Sustainable Funding for Sustained Impact
Learn how Denver created the Climate Protection Fund to advance both equity and climate action over the long haul
Through support and resources from Bloomberg Philanthropies’ network of partners, the 25 cities in the American Cities Climate Challenge (ACCC) have taken bold action against climate change. While participating in ACCC, Denver established the Climate Protection Fund to generate a sustainable source of funding for the Office of Climate Action, Sustainability, and Resiliency (CASR), ensuring that Denver would continue making progress towards its ambitious climate goals beyond the end of the Challenge.
As the May 20, 2020 meeting of the Denver Climate Action Task Force stretched on, the discouragement was palpable, even through Zoom. The members had a critical decision to make, and they weren’t happy with their options.
In the five months since its formation, the task force had achieved some remarkable benchmarks toward its charge of reviewing Denver’s existing climate program, identifying gaps, making recommendations on tactics and investments to reduce emissions, while simultaneously improving equity. It had engaged with thousands of community members, reached consensus on long-term emissions reduction objectives for the City and County of Denver, and formulated specific recommendations for city action to target four primary emissions sectors. The key holdup? Funding. The group still needed to identify the revenue sources that would enable them to realize their vision.
Two Imperfect Options
Months prior, the task force had formed a subcommittee and charged it with comprehensively identifying and evaluating ways to generate revenue. Initially, the task force members were optimistic that an attractive suite of options would emerge that would be both politically and logistically feasible. On May 20, those expectations were formally shattered. Though the revenue subcommittee had investigated many ideas, in the end limitations imposed by federal regulations, Colorado law, and the task force’s tight timeline had winnowed the slate of potential major funding mechanisms to only two options. Both had flaws.
The first option was an energy use tax that would be assessed on each kilowatt of electricity and therm of natural gas used by customers. The tax would be collected through customers’ Xcel Energy or natural gas provider bill, then transferred by the utility provider to the city. The concept was appealing because the tax had the potential to not only raise revenue but also disincentivize a behavior — high energy consumption — that directly contributes to climate change. However, unresolved legal questions clouded the outlook for moving forward with this option.
Even more concerning to many task force members were equity issues for residents who are already disproportionately energy burdened. Low-income households in Colorado already typically spend 10 to 15% of their income on gas and electric utilities — far higher than the 1 to 3% spent by the average American household. “We think of energy as a top-of-the-stack bill, like your rent or mortgage or water bill,” says Jennifer Gremmert, the CEO and Executive Director of Energy Outreach Colorado. “The more people are paying for energy costs, the less they can afford for food or possibly medicine.” The proposed energy tax would only increase the disparity.
The second option under consideration was a sales tax. Legal opposition would be unlikely, and collection would be straightforward. From a behavioral economics standpoint, the tax was neutral — it would neither reward nor punish energy conservation. Like the energy use tax, however, the sales tax would be a regressive measure. Although everybody pays the same tax rate, that amount represents a larger percentage of income for low-income taxpayers than from high-income taxpayers, further exacerbating energy burden inequities .
To understand why the equity issues with the two funding options felt like such a devastating setback, it is important to understand the context of how the task force came to be, what it was charged with accomplishing, and what was happening in the world as the task force went about its work.
How equity became the touchstone of Denver’s climate policy
In 2019, a grassroots group called Resilient Denver crafted a proposed ballot measure to impose an energy use tax in Denver and use the revenue for climate action. The measure narrowly failed to collect the required number of signatures by the deadline for the 2019 ballot. Climate-conscious members of Denver City Council also proposed their own version of the measure to be referred to the ballot through Council. Although a narrow majority of the Council members planned to support the tax, Mayor Michael B. Hancock telegraphed his intention to veto the ordinance if they voted to refer it to the ballot. While the Mayor understood the urgency of climate action, he wanted to ensure it did not come at the expense of equity. Instead, he saw an opportunity to address climate change and racial justice in tandem. So, on August 26, 2019, City Council and the Mayor’s office reached the compromise from which the task force was born.
Council agreed to delay action on its version of the energy use tax ordinance. In exchange, Mayor Hancock announced the formation and funding of a new office of Climate Action, Sustainability and Resilience (CASR). The office would consolidate existing sustainability staff in the Mayor’s office and Department of Public Health & Environment and report directly to the Mayor’s office. CASR had a year to staff up and define priorities before becoming fully functional. In the meantime, the city would immediately launch a Climate Action Task Force to examine Denver’s current climate plans and programs, identify gaps, and analyze funding needs to address climate change equitably.
Even after CASR was formed, Resilient Denver continued with its signature-gathering efforts so that its ballot measure could be placed on the 2020 ballot if the task force failed to produce satisfactory recommendations for funding immediate climate action. City Council similarly retained the option to move its version forward if necessary.
Over 260 people applied to join the task force, and the 25 members selected included advocates from Black, Brown, and Indigenous communities alongside representatives from the fossil fuel and renewable energy industries, small businesses, real estate, environmental groups, religious institutions, transportation organizations, and youth-led organizations. The task force began by engaging experts, local stakeholders, and community members to determine where Denver should focus its climate action efforts and how the programs should be funded.
