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PACEProperty Assessed Clean Energy
for Missouri
2
Formula For Getting the Full StoryA.K.A. Table of Contents: Who - Invented PACE
What - Is PACE Where - Is PACE Found When - Did PACE Happen Why - Is PACE Important How - Is PACE Implemented
“Public goods are those which are in everybody’s interest to have,
but in no one’s interest to provide.”
-The Economist
3
Property Assessed Clean EnergyWho? What? Where? When? Why? How? PACE methodology allows for a political subdivision
(Clean Energy Development Board) to finance the cost of installing energy efficiency or renewable energy improvements on private property.
No upfront payment by property owner
Participants repay the costs of the installations through a assessment on their property tax bill.
A lien attaches to the property secures the repayment obligation. Lien passes with title.
4
Property Assessed Clean EnergyWho? What? Where? When? Why? How?Removes historical barriers to energy efficiency and renewable
energy installations:
Eliminates initial capital requirements; replaced with yearly payments that correspond to the lifespan of the installation.
Will be accessible to residents and businesses of all income levels.
Will incorporate both energy efficiency and renewable upgrades to properties.
Will be sustainable, scalable, and flexible; it will be self sufficient with little to no public financial support
5
Brief History of PACE Implementation Who? What? Where? When? Why? How?
Berkley CA Department of Energy – Pilot ARRA: Jobs Bill – Public Purpose White House
Policy framework (http://www.whitehouse.gov/assets/documents/PACE_Principles.pdf
6
Implementation of PACE Who? What? Where? When? Why? How?
“We are going to make it a lot easier to borrow money. We are doing this by encouraging communities to give you the option to pay the expense of retrofitting your home by paying it back on your property taxes”.
--Vice President Biden
The White House has determined PACE to be a priority mechanism for retrofitting buildings:
7
Brief History of PACE in Missouri Who? What? Where? When? Why? How?
8
Missouri Organizations Supporting PACE Who? What? Where? When? Why? How?
City of Kansas City St. Louis County City of Ferguson City of Creve Coeur Kansas City P&l Missouri Municipal
League Missouri Bankers
Association
Missouri Association of Accredited Energy Professionals
Missourians for a Balanced Energy Future
Renew Missouri Missouri Votes
Conservation Missouri Energy Initiative
9
Missouri Ranked 41st in Energy Efficiency Who? What? Where? When? Why? How?
10
Property Assessment Clean Energy ActHouse Bill 1692 is Signed by Gov. Nixon
In Missouri, PACE was supported by a broad coalition of groups and passed the Missouri General Assembly as part of a bi-partisan effort by a vote of 144-11 in the House as part of House Bill 1692.
RSMO § 67.2800 – 67.2835
11
Eligible Measures Who? What? Where? When? Why? How?
Insulation in walls, roofs, attics, floors, foundations, and heating and cooling distribution systems;
Storm windows and doors, multiglazed windows and doors, heat-absorbing or heat-reflective windows and doors, and other window and door improvements designed to reduce energy consumption;
Automatic energy control systems;
Heating, ventilating, or air conditioning distribution system modifications and replacements;
Caulking and weatherstripping;
Replacement or modification of lighting fixtures to increase energy efficiency of the lighting system without increasing the overall illumination of the building unless the increase in illumination is necessary to conform to applicable state or local building codes;
Energy recovery systems; and
Daylighting systems
"Energy efficiency improvement", any acquisition, installation, or modification on or of publicly or privately owned property designed to reduce the energy consumption of such property, including but not limited to:
12
Missouri Model Who? What? Where? When? Why? How? “on July 12th, 2010 Missouri became the 23rd state to pass PACE-enabling
legislation. Why is this good news, you ask? Well, for three reasons (at least):
Missouri voters have correctly predicted the outcome of every presidential election (save for two, 1956 and 2008) since 1904. Perhaps Missouri will once again be a bellwether, this time for PACE at a national scale?
Missouri’s a long way from Berkeley. The passage of PACE in Missouri is an indicator that PACE is a concept that transcends political, geographical, and social lines. We’ve seen this highlighted in other states as well, but this recent news reinforces the trend.
