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Governor’s Energy Development Summit June 4, 2014

Governor’s Energy Development Summit June 4, 2014. Salt Lake County Pilot C-PACE Program — a public/private partnership. . Kimberly Barnett, Salt Lake County Mayor’s Office Alan Westenskow, Zions Bank Public Finance. Why is SLCo Interested in C-PACE?.

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Governor’s Energy Development Summit June 4, 2014

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  1. Governor’s Energy Development SummitJune 4, 2014 Salt Lake County Pilot C-PACE Program—a public/private partnership. Kimberly Barnett, Salt Lake County Mayor’s Office Alan Westenskow, Zions Bank Public Finance

  2. Why is SLCoInterested in C-PACE? • The County is interested in forging cooperative partnerships and leveraging resources for a C-PACE pilot program. We hope to identify the benefits vs. challenges, educate other key County officials on the model, and evaluate the feasibility of future C-PACE projects. Air Quality - Addressing energy savings, water efficiency, CO2 emissions reduction, and more in our commercial building sector is an important piece of the air quality solution. Eliminating Financial Barriers - The County recognizes that financing can be a significant barrier for businesses to complete significant energy-efficiency and renewable projects that can ultimately lower their energy expenses.

  3. Who Are We Looking to Partner With? PROJECTS MUST be located in Salt Lake County and comply with all requirements outlined in Senate Bill 221, Assessment Area Act Amendments IDEAL PROJECTS WILL HAVE a financing partner already identified and will be larger in size and provide significant energy savings to the building. • Commercial sector with significant energy-efficiency and renewable energy projects. • A true collaborator who will work alongside us to accomplish the first C-PACE project in SLCo.

  4. Characteristics of Different Types of Bonds Source: Zions Bank Public Finance

  5. Traditional SAAs are used to finance curb, gutter, water, sewer, road and other publicly owned improvements Counties do SAAs for unincorporated areas Cities do SAAs for incorporated areas C-PACE uses SAA tool for privately owned renewable energy and energy efficiency improvements for commercial properties Salt Lake County Millcreek SID (SAA) Traditional Special Assessment Areas (SAA)

  6. Benefits of C-PACE/QECBs • Senior Lien - Senior lien on property pledged as collateral, resulting in possible lower interest rate • Increased Value - Type of improvements financed may increase the value of building for loan purposes • Assessment Tied to Property - Assessment can stay with property and transfer with different owner • QECB subsidy - Possibly qualify for lower interest rate from Qualified Energy Conservation Bond (QECB) direct pay federal subsidy • Transfer Payment to Tenant - Building owner can pass payment of assessment onto tenant as a “tax” such as in a “triple net lease” arrangement

  7. C-PACE/QECB Trade-offs • Increased costs of issuance from issuing special assessment bonds • Difficult to do individual small projects and have economics of project pencil out (i.e. projects less than $300,000 to $500,000 may be difficult to do on their own) • QECB projects must pay Davis-Bacon wages on entire project improvements • QECB subsidy may be subject to reduction from federal government sequestration • Note: the credit of the Issuer (i.e. Salt Lake County) is likely not pledged, just the credit of the Borrower

  8. Qualified Energy Conservation Bonds (QECBs) • QECBs can be used for renewable energy, energy efficiency, “green community programs” and other qualified uses for both public and private projects • Total Utah QECB Volume Cap Received - $28,389,000 • Salt Lake County allocated $6,392,683 • Already used $1,917,804 allocation for Salt Palace solar • Remaining allocation of $4,474,879 • Approximately $21,470,230 of Utah allocation remaining • Allocation currently does not expire, however there has been recent discussion in Congress of imposing an expiration date • http://business.utah.gov/programs/pab/energy-conservation-bonds/

  9. Treasury Direct Tax Credit Rate • QECB subsidy is calculated by taking 70% of the “Tax Credit Rate” • Example: 4.39% X 70% = 3.07% subsidy • For a $100 loan, borrower receives a “direct pay” subsidy of $3.07 from federal government to offset interest paid to lender https://www.treasurydirect.gov/GA-SL/SLGS/selectQTCDate.htm

  10. QECB Direct Pay Subsidy Example • True Interest Cost goes from 5.38% to 2.21% (5.38% -3.17%=2.21%)

  11. Next Steps • Solicit Request for Information (RFI) • Review RFIs with County C-PACE team and make preliminary determinations on projects they may be a good fit. • Solicit additional detailed information from a handful of projects and make a decision on which projects to include in the pilot program. • Complete other necessary internal steps such as presentations and formal approval from the County's Debt Review Committee and the County Council.

  12. Thank You! Kimberly Barnett Salt Lake County Mayor’s Office kbarnett@slco.org Alan Westenskow Zions Bank Public Finance Alan.Westenskow@zionsbank.com

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