The Lean & Green Michigan Approach to Property Assessed Clean Energy (PACE)

Transcription

1 The Lean & Green Michigan Approach to Property Assessed Clean Energy (PACE) An Innovative Way to Help West Michigan Businesses Save Money, Create Jobs, Grow the Tax Base and Green our State Andrew S. Levin, JD Copyright Levin Energy Partners, LLC. All rights reserved.

2 Property Assessed Clean Energy (PACE) PACE brokers long-term financing so business property owners can undertake energy improvements profitably making their business more efficient while gaining positive cash flow to plow back into operations Copyright Levin Energy Partners, LLC. All rights reserved.

3 Public policy: PACE is an economic development incentive that requires no taxpayer money. The county is simply giving its businesses a property tax tool to make long-term financing work for clean energy projects. Copyright Levin Energy Partners, LLC. All rights reserved.

4 BACKGROUND: MICHIGAN S PACE STATUTE Public Act 270 of 2010 became law on 12/14/2010 Covers commercial, industrial and multi-family property not single family property Affords flexibility on financing arrangements Allows up to 100% loan-to-value (LTV) financing Bank must consent if there s a mortgage Allows municipalities to work together 31 states and DC have adopted PACE statutes (all since 2008!)

5 Who can take advantage of PACE? Owners of commercial, industrial, agricultural and multi-family property (almost all business owners) Private non-profits (churches, hospitals, private schools and colleges, etc.) Who can not use PACE under the MI statute? Single family homes Government buildings

6 What can be financed under Michigan s PACE Statute? Energy efficiency improvements Water efficiency improvements Renewable energy improvements 100% of eligible project costs Refinancing all of above

7 MORE DETAILED LIST: WHAT CAN BE FINANCED Insulation Caulking, weather-stripping, and air sealing Windows Doors Energy control systems HVAC Energy recovery systems Lighting fixtures and day lighting systems Electrical systems to charge PEVs and HPEVs Water use reduction or efficiency manufacturing processes and equipment Biomass Solar photovoltaics Solar thermal Wind Geothermal Methane gas captured from a landfill Anything else approved as a "utility cost-savings measure" by a municipality participating in Lean & Green Michigan Exclusions: incinerator and digester Energy-efficient or water-efficient

8 PACE CRACKS THE ENERGY FINANCE NUT Problem: most clean energy projects don t work with traditional financing (payback > loan term) Special assessment mechanism provides more secure, longer term financing As a property tax, a PACE special assessment: Is enforced by the county in event of delinquency Runs with the land, so it moves to new owner if property is sold

9 PACE CRACKS THE ENERGY FINANCE NUT (CONT.) Longer term Typical commercial loan: 3-5 years PACE: 7-20 years Secure, fixed interest rate Reduced risk for property owner and lender Plus: contractors must guarantee the energy savings on projects over $250,000

10 The Lean & Green Michigan Model (I) PUBLIC-PRIVATE PARTNERSHIP: FAST, FREE, EFFICIENT Traditional model: local govt. pays vendor $200,000 to $1,000,000 to create PACE district Better way: join Lean & Green Michigan for free Levin Energy Partners administers the district LEP is compensated by administrative fees on each privately-financed PACE deal, not by County This Public-Private Partnership approach is faster (no vendors, no RFP process) and avoids risk for local govt., which invests no money

11 The Lean & Green Model (II) SHARED SERVICES, STATEWIDE IMPACT Michigan statute allows jurisdictions to create shared PACE district Lean & Green Michigan creates a statewide PACE market open to all Companies get one set of efficient rules for projects across state Lenders get broad and diverse pool of projects to finance Counties & cities save money

12 The Lean & Green Model (III) FINANCE PROJECTS WITH PRIVATE CAPITAL Private financing unleashes the market to drive growth Lean & Green brings it! PACE funds: Structured Finance Assoc., Clean Fund, Petros Capital Partners, Samas Capital Banks: Citi, Wells Fargo, Comerica, Fifth Third, PNC, etc. Private Equity Labor capital: Ullico, pension funds Public funding is allowed but not necessary

13 Levin Energy Partners: Ideal partner for West MI counties Knowledge - Harvard-trained lawyer Andy Levin is a national PACE expert and helped pass Michigan s PACE law while heading DELEG Experience 9 counties and 3 cities have already created PACE districts with LEP: Eaton, Genesee, Grand Traverse, Huron, Ingham, Macomb, Saginaw, Washtenaw and Wayne Counties Cities of Rochester Hills, Royal Oak and Southfield Cost effectiveness - LEP helps the County implement PACE at no cost to taxpayers

14 A FAST-GROWING MARKET 9 counties + 3 cities have joined Urban & rural, big and small 4,320,314 people in the market That s 44% of MI s population Expanding at a rapid rate

15 First Project Announced Spring LAW-FIRM = Super high visibility Southfield office bldg. 146 kw solar panels on roof & car ports 4 kw wind turbines on roof EV charging stations (solar-powered) Super high efficiency lighting $530,000 of PACE financing over 20 yrs. Public commissioning held on December 3

16 Star Lincoln Dealership Family-owned business in Southfield, built in early 1970s Looks great, but energy sink beyond show room $500,000 in PACE-financed upgrades will generate over $1,000,000 in savings with a 20% ROI LED lighting, HVAC, controls, weatherization, compressors, bay doors (will open and close < 3 seconds!) pure EE play Each $1 in project: 87 repays assessment, 13 = cash for owner for 20 years!

17 Michigan Public Service Commission Agency is leasing building for 20 years Negotiated with property owner to include LED retrofit, small solar installation & variable speed motors as part of lease First state energy agency in USA to use PACE Great example of how PACE solves split incentive problem About $480,000 in PACE financing will generate over $720,000 in savings

18 Lean & Green Michigan Project Pipeline Over $50M serious projects proposed Next to be announced: $700,000 LED project at large shopping mall in Washtenaw County Further examples: 1MW solar PV for northern Michigan factory Large HVAC/EE project for Detroit charter school

19 Montcalm project ready to go! Cambridge Court Apartments in Greenville Over $135,000 of improvements including: High efficiency plumbing LED lighting inside and out High efficiency HVAC upgrade Programmable thermostats, Energy Star refrigerators, solar panels Over $150,000 in positive cash flow Collaboration between two MI companies Parker-Arntz of Greenville PK Housing of Okemos 19

20 Kent County project ready to go! Eastbrook Apartments in Grand Rapids Over $213,000 of improvements including: High efficiency plumbing LED lighting inside and out High efficiency HVAC upgrade Energy Star refrigerators Solar panels 1.46 savings-to-investment ratio Over $100,000 in positive cash flow 20

21 ECONOMIC DEVELOPMENT IMPLICATIONS Economic gardening help all home grown industries Property owners: save money, get green PR Tenants/employees: buildings are more comfortable, less expensive, and greener Contractors: get a new way to gain business Citizens: put local residents to work on retrofits, etc. County: cutting edge of greening; improve biz climate Planet: reduce carbon footprint

22 Next Steps County commissions pass resolution of intent Commissions hold public hearing Commissions pass resolution of adoption (can be at same meeting as public hearing) Start working with West MI businesses to develop and finance clean energy projects! 22

23 The Lean & Green Michigan Approach to Property Assessed Clean Energy (PACE) An Innovative Way To Help Michigan Businesses Save Money, Create Jobs, Grow The Tax Base and Green our State Copyright Levin Energy Partners, LLC. All rights reserved.