In Part I, Ithaca’s Green New Deal and Partnership with BlocPower set up a dilemma for Ithaca building owners and Cornell small living units. In this sequel, we will compare BlocPower to other alternatives in the current climate of bank runs and financial uncertainty.
Ithaca Historically Financed Its Infrastructure Locally
In the Frank Capra movie, “Its a Wonderful Life,” Jimmy Stewart is the manager of a small community bank, who knows all his customers and who all of Bedford Falls, NY trusts. When he faces a run on his bank, he appeals to his depositors that they know and can trust him.
This congeniality also describes the relationship between financial institutions and customers in Ithaca, NY. For all of Ithaca’s history, local financiers and community banks funded investments in the Ithaca community. Ezra Cornell launched his pioneering early telegraph business, which grew to become Western Union. Later, another group formed the Ithaca Gas Light Company to extract methane from coal to light and heat homes. The Ithaca Gas Light Company has since grown to become New York State Electric and Gas (NYSEG). Later, Ezra Cornell invested in various ventures to bring railroad lines to Ithaca.
As time went on, Tompkins County Trust and Citizens Bank emerged as Ithaca’s two long-standing community banks. Notable alumni such as Charles Edward Treman Jr. ’30 and Greg Hartz ‘83 devoted their careers to community banking. Their banks were sufficiently staffed such that if either would take time off to cheer at a track meet or play in a charity ice hockey game, the bank could operate smoothly in their absence.
The Cornell Review asked former Ithaca Mayor William Shaw ‘69 if these banks were solid because the bankers knew their customers, and the community knew their bankers:
“Absolutely, I know this first hand and know this about the last three Tompkins Trust Co Bank Presidents, as a customer, attorney for customers, as a former mayor, and how they performed as community leaders which has always been extraordinary. And another example is their personal and community leadership locally in times of recession.”
In 1994, Citizens Bank joined M&T Bank. Both M&T and Tompkins offer home improvement loans, home equity loans and personal loans that can be used to make decarbonization investments. The rates depend on the credit score of the borrower and when the loan is made.
Even if the community banks did not feel an obligation to their Ithaca neighbors, all banks are heavily regulated to assure fair credit practices and disclosures.
BlocPower
As discussed in Part I, Brooklyn-based BlocPower offers equipment leases for 15 years at 6% interest.
To show the impact, one can estimate based upon an older study of Cornell small living units adjusted for inflation. The typical small living unit with around 25 people may need to do a $1 million overhaul to install new insulation and a new electric service, and replace wiring, a gas furnace, fixtures, stove and water heater. Such a lease would require $79,836 of annual payments.
If the building houses 25 people, that would be a rent increase of $3,193 per year per bed. The electrification advocacy group Rewiring America has estimated potential savings and says the typical Tompkins County home could save $594 per year by electrifying. So, some of the lease cost may be offset by fuel efficiency savings, or tax credits, but large rent increases are still the inevitable result.
BlocPower has committed that at least 50% of its work will be targeted to disadvantaged communities within Ithaca. The New York State Energy Research and Development Authority (NYSERDA) formed a loan guarantee fund that will take the first $2.5 million of losses from Ithaca residents defaulting on their BlocPower equipment leases. Beyond that, BlocPower has received a $3 million guarantee from the Kresge Foundation.
BlocPower is currently advertising to hire a “Clean Energy Project Associate“ to represent it in Ithaca during a one-year long campaign. Although there is mention of working with local churches and organizing local volunteers, there is nothing about depositing some of BlocPower’s excess funds with local Ithaca banks.
One would hope that Collegetown landlords or Cornell co-op presidents could look at all of the alternatives and make a plan that best serves their needs. But when BlocPower visits a low income homeowner, who may lack financial knowledge, what would prevent BlocPower from “overselling” more upgrades than are necessary or affordable? BlocPower is not regulated as strictly as banks.
Cornell has yet to do its due diligence on BlocPower, but the press reports of BlocPower’s CEO conducting emergency wire transfers while locked in the airplane bathroom during the SVB crash may raise red flags.
Credit Unions
Many Ithaca residents use non-profit, member-owned credit unions for saving and borrowing. The credit unions are regulated by the New York State Superintendent of Financial Services. Credit union accounts are insured by the National Credit Union Administration (NCUA) up to $250,000.
The CFCU Community Credit Union was founded in 1953 as the Cornell Federal Credit Union. It has since expanded and merged with what started as the Syracuse University Credit Union.
The Alternatives Federal Credit Union is also based in Ithaca. It emphasizes “economic justice” and seeks to provide services for “low/moderate income and marginalized communities.” Both CFCU and Alternatives will provide various forms of financing for green new deal investments. Some of their rates are below the 6% offered by BlocPower.
Ithaca has two other credit unions: Tompkins Employees Federal Credit Union and Visions Federal Credit Union.
Incentive Programs Offered through NYSEG
Even before the Ithaca Green New Deal, NYSEG offered incentive programs for both gas and electric customers. These programs are mandated by the New York Public Service Commission which regulates NYSEG. Cornell’s small living units and Ithaca landlords are covered by the Multifamily Energy Efficiency Program. Instead of BlocPower assessing the building, NYSEG’s partner RISE Engineering develops a plan to improve energy efficiency. Although the plan provides for free installation, Cornell’s collective bargaining agreements will not allow RISE to install thermostats or lighting fixtures in Cornell-owned small living units.
For affordable housing, the NYSEG plan offers even greater incentives. NYSEG also offers plans for commercial and industrial buildings that are not prioritized by BlocPower. All of these programs are voluntary.
Do Nothing and Wait
As mentioned in Part 1, the August 2022 Inflation Reduction Act contained $391 billion of incentives, mostly in the form of tax credits. The federal approach is to use incentives rather than try to force people to convert from gas to electricity. NYSERDA also offers new programs over time. Finally, as decarbonization and solar power come to scale, new technologies may emerge and equipment may become more efficient. The result may be that those that wait until their installed gas furnace gives out will have a better set of options than someone who disposes of a working gas furnace today as a part of the Ithaca Green New Deal.
In sum, it pays to shop around for financing and to work with a lender that you trust. If you are a Cornell student, you should lobby for an adjustment in financial aid to reflect the higher rents. Finally, if you are in a small living unit, you should look at creative ways to capture the various tax incentives that come with these green investments.
Ithaca-based institutions have met the financial needs of the community for 150 years without relying upon “hot money” that can get caught up in unprecedented bank panics. Tried and true approaches can finance the Ithaca Green New Deal just as they met past challenges.