Missouri’s bankers backed PACE. A source close to the effort told me that participation from the local banker’s association was critical to getting the bill pushed into law, going as far as saying that their participation was “the only way [the bill] got passed.”
Source: Huffington Post
13
Program Steps and Process Cycle Who? What? Where? When? Why? How?
Clean Energy DevelopmentBoard is organized aspolitical subdivision
Property ownersvoluntarily enter
assessment contract tofinance and install energy
improvements
Bond Proceeds providefunds to pay for energy
projects
Property owner repays thebond through tax bill for a
period up to 20 years
PACECycle
Property Owner
Education /Information
PACE AccessAdministration
MeasureSuccess
14
Program Process Who? What? Where? When? Why? How?
Application: Participant must release access to utility bill
Home Energy Audit: From approved contractor. Results determine which measures to install. Cost of audit incorporated into loan.
Cost Estimates: Participants obtain written "not to exceed" estimates from pre-approved contractors.
Review of Proposal: Review of audit and bid information to ensure the proposed measures have a positive savings to investment ratio.
Obtain Funding: Board obtains funding through financing mechanism
Notice to Proceed: Issued to contractors.
Completion of Projects: Inspection by PACE Program Administrator.
Contractor Payment: Board or its designee will directly pay contractor.
Repayment: Financing repaid via assessments on participant’s tax bill
Measurement and Verification: Review of energy consumption. Determine program performance and which measures have greatest impact.
15
Flow of Funding Process Who? What? Where? When? Why? How?
PACE Board
Bond
Trustee
Assessor /Collector
16
Typical Missouri Community? Who? What? Where? When? Why? How?
Owner-Occupied Housing Units . . . . . . 4,924 Sample PACE Transaction:
Minimum Bond Size Required $5 -10 Million
Average Property Improvement $10,000
Assessment Contracts Required 500
Source: U.S. Census 2000
Creve Coeur: PACE Penetration
Round 1: 10 (10%)
Stranded: 80 (80%)
Round 2: 10 (10%)
17
Mean: 13,409
Median: 5,180
Std. Dev.: 33,484
18
Mean: 80,800
Median: 37,731
Std. Dev.: 124,842
19
0
10,0
00
20,0
00
30,0
00
40,0
00
50,0
00
60,0
00
70,0
00
80,0
00
Northw est Missouri RegionalCouncil of Governments - 14
Northeast Missouri RegionalPlanning Commission - 13
Boonslick Regional PlanningCommission - 1
& SE Missouri Regional Planning Econ Dev Commission -18
Green Hills Regional Planning Commission -4
Kaysinger Basin Regional Planning Commission -6
Lake of the Ozarks Council of Local Governments -7
Mo- Kan Regional Council -12
South Central Ozark Council of Governments -17
Pioneer Trails Regional Planning Commission -16
Mark Tw ain Regional Council of Governments -8
Bootheel Regional Planning and Econ Dev Commission -2
Meramec Regional Planning Commission -9
Harry S Truman Coordinating Council -5
Ozark Foothills Regional Planning Commission -15
Mid-Missouri Regional Planning Commission -11
Southw est Missouri Council of Governments -19
Mid- America Regional Council -10
East-West Gatew ay Coordinating Council -3
538,871
262,463
141,805
Owner Occupied
Residences by RPC
Missouri Total: 1,535,202
Ave. by county seat:* 2,527
Ave. by county: 13,350
Ave. by RPC: 80,800
* 290,692 not including City of St. Louis
20
Implementation Who? What? Where? When? Why? How?
