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CED Case Study Trying to Build a Business in the Clean Energy Field FY 2018

Isles, Inc. - Trenton, NJ

Published: June 29, 2018
Audience:
Community Economic Development (CED)
Category:
Case Studies
Tags:
grantees

This case study is a part of the CED Lessons from the Field resource.
To learn more and explore the case study library, go to CED Lessons from the Field.

Over the last decade, clean energy business and green businesses have been seen as an important opportunity to create jobs. These jobs might range from building the new technologies of energy generation, as well as the equipment needed to capture and transmit clean energy to homes and buildings across the country.

Subsequently, jobs could be created to retrofit homes and buildings with cleaner, smarter energy and to insulate those buildings. Recognizing the potential for these ancillary jobs, Isles, Inc., a New Jersey-based community development corporation with a long and deep track record in organizing and development, created Isles Green Delta Energy. Ultimately, this for-profit company was not sustainable, but Isles, Inc. learned from its struggles, used new opportunities, and established Isles E4, a nonprofit company conducting the same work, as well training and employing low-income staff.

The Community Development Corporation

Isles, Inc. was founded in 1981 to improve living conditions in the lower-income areas of central New Jersey. From its headquarters in Trenton, the state capital, the Isles motto was “create self-reliant families in healthy, sustainable communities.” Mirroring this organizational theme are the programs that Isles has developed. Each balances service to families with an eye to improving the environment and communities.

The CDC sponsors numerous programs, and it wanted to use the programs and its experience operating them to pursue a business in this new field. The programs include

  • Real Estate Development of affordable housing in the city of Trenton
  • Foreclosure Assistance, including counseling and assistance in restructuring mortgages
  • Weatherization, to encourage and perform energy improvements on homes and apartments
  • The Center for Energy and Environmental Training, a program that offers jobs training in weatherization, healthy home and environmental improvements, and construction
  • Lead, Asthma, and Healthy Homes, through which the CDC provides home audits to abate health threats such as lead paint
  • Isles Youth Institute, a YouthBuild-oriented model of leadership development and career preparation for teens
  • Financial Solutions, including coaching, credit-building finance, and savings products

It also provides technical assistance in areas, such as community planning, first-time homeownership, and urban agriculture. Isles also has bought a large, vacant mill building in which it plans to develop a mix of uses, including 45 apartments, nonprofit offices, arts spaces, and business locations.

The City of Trenton—the target community for Isles—needs these services. Its median household income of $35,000 is only half of the income of the surrounding Mercer County, New Jersey.

Energy Training and Business

In 2006, as a part of Isles’ long-range planning, the CDC decided to combine the efforts of several of its programs to take advantage of the growing awareness of green energy and healthy home needs. The Isles Youth Institute trained youth in construction and home rehabilitation, and Isles was interested in making jobs available for the most successful graduates. In addition, the CDC aimed to establish a presence in the home and building-improvements market that capitalized on its programs offering energy audits and advice on weatherization, as well as lead-paint and other health and energy issues. External to the organization, the State of New Jersey was offering increased funding for weatherization and other energy improvements.

With these components in place, Isles applied for and received a $250,000 Community Economic Development grant from the Office of Community Services in 2008. It then set up Isles Green Delta Energy as a private for-profit organization to employ low-income people to do energy improvements to small and large buildings throughout central New Jersey.

Green Delta Energy was to be “like a conveyor belt from the building and life skills training we were doing to jobs in a viable business,” said Peter Rose, managing director for Community Enterprises at Isles. The CDC was able to use the CED grant and a state neighborhood assistance tax credit program (that allowed businesses to get credits against state income taxes in exchange for contributions made to approved organizations) to capitalize the new business at $350,000 and continue to provide training for employees of the business. The new business had an agreement with the state energy training program to supplement the business capital and further expand specialized training in solar design and installation, energy auditing and efficiency, green construction, and environmental clean-up. Isles also pledged to emphasize hiring workers from Trenton’s Urban Enterprise Zone and Weed and Seed neighborhoods.

Isles’ CED employment goal was to employ 18 local, low-income residents full-time in the new business. Each employee was to get financial and life skills education through the CDC’s other programs, in addition to the construction-oriented training. In the end, Green Delta Energy had a payroll of 39, with 32 (or 82%) being low-income individuals. Just about half (47%) received financial education, and one-third (31%) graduated from the training program funded by the state’s energy program.

This roster helped Isles and Green Delta Energy complete energy improvements for more than 800 homes and apartments during the four years of the CED grant period (including a one- year extension). One of the benefits of the new training was that the employees learned how to work in multifamily buildings, and some of the first jobs were with multifamily housing clients. Having accomplished this work, the business was better able to compete for work.

Another boost was the American Recovery and Reinvestment Act (ARRA, the 2009 financial stimulus bill), which provided energy improvement money to the state. The state helped Green Delta Energy with funds to expand its supervisory staff and buy specialized equipment. This meant, in turn, that the business was better able to compete for work, and Isles attributed 350 weatherization project completions to the ARRA funding.

Bumps in the Road

These benchmarks were not achieved easily, and indeed Isles Green Delta Energy experienced real problems. Most of its problems appeared to be in three areas—(1) business development, (2) employee issues, and (3) capital.

We “learned a lot about how hard it is” to start a viable business, said Isles’ Mr. Rose. The first couple of years were learning ones, he said. Part of the issue was creating a track record that would enable the business to compete for work against other firms. This was especially true in the arena of multifamily buildings, where the work was more complex than for single-family homes. ARRA helped because it provided money to incentivize such work, but it took a year after the award of money from the state to finalize a contract. Secondly, the state encouraged Green Delta Energy to work on projects in Newark, which was 2 hours away, requiring a great deal of unbillable time for the company.

While Isles was getting a mix of LIHEAP (the federal Low Income Home Energy Assistance Program) and private jobs, it found LIHEAP funds becoming scarcer, and it was not obtaining enough private energy improvement work to sustain a workforce. Property owners did not often see the benefit to their bottom-line profits of retrofitting their buildings.

On the workforce side, Green Delta Energy struggled with the quality of staff workmanship. Even though training was a built-in component of the enterprise, the business had to make a large number of installation corrections due to errors made by its workforce. The company did not initially have the funds to employ enough supervisors to oversee each job as it was being done. As a result, the company spent time and money making corrections and firing underperforming employees. This issue also affected the company’s reputation; consumers expected high-quality work and service.

Lastly, the company was undercapitalized, which affected business development and went hand- in-hand with the workforce quality problems. Green Delta Energy did not have the resources to hire sufficient field supervisors until it secured ARRA funds in the third year of the company; then, it was able to hire more supervisors, energy auditors, and outreach staff. The company also did not have enough money to do the type of marketing needed to secure more privately funded projects.

The Future

After the CED grant period expired in 2012, Isles decided that its Green Delta Energy business had little chance of long-term survival. It chose instead to form a nonprofit subsidiary, Isles E4 (Energy, Environment, Equity, and Employment), to continue the same work but without the need to make a profit. Isles E4 brought on the staff of Green Delta Energy, and as of the end of 2013, it employed about eight people (it could carry 13 or more during its busiest times). It has become an accredited contractor, licensed by the Building Performance Institute, which provides potential customers with a sense of security that Isles E4 knows its business

Isles, Inc.

10 Wood St.,
Trenton NJ 08618
https://www.isles.org/

Last Reviewed: June 3, 2019