. The administrative cost limit, therefore, would have been about $3.1 million one year and $5.8 million the next.   

The timing of when revenue is collected and when it is available to the program was also tricky. The time lag made managing the receipts complex. The Revenue Division must reconcile receipts from actual taxes owed based on filed returns to prepayments made based on estimated taxes owed. Council adopted a prepayment grace period for the program’s initial tax year in 2019 and waived penalties and interest on overdue amounts. As a result, the Revenue Division decided not to provide updated revenue estimates for the program until it obtains enough information to present a more stable estimate. The Revenue Division said it will be able to provide better estimates once the tax matures over the next year or two.

This necessitated some guesswork from the program on its ability to operate within the upcoming administrative cost cap. Management reported in its requested budget for Fiscal Year 2021-22 that its administrative cost rate would be 5.2% by using the midpoint in the Revenue Division’s projected range, which was $52.5 million. Staff said the program would research whether to change the calculation of the administrative rate from an annual to a cumulative basis to provide more consistency for budget management. It is important that Council understand how management is using its discretion to categorize costs and which assumptions underlie reports of its performance against the cap to determine if adjustments are needed.  


The Commissioner-in-charge and the Director of the Bureau of Planning and Sustainability should work with the committee to ensure the Portland Clean Energy Fund:

  1. Sets timeframes and publicly presents plans to Council for:
    • Reporting on funding allocations by category;
    • Setting program performance goals and developing reporting system; and
    • Completing their workforce and contractor equity plan.
  2. Proposes to Council a plan for how the program will proceed with the legislation’s climate initiatives given that the Climate Action Plan has expired.
  3. Proposes to Council guidelines for the purpose, qualifying activities, and desired outcomes of capacity-building spending for the program.
  4. Evaluates oversight responsibilities and, if needed, seeks input and proposes legislative changes to Council.
  5. Clarifies and communicates to Council which expenses are included as administrative costs subject to the cap.
  6. Continues to work with the Revenue Division to obtain timely revenue reports to improve budgeting and administrative cost management.

Commissioner, Bureau, and Committee Co-Chairs generally agreed with our recommendations

View the joint response to the audit from the Commissioner-in-charge, Planning and Sustainability Director, and Committee Co-Chairs.

How we did our work

The objective of this audit was to assess whether the Portland Clean Energy Fund program had put management systems in place to implement the legislation. Our audit period covers activity from February 2019 when Council first adopted Code changes after voters approved the initiative to April 2021 when Council approved of the program’s inaugural portfolio of grants. The one exception being revenue numbers that were based on audited financial statements as of June 2021 (Fiscal Year 2020-21). Individual grant awards were outside of the scope because none had been awarded at the start of the audit.

To accomplish our objectives, we:

  • Reviewed Measure 26-201, relevant Portland City Code and City administrative rules, and available and applicable program guides, budgets, procedures, and committee records;
  • Interviewed employees in the Bureau of Planning and Stainability, members of the program committee, other relevant City officials, members of the Measure 26-201 coalition, and Energy Trust of Oregon staff;
  • Reviewed City Council actions, meeting minutes, and related supporting documentation;
  • Reviewed and assessed inaugural grant information, and interviewed application support grant recipients;
  • Assessed administrative spending by comparing revenues and budgeted expenditures against the administrative cost cap;
  • Assessed climate, equity, and accountability system requirements in Code against program activities completed during the audit period;
  • Assessed the program’s oversight system against standards for internal control;
  • Reviewed the oversight roles and responsibilities for other voter-approved City programs: Arts Tax, Children’s Levy, Fixing Our Streets, and Housing Bond; and
  • Reviewed relevant audits published by our office as well as other jurisdictions.

We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Audit Team: Tenzin Gonta, Performance Auditor III, Gordon Friedman, Performance Auditor I, Elizabeth Pape, Performance Auditor II