PACE and Open Market Financing

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Elaine George
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1 Monthly Municipal Forum PACE and Open Market Financing December 14,

2 Today s presenters: Welcome! David Gabrielson, Executive Director, PACENow david.pacenow@gmail.com John Kinney, CEO, Clean Fund john.kinney@cleanfund.com Craig Hill, Managing Director, Clean Fund craig.hill@cleanfund.com 2

3 Sonoma County Program Updates What s NEW in the last 6 months First Open Market-Financed PACE Project! Program Expansion Activities 10% Energy Efficiency for Renewables Residential Energy Analysis Rebate Program Website with On-Line tools Expanded Marketing and Outreach efforts Contractor Requirements and Training Program Activity FHFA Litigation Update 3

4 PACE PROPERTY ASSESSED CLEAN ENERGY Accelera4ng Commercial PACE PACENow

5 27 STATES HAVE VALID PACE LAWS PACE is a World Changing Idea Scien6fic American, 2009 $%%D# $%&&# $%%D# $%&%# $%&%# EF# $%&%# $%&%# $%&%#!"#$%&%# -<#$%&%# (F#$%&&# '(#$%&%# -'# "G#5H1?A;>#<I*:/01*2# $%&%# )*+*,#-+./01*2#3456#7#'5-8#9:,;#6<(5#=,>1?@+A/;#9+?#6+??,B# PACENow

6 LEGISLATION HR 2599 FHFA, OCC, Fannie Mae, and Freddie Mac must: 1. Adopt underwri4ng standards for mortgages with PACE assessments 2. Rescind 2010 edicts and affirm validity of assessments 3. Not penalize communi4es with PACE programs PACE Programs Required Underwri6ng standards: Commercial PACE Programs Require Exis6ng Lender Authoriza6on Residen4al Programs would require 1. Homes must have 15% or more posi4ve equity 2. Residen4al Projects limited to 10% of home value 3. Energy audit and work performed by accredited professionals 4. Projects must show cash flow savings (posi4ve Savings/Investment Ra4o) PACENow

7 HR 2599 SPONSORS PACENow

8 LOOKING FORWARD Commercial PACE PACENow

BUILDING SECTOR BREAKDOWN Poten6al for PACE 10 years 100 be 2 of Total Commercial by 2021 20% Retrofiged w PACE $50

9 BUILDING SECTOR BREAKDOWN Poten6al for PACE 10 years 100 be 2 of Total Commercial by % Retrofiged w PACE $50 Billion in direct spending 1 Million jobs Source: McKinsey & Company, Unlocking Energy Efficiency in the US Economy, 2009 PACENow

10 PACE SOLVES COMMERCIAL BARRIERS PACENow

PACE COMMERCIAL P REOME CEREGDING PROGRAMS California PACE-Regional Sonoma County, CA Bedford, NY Milwaukee, WI Northampton, MA Ann Arbor, MI Northeastern OH Sacramento, CA Placer County, CA San

11 PACE COMMERCIAL P REOME CEREGDING PROGRAMS California PACE-Regional Sonoma County, CA Bedford, NY Milwaukee, WI Northampton, MA Ann Arbor, MI Northeastern OH Sacramento, CA Placer County, CA San Francisco, CA WRCOG, CA Boulder County, CO Kansas City, MO Washington, DC Los Angeles, CA Palm Desert, CA Santa Fe, NM State with Emerging Commercial PACE Program FL-Regional x 3 State with PACE Enabling Legisla4on PACENow 10

12 CALL TO ACTION - SCALING PACE Achieving Scale 4 Challenges 1. Star4ng PACE Program 2. Marke4ng EE & RE to CRE Owners 3. Gaining Support from Mortgage Lenders 4. Crea4ng a PACE Asset Class PACENow

13 RESOURCES PACENow

14 What is Open Market Original PACE Homeowner Open Market PACE Commercial Real Estate Firm Program introduces contractors and projects Consumer protections Real estate owner qualifies contractors and financing Maximize competition Programmatic project qualification Engineering/audit-based economics Consistent one size fits all Project finance approach Rely on law/legislation for protection Lien-holder approval based on merits 1

15 Open Market - Implementation Residential / Small Commercial Medium / Large Commercial Original SCEIP Open Market Extension 8/11 San Francisco Los Angeles 2

16 Why Open Market Appropriate government provision of market mechanism for sophisticated private sector actors Allows programs that require minimum of government expense and resources Reduces frictions for property owners, energy contractors and finance providers to work across programs key for nationwide adoption Maximizes private sector innovation, competition & financial market efficiencies 3

Open Market Program Spectrum Basic Minimal Comprehensive Elaborate Authorizing Resolutions

Policy Objectives Minimal Program Administration Basic Underwriting Criteria Authorizing

Requirements Residential/ Commercial Tracks Website/ Technology Requirements Community Outreach

17 Open Market Program Spectrum Basic Minimal Comprehensive Elaborate Authorizing Resolutions Minimal Program Policy Objectives Punch-list of Requirements Authorizing Resolutions Program Policy Objectives Minimal Program Administration Basic Underwriting Criteria Authorizing Resolutions Program Policy Objectives Program Administration & Customer Support Project Loading Requirements Residential/ Commercial Tracks Website/ Technology Requirements Community Outreach Job Creation Requirement Underwriting Criteria Certification Program Program Staffing Requirements Vendor Training 4

Sonoma Mountain Village First project using Open Market PACE Structure - September 2011 Project stalled under original SCEIP program structure Adoption of Open Market track by Sonoma allowed Clean

18 Sonoma Mountain Village First project using Open Market PACE Structure - September 2011 Project stalled under original SCEIP program structure Adoption of Open Market track by Sonoma allowed Clean Fund to contribute private sector expertise Project Specifics 1MW PV $5MM total $1.6MM PACE financing by Clean Fund Sonoma program modifications Lien-holder negotiations Positive EBITDA & improved covenants 5

19 Project Approach Understand County (SCEIP) and owner objectives Mediate between owner & mortgage lender Consider policy, finance, & environmental goals Tenant leases Accounting & covenant compliance Guarantees & insurance mitigation Project return analysis Community Reinvestment Act credits Collateral, guarantees & fees 6

20 Contact Us John Kinney (Finance) (415) , x101 Craig Hill (Programs) (415) , x103 Derek Brown (Partners) P (415) , x102 derek.brown@cleanfund.com 7

Questions? Sonoma County Energy Independence Program SCEIP@sonoma-county.

21 Questions? Sonoma County Energy Independence Program (707)

22 Future Forums Mark your calendar for these upcoming webinars: January 18, 2012: Marketing Non-Residential PACE Presenters: Richard Chien, City of San Francisco David Hodgins, L.A. Commercial PACE pilot February 15, 2012: Working with Lenders March 21, 2012: Implementing Residential PACE April 18, 2012: Hybrid PACE Programs 5

PACE. Energy Efficiency Investments can Cre Jobs and Build a Brig Clean-Energy Future Americans Nationwid

PACE. Energy Efficiency Investments can Cre Jobs and Build a Brig Clean-Energy Future Americans Nationwid PACE Financ Energy Efficiency Investments can Cre Jobs and Build a Brig Clean-Energy Future Americans Nationwid Partners The American Sustainable Business Council is an advocate for and business networks