PACE Property Assessed Clean Energy - National League of Cities

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Property Assessed Clean Energy

National League of Cities
Congressional City Conference, March 2012
Private Market Solution to meet National Goals

PACE is Property Assessed Clean Energy

How PACE Works

 Local government    Property owner   Local government       Property owner
creates assessment     opts-in and    provides financing   pays assessment on
      district        makes energy    – adds assessment     tax bill (for up to
                      improvements        to tax roll           20 years)

PACE – early momentum with Residential Programs
PACE is a World Changing Idea… Scientific American, 2009
2008 to 2011
ü Legislation passed in 27 States
ü DOE best practices and
ü Pilot programs in California,
  New York, and Colorado
   •   3,176 EE/RE Projects
   •   $68+ million in spending
   •   1,000+ Estimated Jobs
ü FHFA stalls residential programs
ü Legislation and Litigation
ü Focus shifts to commercial

Legislation to Restore Residential PACE

PACE Assessment Protection Act of 2011
ü HR 2599 introduced by Rep Nan Hayworth on July 20, 2011
    • Requires GSEs to establish fair underwriting standards for PACE
    • Programs must conform with enhanced DOE standards set forth in the
       bill, such as:
        o Homes have at least 15% equity
        o Audit and work by qualified contractors that produce positive SIR

ü 51 Co-sponsors – (Bipartisan support - 29 D, 21 R)
    • Nita Lowey is a co-sponsor
ü Stalled in Financial Services Committee

Litigation to Restore Residential PACE
U.S. District Court in Northern California orders Rulemaking
Federal Administrative Procedures Act requires FHFA to seek and weigh
public comment prior to imposing rules
    1. Advance Notice of Proposed Rulemaking published January 26 th
        • Public has until March 26th to enter comment
        • Comment can take any form, may address any of the FHFA’s stated concerns, and
          can provide proposed guidance (i.e. a “rule” recommendation)
            A. PACE assessments are valid
            B. PACE poses no meaningful risk to mortgage lenders
            C. PACE programs can be designed to protect the interests of local
                 governments, homeowners, and mortgage lenders
            D. PACE programs should be allowed to proceed
        • Resources, including Template Letter and Talking Points at
    2. FHFA issues Proposed Rule on April 26
        • Public will have at least 30 days to enter comments on proposed rule
    3. FHFA issues Final Rule

Residential Program Performance

 Program Administrators, March 9, 2012

Focus Shifts to Commercial PACE

               Commercial PACE

Potential for Commercial PACE

                                                            Potential for PACE – 10 years

                                                            100 bft2 of Total Commercial by 2021

                                                            20% Retrofitted w PACE

                                                            $50 Billion - direct spending (at $2.50 ft )

  Source: McKinsey & Company, Unlocking Energy Efficiency
          in the US Economy, 2009
                                                            1+ Million jobs

Barriers to EE - Commercial

   Source: EE Indicator – NA 2010, Johnson Controls and International Facilities Management Association (IFMA)

PACE Solves Commercial Barriers

PACE Commercial – Emerging Programs

California PACE-Regional                                          Edina, MN
                                                                              Milwaukee, WI      Bedford, NY
                                                                                          Ann Arbor, MI      Northampton, MA
 Sonoma County, CA
                                                                                               Northeastern OH

                   Sacramento, CA            Boulder County, CO                                          Washington, DC
               Placer County, CA                                         Kansas City, MO
 San Francisco, CA
                      WRCOG, CA
 Los Angeles, CA      Palm Desert, CA
                                           Santa Fe, NM

    State with PACE enabling legislation
    State with emerging commercial PACE program

     Commercial PACE program operational (or near)
     Commercial PACE program in development

Commercial Projects to Date

Accelerating Commercial PACE
PACENow focus on 4 key challenges
1. Support for establishing programs
   ü   Legislation
   ü   Local, regional, statewide
   ü   Open market vs Sole source
2. Initiatives to drive CRE owner demand
3. Strategies for gaining support from existing mortgage lenders
   ü   Track record of support from national, regional, and local lenders
4. Short-term and long-term financing strategies
   ü   Short-term: owner arranged
   ü   Long-term: aggregation of assessments and securitization


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