Written by The Business Journal Staff
And new bond sales are on the way to provide the upfront capital costs for even more energy-saving fixes made possible through the passage of AB 811 in 2008. Dozens of California municipalities have signed on with a Property Assessed Clean Energy program, allowing property owners to finance HVAC repairs, solar panels, low-flush toilets and other building improvements through line items on their property tax bills.
The program’s financing agent, Figtree Energy Resource Co. of San Diego, is close to issuing $5 million in private placement bonds on commercial properties in both Fresno and Palm Springs, a far cry from $725,000 that poured into Fresno during the first bond sale in late 2011.
Fresno’s Sustainability Manager Joseph Oldham said ideally, businesses could reap energy savings greater or equal to the debt service on the building when stretched out over the maximum payoff term of 20 years.
“In many cases we’re seeing pretty significant energy savings in the order of 20 to 30 percent depending on measures,” he said.
Another unique benefit to PACE, he added, is that the cost of the improvement, whether it be lighting retrofits, window sealing or even new efficient appliances, is tied to the building’s lien and can be transferred to a new owner in case the property changes hands.
Also, he said, no credit checks are necessary and the fee-based energy audits necessary to determine areas of water and energy waste will bring property owners into compliance with AB 1103 requiring nonresidential buildings to disclose energy consumption data to potential buyers or lessees.
Ultimately, the big payback to the community, he said, is the jobs and investments created from energy savings, spelling more economic activity in the community.
One project totaling around $350,000 is taking place on the office of Gunner and Andros Investments in Fresno’s Fig Garden Village, where local company Fryer Roofing is installing a white reflective cool roof to help lower the building’s cooling costs in the summer.
“This is our first PACE project,” said CEO Bruce Fryer. “We’ve actually roofed one of the towers recently, but it wasn’t under the PACE program. Now we’re doing tower two.”
Representatives of Figtree will be presenting on the PACE program during the Economic Development Corporation serving Fresno County’s Clean Energy Cluster held Thursday.
Seeking to help even more businesses save energy, the City of Fresno signed on with another PACE provider last September following the launch of CaliforniaFIRST, a program sponsored by the California State Association of Counties and the League of California Cities.
With more than 100 counties and cities already participating, the program can finance projects totaling around $50,000, as opposed to Figtree, which requires a threshold of $500,000 before it can justify the sale of municipal bonds.
What this means, Oldham said, is that CaliforniaFIRST can fund upgrades on a case-by-case basis.
“I think there are niches for both programs, and there’s a big market for both, but I think both programs can operate concurrently without any issues,” he said. “They don’t see themselves as being direct competitors because their model is different.”
Another difference is the fact that CaliforniaFIRST works on an open market model in which property owners eyeing upgrades are allowed to choose their own investor and corresponding interest rate whereas Figtree decides on the source of capital and interest rate.
“What we have seen is it takes a little while to educate the market that this is a viable financing tool,” said Cliff Staton, executive vice president of Renewable Funding of Oakland, the company selected to be the program’s administrator. “We picked up a lot of steam in the past few months and we expect 2013 will be a break out year.”
Fresno County was one of 14 to join the program as CaliforniaFIRST launched its initial sweep enrolling counties and cities across the state.
By the end of December, 22 water and energy improvement projects had already applied totaling $8.5 million, most of them solar photovoltaic installations and another 22 percent in energy efficiency measures. Currently, 37 applications are awaiting approval for funding.
The next participation phase passed last month, extending CaliforniaFIRST’s financing model to Contra Costa, Marin and Napa counties.
With the Board of Supervisors expressing interest in the issue during a meeting on Jan. 29, Tulare County is now a likely candidate for the next round of enrollees to join up some time later this year.
Ken Loeb, natural resource conservation manager with the City of Visalia, said several cities have been on board for some time but the program requires county participation before bringing separate communities into the fold.
Once Tulare County is included, he said, even cities already enrolled with Figtree, like Tulare, Exeter and Farmersville, can join CaliforniaFIRST simply by passing a resolution establishing the PACE district and making sure contracted assessments are placed on the county tax roll.
“We would just provide information, marketing, outreach and availability and the opportunity for business owners if they choose to take advantage of it,” Loeb said. “CaliforniaFIRST would set up a website through Tulare County through which cities could apply.”
While only commercial projects are eligible for PACE financing, Loeb said he is optimistic that residential properties will soon become eligible following legislative action against the Federal Housing Finance Agency.
The residential market has been excluded from involvement since 2010 when the agency, which oversees mortgage-finance enterprises Fannie Mae and Freddie Mac, addressed concerns that the energy improvement loans would take priority over mortgage debts in case of default.