CLEAN ENERGY DEVELOPMENT BOARDMEMBER COMMUNITIES
CITY / COUNTY
PROGRAMEDUCATION &
OUTREACH
ENERGY EFFICIENCYPROJECTS
PROGRAMADMINISTRATIONLOCAL STAFF AND
ADMINISTRATIVE TEAM
PROGRAM COUNSELPROGRAM MANAGER
Financial AdvisorUnderwriter / Bond Counsel
21
Aggregation Process Think Carpooling
Property Owners
Property Owners
Property Owners
Property Owners
Property Owners
Property Owners
County City Village County City Village
CEDB/RPC CEDB/RPC
EIERA
Bond Issue
Bond Market or
22
PACE Process Who? What? Where? When? Why? How? Steps
Communities Join Clean Energy Development Board (CEDB)
Accept CEDB Produces Policy Manual Develop Procedures with Regional Flavor Accept Applications from Property Owners Board executes Assessment Contracts Issue Revenue Bonds When Contracts are of
Efficient Scale Repeat as Demand Requires
23
PACE Stakeholder PerspectiveStakeholder Satisfaction
(Stakeholder Wants & Needs)Stakeholders Stakeholder Contribution
(Organization Wants & Needs)
No Up-front CostReduced Energy CostInsulated From Future EnergyPrice SpikesIncreased Property ValueIncreased Home Comfort
Property Owners
Additional Disposable IncomeMore Energy IndependentCommunityHigher Assessed ValuationBetter Housing Stock
Revenue Neutral projects.Government provided financingfunds both the loans and theprogram administration costs.Meets expectation for provisionof services to community.
Municipalities &Communities
Little or No Demand on GeneralFundJobs Can't Be OutsourcedStimulates Local job creationthrough installation of efficiencyimprovements on privateproperty.
Improves economiccircumstance of communityFulfills desire for communityleadershipImproved quality of life
Policy Makers
Provides Job CreationOpportunitiesPromotes clean energy initiativesReduces reliance on foreignenergy sourcesProgress toward GHG reduction
Eliminates barriers to EEprojectsProvides expertise in energyefficiency and renewableproperty improvements
Contractors
Enhances community andeconomic developmentDevelops new market andimproves commerce
Virtually no risk of loss asproperty tax liens are senior tomortgage debt
97% of property taxes arecurrent & losses are < 1%Delinquent taxes earn up to18%
Investors
Financing mechanism is wellunderstood by municipalcorporationsSpecial tax revenue bonds areaccepted by the bond marketPrivate capital is virtuallyunlimited providing sustainability
24
Existing Program Comparisons Who? What? Where? When? Why? How?
Source: Merrian Fuller Lawrence Berkeley National Laboratory
PACE ProgramLocation
Berkeley,California
Palm Desert,California
Boulder County,Colorado
ProgramStarted
Source of CapitalFinancing
MechanismCollection
MechanismEligible
MeasuresCredit Req. Security
Rate TermMax Amt
WhoProcess
App?
LocalGovtStaff
Results as ofAugust 2009
Nov 2008"micro" bond sold to
financial partnerSpecial Tax
(Mello-Roos)Property tax
billSolar PV(pilot)
Clear title &good propertytax payment
history
Seniorlien on
property
7.75%20 years$37,500
3rd Party1.25FTE
38 projects$28,000 ave /per
$1M committed
Oct 2008
Phase I general fund,Phase II
RedevelopmentAgency bonds, nowseeking a financing
partner for Phase III
Assessment(AB811)
Property taxbill
Energyefficiency,
solarthermal,solar PV
Clear title &good propertytax payment
history
Seniorlien on
property
7%up to 20 yrs.
No maxCity staff
1.5FTE
206 projects$36,000ave / per
$7.5Mcommitted
April2009
County issues bondsAssessment
(HB08-1350)
Property taxbill
Energyefficiency
and varietyof
renewables
Clear title &good propertytax payment
history
Seniorlien on
property
Varies(6.68% for1st round)
15 Yrs.$50,000
Countystaff w/
3rd party
1-2FTE
393 projects$19,000ave / per
$7.5M committed
Babylon, NewYork
August2008
Municipal solid wasterevolving fund
Assessment(amendedsolid waste
code)
Separatebill,
transfers toproperty tax
bill ifdelinquent
Energyefficiency,
solarthermal,solar PV
Clear title &good propertytax payment
history
Seniorlien on
property
3%term varies
$12,000City staff 3 FTE
169 projects$7,100 ave / per$1.2M committed
Discussion & QuestionsJohn HarrisCountry Club BankColumbia, Missouri573-239-1136
www.midwestpace.blogspot.comwww.mocefllc.com