One immediate theme in the task force’s research was that the effects of climate change — from extreme heat to hail to flooding to air pollution — are felt most acutely in the communities that have long been harmed by systemic racism. “The government has a legacy of policies that have resulted in significant pollution and disproportionate risks in our under-resourced communities from climate events,” says Jorge Figueroa, Community Partnerships Administrator for CASR. For example, many neighborhoods in the west and north parts of Denver were historically subject to redlining, a discriminatory banking practice in which the federal government classified certain urban neighborhoods as “hazardous” for the purpose of property investments based on racial and ethnic makeup. Without federal backing, banks would not make mortgages on homes in redlined areas, preventing people of color from building intergenerational wealth through homeownership. In this way, redlining perpetuated neighborhood segregation and led to significant wealth and health disparities that persist today.
The task force recognized that without intentional interventions, the disparities would continue widening. Take extreme heat. On average, the daily high temperature in Denver exceeds 95 degrees 17 more times each year now than it did during the 1970s. Sweltering summers impact everyone, but the harm is magnified in neighborhoods in north and west Denver. Because they tend to have more concrete and less green space, these neighborhoods get physically hotter, often by several degrees. Residents are more likely to be energy burdened, and therefore unable to absorb the cost of installing and running air conditioning to cope with the heat. Vulnerability is worsened by insufficient public amenities like cooling centers and shady parks, and population characteristics like age, mobility impairments, and other disabilities limit access to such amenities even where they do exist. Heat also exacerbates poor air quality and its attendant health impacts, already a persistent problem in these neighborhoods because of proximity to major highways, factories and industrial areas.
The task force began by prioritizing equity, working with a consulting group that specializes in social justice from its first meeting. Then, external events raised the stakes even higher. As the task force wrote in the introduction to its recommendations report:
“We launched in January of 2020, before a trifecta of acute and interrelated crises unfolded during the writing of this recommendations report: a health crisis due to the COVID-19 pandemic, the associated economic crisis, and the racial justice crisis further brought to light by the killing of George Floyd by a police officer.”
Between the emerging national focus on systemic racism and feedback from stakeholder and community members, the message to the task force was clear: addressing injustice is inextricable from addressing climate change, and the people most harmed by climate change must be the first beneficiaries of Denver’s Climate Protection Fund.
Equity considerations had gone from one priority among many to the central touchstone of Denver’s emerging climate policy. It did not sit well with committee members, therefore, that both the sales tax and the energy use tax would impose a heavier financial burden on exactly the communities that were least able to afford it.
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Back at the meeting, task force members took turns weighing the two funding options. Several wondered aloud whether they would be able to bring themselves to vote for either. But Resilient Denver had every intention of moving forward with its version of the energy use tax if the task force did not present a viable alternative — and this time, it had gathered enough signatures to get on the ballot. This meant that for the task force, not reaching a decision would amount to its own kind of decision. This knowledge helped the task force members overcome their discomfort and make a difficult, imperfect, choice.
In addition to the useful leverage created by Resilient Denver’s backup proposal, the task force was heartened by reflecting on its own composition and procedures. Since the members represented such a diversity of experiences and engaged in such a comprehensive community engagement process, they were confident that they were not excluding important perspectives. And because they had so thoroughly deliberated and debated every single recommendation, they could trust that they were not overlooking better alternatives.
In the end, the task force reached consensus on recommending the sales tax, as well as several other funding mechanisms that would generate smaller amounts of revenue. The impact of the sales tax on low-income residents was softened by existing exemptions for food, water, fuel, medical supplies, and feminine hygiene products. In 2022, Denver added an exemption for diapers. The task force also determined that 70% of sales taxes in Denver are paid by visitors, meaning that the fundraising load is not borne solely — or even primarily — by local residents. In its formal recommendations report to City Council, the task force emphasized the need for “specificity about how the money will be spent in a way that will most benefit people of color and under-resourced communities.”
From Recommendation to Reality — Ballot Measure 2A
The task force concluded its recommendations report by urging the city to take strong and swift action to build upon the task force’s momentum. The city obliged. Less than a month after the report was issued, City Council voted to send the sales tax to the ballot as Ballot Measure 2A.
The ballot measure included visionary language to help further ensure that the distribution of the funds will not further inequity, mandating that the CASR invest at least half of the Climate Protection Fund money directly in communities, “with a strong lens toward equity and race and social justice.” As Jennifer Cloud, Vice President of Housing Development for the Colorado Coalition for the Homeless, put it, “We are asking low income families to make a disproportionate contribution to the Climate Protection Fund through this sales tax. They deserve to benefit from the work, be part of the solution, and be part of the story of the future of Denver.”
In addition to directing at least half of the fund toward improving equity, the ballot measure further limited the allowable uses of the money to six categories based on the recommendations and work of the task force: renewable energy investments; neighborhood-based environmental and climate justice programs; adaptation and resiliency programs for vulnerable communities; providing affordable, clean, safe and reliable transportation choices; and upgrading the energy efficiency of buildings and industry.
The voters clearly responded to the specificity of allowable use categories and equity mandate, both of which were informed by insights from the task force. In November, 2020, Ballot Measure 2A passed with overwhelming support — nearly a two-to-one margin. By that time, CASR was staffed up, functional, and ready to bring the task force’s vision to life.
