Scranton, Pennsylvania was once known as the Anthracite Capital of the World—a nod to its centrality to coal production for steel production. [1] By 1880, Scranton was known by another name – the Electric City – another nod to its role in America’s industrial and energy revolution. Now, with new financing tools and clean energy tax incentives brought about by President Joe Biden’s Inflation Reduction Act (IRA), Scranton and other cities like it are positioned to build out the United States’ clean energy economy.
In late March, Scranton Mayor Paige Gebhardt Cognetti greeted thirty community, non-profit, and local government leaders at the first stop of a three-day, seven-city road trip where Treasury and Commonwealth of Pennsylvania officials sought to get the word out about these clean energy incentives. The focus was simple: to make sure that every community is aware of how the IRA’s novel elective pay provisions (sometimes known as “direct pay”) can help to propel the clean energy transition, transform communities, create jobs, and save money.
IRA tax credits under elective pay (also known as direct pay) can make the difference when it comes to financing projects that are both necessary for the clean energy transition and can result in recurring cost savings for government and non-profit organizations.
Similar meetings were held in Wilkes Barre, Reading, York, Lebanon, Harrisburg, and State College, thanks to Pennsylvania Governor Josh Shapiro’s team, who worked with local government and non-profit leaders to organize these IRA information sessions. These were the first steps to execute on U.S. Treasury Secretary Janet Yellen’s commitment to reach out to 150 cities where citywide poverty is at or above 20 percent; there is a history of population decline; and there are 20,000 or more residents. [2] These communities may have often been left out or left behind, but they are also places where state and local leaders care deeply and are committed to ensuring their communities flourish. Now – with the support of the IRA and the other programs of the Biden-Harris Administration’s Investing in America agenda – these places are beginning to see a comeback.
IRA is driving clean energy investments and job creation across America. The Biden-Harris Administration is committed to making sure that those investments reach the places in our nation that need them the most. And that commitment is producing results:
- 69 percent of clean energy investments announced since the IRA was passed have been in counties where the employment rate is below the national average.
- 75 percent have been in counties where the median household income is below it.
- 84 percent have been where college graduation rates are below the national rate.
Just as the IRA has spurred clean energy investment by the private sector, it can do the same with the public and non-profit sectors. Because of direct pay, entities that generally don’t pay Federal income tax such as state and local government and many non-profit organizations are now able to access tax credits to help pay for clean energy investments from charging stations to electric vehicles to batteries and geothermal plants.
While direct pay is a new and different concept, especially for local governments, awareness is growing. That’s due in part to ongoing efforts by Treasury and outside organizations committed to engaging local governments. The U.S. Conference of Mayors, the National League of Cities, the National Association of Counties and the Government Finance Officers Association in particular have been strong partners in this effort.
But many local governments aren’t yet aware of direct pay. That’s particularly true for those local governments that have jurisdictions characterized by high poverty and population decline, where the combination often leads to real drains on local government capacity.
As Secretary Yellen noted in her March speech in Kentucky, the Treasury Department wants to ensure that every local government is aware of and takes advantage of the opportunities to secure funding under direct pay. [3]
For that reason, Treasury is reaching out to the leadership of 150 cities in the next six months. The 150 cities are all in different stages when it comes to their economic comeback. For example, in Detroit, the City is pursuing an ambitious plan to create six solar farms in neighborhoods to create enough renewable energy to offset the use by all City buildings. [4] Officials in Reading reported that they had already completed projects and were ready to file for direct pay. [5]
Treasury has also joined the Thriving Communities Network (TCN), a collaboration across the federal government to target resources from the Administration’s historic investments through the American Rescue Plan, the Bipartisan Infrastructure Law, the Inflation Reduction Act, and the CHIPS and Science Act to communities with histories of economic distress and systemic divestment. Through TCN, Treasury is already starting to work with the Department of Agriculture’s Rural Partners Network to coordinate outreach to high poverty rural counties. [6]
As work of direct pay spreads, it will be a force multiplier for every community as we work as a nation to transition to a clean energy economy.
[1] About Scranton – City of Scranton (scrantonpa.gov)
[4] City announces 9 finalists for Solar Field Host Neighborhoods | City of Detroit (detroitmi.gov)
[6] TCN Letter