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Matthew H. Brown presented to the Salt Lake County Debt Review Committee about a structural option for using Qualified Energy Conservation Bonds, the proceeds of which would be used to fund energy efficiency loans supported by a Title 1 PowerSaver loan insurance project. The Debt Review Committee sent the proposal on to the County Council with a positive recommendation, subject to a review of certain alternatives.
Citation preview
CLEAN ENERGY FINANCING: QECBs WITH POWERSAVER
Presentation to Debt Review Committee
Matthew Brown, PrincipalMarch 29, 2012
OVERVIEW
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VISION FOR SALT LAKE COUNTY
Launch residential energy upgrade market with affordable interest rates and scalable design
The Salt Lake County QECB/PowerSaver model can spark consumer demand for residential energy upgrades, including solar and cost-saving energy efficiency.
Demand can be met with local equipment vendors and contractors, creating not just local jobs but a market as the offering scales.
Creation of the market will attract subsequent investors, thereby allowing the Salt Lake region to become a hub of energy upgrade activity
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WHAT ENERGY EFFICIENCY LOOKS LIKELow cost, high return upgrades with immediate savings and increased value and comfort
Before upgrade After upgrade
• Wasted heating and cooling• High utility costs• Hot/cold zones and low comfort• Average resale value
• Balanced, efficient HVAC• Reduced utility costs• Liveable space and high comfort• Marketing advantage on resale
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ELIGIBLE UPGRADESMost measures will be available locally and can be installed by local contractors
Insulation Duct sealing Storm Doors Window Replacement Storm Windows Heating System Gas/Propane/Oil Boiler / Furnace Air Conditioner
Water Heater (gas, propane, electric, tankless)
Energy Star Roofs Ground Source Heat Pump Water Heater (Solar) Fuel Cells Micro-turbines Solar Panels Small Wind Turbines
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ENGAGING THE LOCAL COMMUNITY
St. Louis County and others have seen tremendous contractor support
• Over 60 contractors were approved within the St. Louis program.
• Many contractors paid for independent marketing, including one that spent over $30k promoting the program.
• These projects are primarily initiated by contractors.
Rollout strategy for integrating contractors with PowerSaver lender will be critical.
Contractors need to understand financing and be enabled to originate projects.
Fannie Mae lenders have used this “dealer loan” model successfully for years.
COMBINING QECBs WITH POWERSAVER
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BENEFITS OF QUALIFIED ENERGY CONSERVATION BONDS (QECBS)
• Well below-market interest rates• Up to 70% interest subsidy from IRS• Consumers benefit directly from low rates
• Boulder County – 1.1 to 2.9% for commercial loans• St. Louis County – 3.5% for
residential loans• Available for qualified energy conservation
purposes• Renewable energy• Energy efficiency• Certain transportation projects• “Green community programs”
• Exempt from the 30% private activity cap
• Salt Lake County has approximately $4.49MM of available QECB allocations
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POWERSAVER SUMMARY
• FHA-based private mortgage insurance product designed to result in low-cost lending for residential energy upgrades• HUD has approved 17 PowerSaver lenders to
date• The mortgage insurance guarantees up to 90%
of each qualifying loan and up to 10% of the lender’s Title 1 portfolio• The maximum loan amount is $25,000
• Loan must be secured if over $7,500
• Credit requirements include:• FICO ≥ 660; Debt-to-income ≤ 45%; Loan-
to-value ≤ 100%• Employment and income verification
requirement (2 years)
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POWERSAVER APPROVED LENDERS
HUD Approved and Utah Licensed:
AFC First Financial - Allentown, PA
Bank of Colorado - Ft. Collins, CO
City of Boise - Boise, ID
Neighbors Financial Corp. - Sacramento, CA
Paramount Equity - Roseville, CA
Sun West Mortgage Co. - Cerritos, CA
WJ Bradley - South Jordan, UT
At least 7 PowerSaver lenders would be available to partner with the County
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ADVANTAGES OF COMBINING QECBS WITH POWERSAVER
• QECB interest rate subsidy combined with HUD PowerSaver’s mortgage insurance could allow Salt Lake County to launch a below-market rate financing program for residential energy upgrades• PowerSaver mortgage insurance may allow pure conduit structure without
credit support from Salt Lake County for the bond issuance• Establishing a relationship with a PowerSaver lender could allow the
program to scale as QECB proceeds are expended, resulting in a sustainable, low cost model
STRUCTURE OVERVIEW
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CONDUIT ISSUANCE QECB WITH SALT LAKE COUNTY SUPPORT AGREEMENT
= Capital Inflow
= Capital Outflow
= Credit Enhancement
Bond Purchasers
Conduit Issuer Created by Salt Lake County
Residential Property Owners
PowerSaver Lender (with optional Administrator)
P&I payments made to the Lender
Loans are originated with funding to contractor
Capital supplied to fund loans
Principal and interest paid to investor
FHA: Mortgage Insurance
IRS: Interest Rate Subsidy
Bond proceeds
90%/10%
Up to 70%
5% Borrower Funded DSR Capitalized
Fee
DSR for benefit of bond purchasers
P&I passthrough
QUESTIONS
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