Energy Efficiency and Renewable Energy Financing Districts

1. Energy Efficiency and Renewable Energy Financing Districts Presented By: Matt Bell Partner, Viridian

2. Buildings and the Environment • Buildings account for 36% of greenhouse gas emissions • Buildings account for 72% of the electricity use • Existing Buildings today will still account for the majority of buildings in the year 2050. • A focused effort must be given to making existing buildings more efficient to make even modest reductions in GHG emissions.

3. What is an Energy Financing District? • EFDs enable local governments to raise money through the issuance of bonds to fund energy efficiency projects and renewable energy projects. • The bonds are repaid through a “special tax” or “assessment” property tax bill for only those property owners who choose to participate. • Financing is secured by a lien on the property and like other taxes is paid prior to other claims in the event of foreclosure.

4. Energy Financing Districts • Property Assessed Clean Energy (PACE) • Sustainable Energy Financing • Clean Energy Assessment Districts (CEAD) • Contractual Assessments • Special Tax Districts

5. Barriers to energy efficiency and renewable energy installation • Lack of Information by consumers • Uncertainty of savings • Split incentives • Transaction Costs • Initial Capital Investment • Length of payback

6. EFD Benefits to the Homeowner • Little or No upfront cost to the homeowner • Longer repayment periods • Interest payments are tax deductible • Easy application process • Improved property value • Immediate energy savings • Repayment obligation is transferred when the property is sold

7. EFD Benefits to the Local Government • Assists local government in reaching reduced GHG emission goals. • Stimulates the economy with local green job creation through energy retrofitting and renewable energy installation • Provides a secure financing mechanism with a low risk of default with loans secured by property liens • Positive Publicity for the local communities participating in EFDs.

8. Limitations of Energy Financing Districts • Available only to homeowners and not renters • Expected life of the improvements must be at least as long as the repayment period. • Cannot be used for transferable items such as refrigerators and light bulbs. • Set up and administration cost

9. How to form an EFD • Pass enabling legislation • Develop a management team to administer and manage the program • Design a program that meets the specific goals • Secure Funding • Formally create a Special Tax District or tax assessment district • Launch the program

10. Pass Enabling Legislation • Arkansas currently doesn’t have legislation that will allow for the special improvement assessments to prime a previously recorded mortgage. • It requires State Statutory authorization as well as approval by the local government entity

11. Developing Management Team • Local government will need to hire a management team and seek partnerships to develop and manage the program • Legal and Bond Council will be required • Financial consultants • Sustainability program manager • Staff from County Recorder / Tax Collecting body

12. Design a program • Establish a goal of energy reduction targets, GHG reduction targets, economic development, renewable energy production • These targets must be developed with a team of advisors to evaluate cost and benefits of measures • Develop eligibility properties and eligible improvements

13. Secure Funding • Can be financed through general funds as part of their investment portfolio strategy • Issue bonds and determine market through consultation with bond council • Possible use of EECBG (Energy Efficiency and Conservation Block Grants)

14. Create the Special Tax District • Will require several steps by the City Council or County Board for district approvals • Determine the boundary of the district

15. Examples of EFDs • Berkley, CA: Berkley First • Boulder County, CO: ClimateSmart Program • Palm Desert, CA: (EIP)Energy Independence Program • Babylon, NY: Long Island Green Homes Program • States that are pursuing enabling legislation: Colorado, Louisiana, Maryland, Nevada, New Mexico, Ohio, Oklahoma, Oregon, Texas, Vermont, Virginia, and Wisconsin.

16. Berkley First Program • Pilot Started November 2008 • Property owners reserved $1 million in funding in the first 10 minutes of program launch • 38 projects with average cost of $28,000 each • Pilot program only allowed for PV Solar installations

17. Boulder County, Climate Smart • November 2008 voters passed enabling legislation establishing $40 million in bonding capacity • Allows for various energy efficiency measures: air sealing and ventilation, insulation, space heating and cooling, lighting retrofits, water heating, windows and doors, solar PV, solar hot water, etc. • First application process had 393 applicants with $7.5 million in projects • Boulder is tracking utility data on all applicants to compare dollars invested and dollars saved

18. Energy Independence Program Palm Desert, CA • Managed by the city of Palm Desert Office of Energy Management • Goal of reducing energy use by 30% in five years • Funds projects for residential, commercial and industrial customers • Allows energy efficiency measures as well as renewable energy projects • Initial Investment of $7.5 million funded 205 projects with an average cost of $36,000

19. Long Island Green Homes Project Babylon, NY • Adopted a green building code in 2006 • Requires Energy Star for homes and LEED certification for commercial buildings over 4000 sf. • Financed through the classification of CO2 as a solid waste and use $2.5 million from the city’s solid waste reserve fund • Funds cost effective energy efficiency measures and solar but must meet Energy Star • Funded 169 projects with an average cost of $7100 • Measures are predicted to save 28% on energy bills

20. Resources www.climatesmartloanprogram.org www.cityofpalmdesert.org www.berkleyfirst.renewfund.com www.thebabylonproject.com

21. Questions