Transcript Slide 1
Overview of Property Assessed Clean Energy (PACE) Program A Unique Option to Finance Your Energy Initiative Executive Summary PACE Property Assessed Clean Energy • Chapter 187, passed in 2011, creates the ability for municipalities to place Clean Energy Special Assessments on existing properties at the request of the property owner through the adoption of a special assessment ordinance • Municipalities that adopt the special assessment ordinance may utilize a County Improvement Authority to issue bonds secured by the assessments in order to fund clean energy improvements THERE ARE NO MUNICIPAL FUNDS AT RISK 2 Why do property owners use the program? • 100% FINANCING/PRESERVATION OF CAPITAL – As the program can finance 100% of costs, a property owner does not need to contribute new equity to the project. • BALANCE SHEET – Collateral is the assessment on the property, not the owner’s credit. • TRANSFER OF PROPERTY – In addition to the capital improvement and cash flow benefit, the repayment obligation runs with the property until fully paid and not the property owner. • TERM OF FINANCING - The Assessment lasts for the life of the asset creating an immediately positive net cash flow. Conventional financing usually has a limited term that puts short-term strain on cash flow. No acceleration of loan. 3 Public Policy Benefits • JOBS – increase of temporary and permanent jobs. Every $1,000,000 in assessments will create/preserve 17 jobs. • IMPROVED PROPERTY – allows aging properties that need capital improvements to be viable by making improvements affordable • CLEAN ENERGY – reduces carbon emissions and pressure on grid Source: American Council for an Energy Efficient Economy 4 Existing PACE Legislation Source: pacenow.org 31 States adopted PACE legislation 17 States have active PACE programs 33 Active PACE Programs in those 17 States 16 PACE Programs have funded projects in 7 States 5 Team Approach Executed first PACE securitization Highly Rated Bank (A2, A+, A+) Committed Loan Capital to PACE program in NJ National Engineering Firm with 23,000 employees Super ESCO Program Administrator for Florida PACE Proprietary PACE software solutions Experienced Tax-Lien Investor Committed Equity for PACE programs New Jersey’s leading Financial Advisor Leader in Improvement Authority Financings 4 Deal of the Year Awards 6 Process for Property Owners • There are 8 general steps for a property owner to obtain financing: ― Step 1: Property Prequalification ― Step 2: Submit a formal application ― Step 3: Obtain Contractor Estimate ― Step 4: Contractor Bid Summary to Underwriting ― Step 5: Project Approval by Agency ― Step 6: Closing, Lien Placement, and Notice to Proceed* ― Step 7: Work Performance ― Step 8: Property Owner Approval (and Final Payment) * Although work may commence prior to issuance of the Notice to Proceed, any such work would be conducted at the sole risk of the contractor. 7 The Process STREAMLINED & STRAIGHT FORWARD: • A simple step by step guide explaining the process of a Commercial project from inception to completion. 8 Steps 1 - 4 • Steps that outline the project process from determining eligibility, through project submission. ELIGIBILITY - Property Owner evaluates potential benefits - Property Owner reviews eligibility requirements - Property Owner completes application SUBMIT APPLICATION - Property owner provides property information - Property owner provides lender information and consent - Property owner identifies qualifying improvement(s) OBTAIN ESTIMATES - Property owner reviews list of eligible contractors - Property owner obtains estimates from one or more contractors - Property owner selects preferred contractor SUBMIT PROJECT - Selected contractor prepares project proposal - Property owner submits project proposal to Leidos 9 Steps 5 - 8 • Steps that outline the project process from agency review, through the issue of final payment. Project REVIEW - Leidos validates Contractor - Leidos validates Property Owner - Leidos communicates project review to contractor and Property Owner. - Leidos validates cost and savings - Leidos approves project SCHEDULE CLOSING - Leidos collaborates with property owner to establish a closing date for the financing. - Leidos and property owner execute financial documents and the contractor is given notice to proceed. INSTALL IMPROVEMENT - Contractor obtains permits - Contractor completes installation - Local building official approves permit FINAL PAYMENT - Contractor submits a final payment package to the Property Owner for approval. - Leidos reviews the final payment package, approves then issues final payment. 10 Eligible Measures • Must be permanently affixed to the property. • Requires an energy assessment to validate the correct relationship between cost and expected energy savings • Assessment can include costs for permits, inspection, energy analysis, engineering and design, assessment origination, recording and collection fees. • Allowable Projects: Energy Efficiency Renewable Energy Flood Mitigation (pending in NJ) • Eligible Properties: 1-4 Family Residential Commercial/Industrial/Multi-Family > 5 families Religious or Non-Profit Healthcare Educational Agricultural 11 Benefits to Local Governments • New opportunities for investment • Employment growth and economic development • Increasing the value of the area’s building stock • Reduce the stress on the local infrastructure • Increases community resilience • Supports state and local conservation and sustainability goals and Clean Air Act nonattainment levels • No need for public funds or administrative assistance • Once established, can be self-sustaining • Supports disaster preparedness 12 Benefits to Mortgage Lenders • Assessment mechanism is well understood • Increased Net Operating Income improves mortgage coverage • Increased value of collateral outweighs lien exposure • PACE can finance needed capital improvements with no additional debt • Amount of a PACE assessment is small compared to the value of the related property • The maximum LTV for PACE assessments is initially 20% 13 Benefits to Contractors • Creates more work for contractors • On-demand access to program training • Recognizes and rewards ethical business practices • Lower cost and more flexible financing terms • Standard set of rules and procedures • Prompt and direct deposit final payment • Technical support • Prominent exposure • Access to professionally-developed marketing collateral • Potential for special program equipment promotions 14 “Best Practices” Highlights • Owner must be current on their property taxes and mortgage – limited look back • Mortgage-related debt on the property is limited with respect to the assessed or appraised value • Proposed assessment must not exceed a stated percentage of the assessed value • Assessment and mortgage debt must not exceed 100% of the market value of the property • The total annual property tax and assessments, including the contractual assessment must not exceed a fixed percentage of the property’s market value • Endorsed by White House and DOE • Accounting and tax treatment similar to property taxes 15 Property Owner Benefits • Up to 100% financing can be provided for qualifying improvements • Up to 20 years to pay based upon the weighted average life of the improvements • Off balance sheet financing as a special assessment is placed against the property and collected with property taxes • Special assessment may be tax deductible1 • Special assessment can remain with the property upon title transfer (sale, transfer, refinance or foreclosure), or retired as a negotiable term of sale • Federal Tax Credits or rebates, which can be utilized or monetized, are available for many energy related improvements • Simple paperwork. Low set-up costs; use of existing Appraisals and Environmental Studies; no Notes or Security Deeds are filed against the property • All work must be permitted and approved by local building department • Work performed by qualified and licensed contractors 1The tax deductibility of this assessment may vary due to internal accounting standards. Please verify with the appropriate tax consultant. 16 Presenters • Please contact any of the presenters if you have any questions. ― Dan Mariniello - (201) 656-0115 - [email protected] ― Hamilton McLean - (407) 648-3597 – [email protected] ― C.J. De Santis - (646) 291-6890 – [email protected] ― Ryan Donavan - (212) 250-8257 - [email protected] 17