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V4 CCSE Henderson 091610

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  • How does it work? It’s simple. First, a city or county creates a land-secured financing district. Property owners can choose to sign up for financing and then hire a contractor to install their energy project. Then, a PACE Bond is issued to finance the work and uses the proceeds from the bond to send a check to to property owner to pay for energy project. Finally, the property owner pays the contractor for the work and then repays bond through a small assessment on their property tax bill.
  • Many taxpayers are skeptical of new government programs – especially when they hear that the program originated in Berkeley, California. But PACE is popular with local governments because it is tax neutral and has no exposure for the General Fund. As I’ve described, PACE is also one of the best and fastest tools for local governments to reach their climate change goals. But perhaps most importantly – at least right now in the midst of the Great Recession – is that PACE financing programs help create jobs QUICKLY. How many jobs will this program create? Let me show you an estimate …
  • We’ve talked a lot about benefits to the city. But the big question for every property owner is: will I save money? Each person will need to do their own assessment, but based on some back-of-the-envelope calculations, the average homeowner could save a lot of money by investing in energy efficiency and possibly solar. Another big benefit of PACE financing is that it is not based on personal credit. The application takes only a few minutes – and mainly deals with whether you have paid your property taxes on time over the previous three years. Also, if you sell you home, the new owner automatically assumes payments – just like if it were a school bond or some other municipal bond. So you are not stuck in the position of making a big investment in your home that you can’t recoup when you move.
  • The Obama Administration and the Congress have been very supportive of PACE financing. In October 2009, Vice President Joe Biden held a press conference at the White House – where he publicly stated the administration’s support of PACE financing as an important means of helping the nation achieve its climate change goals, while saving money for homeowners and creating jobs. The Congress and the Administration also supported PACE financing in the Recovery Act last spring. It also authorized the use of Qualified Energy Conservation Bonds. And, through the U.S. Department of Energy, the Administration allocated $454 million to local governments and public-private partnerships through its “Retrofit Ramp Up” program.
  • Total DOE/ARRA funds for PACE? $150 million Who participated in interagency working group? HUD, DOE, National Economic Council Any news on the congressionally led PACE discussions? As noted on the slide, the negotiations were terminated by FHFA. This means that there is greater motivation for a legislative solution.
  • Additional Lawsuits Babylon, NY: July 13, 2010 Sonoma County, CA: July 27, 2010 Sierra Club: July 30, 3010 Current status of lawsuits? Not sure. I seem to recall a Dec date for the first hearing. But it is a distant recollection. You should check with the AG’s office.
  • Congress back in on Sept. 13, recess on Oct. 8
  • EUC is a comprehensive State-wide energy and water efficiency and clean energy retrofit program Principal goals are to reduce consumer confusion, build a retrofit industry, reduce energy and water consumption and create jobs It brings together disparate programs from all levels of government, utilities, the public and private sectors Provides a single State-wide location for any Californian to get information on how to retrofit their building and all of the programs they are eligible for Provides early implementation and infrastructure for AB 758 and Home Star
  • The Energy Commission has contracted with CSCDA to develop attractive financing products for home and commercial building owners CSCDA will administer a solicitation for the offering of private financing for building retrofits. We are confident that lower interest rates can be achieved by CSCDA than could normally be achieved by: offering a program that essentially serves an audience on 13 million homes and 10 billion square feet of commercial space, provides consistent underwriting criteria and ensures expected program benefits through strict contractor qualifications, loading order adherence and quality assurance measures Building owners will be able to apply through EUC website or with contractor assistance
  • Transcript

    • 1. PACE and the Path Forward Annie Henderson | September 16, 2010
    • 2. PACE: Simple, Effective Tool Property owner repays bond through property tax bill (up to 20 years) Proceeds from PACE bond or other financing provided to property owner to pay for energy project Property owners voluntarily sign-up for financing and install energy projects City or county creates type of land-secured financing district or similar legal mechanism
    • 3. Key Benefits for Cities & Counties Helps meet energy and climate goals Promotes local jobs Tax neutral and no exposure to General Fund
    • 4. Key Benefits for Property Owners Saves money on utility bills Repayment transfers to new owner Not based on personal credit
    • 5. We are going to make it a lot easier to borrow money. We are doing this by encouraging communities to give you the option to pay the expense of retrofitting your home by paying it back on your property taxes.
    • 6. National PACE Policy 4 States Have PACE Legislation Pending 24 States Have PACE Authority
    • 7. FHFA/Fannie Mae PACE Activities
      • June 2009: FHFA guidance letter
        • Concerns regarding senior lien and homeowner risk
      • September 2009: Fannie Mae lender letter
        • Reviewing underwriting guidelines for PACE; Until guidelines are issued, treat payments as a special assessment
      • May 2010: Fannie Mae lender letter
        • PACE “loans” and promise to issue additional guidance and work with federal and state agencies, while “preserving the status of mortgage loans o riginated as first liens”
    • 8. FHFA/Fannie Mae PACE Activities
      • July 2010: FHFA guidance letter
        • “ Safety and soundness concerns”
        • Violation of Uniform Security Instrument
        • Reduce loan amount by potential PACE amount
      • August 2010: Fannie Mae lender letter
        • PACE “loans” prior to July 6 th must be paid off at time of refinance
        • “ Fannie Mae will not purchase mortgage loans [with PACE debt] unless the terms of the PACE program do not permit priority over first mortgage liens.”
    • 9. Impacts on PACE
      • Active and planned PACE programs on hold around the country
      • Commercial PACE programs face uncertainty
    • 10. Path Forward
      • Negotiations
      • Litigation
      • Legislation
    • 11. Negotiations
      • October 2009: White House led interagency working group
        • Result: White House Policy Framework for PACE
        • Release of DOE/ARRA Funds for PACE programs
      • Spring 2010: Renewed discussions regarding PACE guidelines and pilots
        • Result: May 5 th Fannie Mae/Freddie Mac letters and July 6 th FHFA/FDIC/OCC letters
      • July 2010: Congressionally led PACE discussions with FHFA and other regulators
        • Result: FHFA sent a letter to Members of Congress breaking off talks.
    • 12. Litigation
      • California Files Suit
        • People of the State of California vs. Federal Housing Finance Agency ( Filed July 14, 2010)
        • “ California seeks a prompt judicial declaration against Fannie Mae and Freddie Mac that, under California law:
          • (a) PACE programs operate by assessments, not loans, and such assessments are valid;
          • (b) liens that may result from PACE assessments, like those resulting from other types of assessments, have priority over mortgages; and
          • (c) participation in PACE programs is compatible with, and not in violation of, Fannie Mae’s and Freddie Mac’s standardized mortgage documents.”
      • Additional lawsuits filed by Babylon, Sonoma County and Sierra Club
    • 13. Legislation
      • PACE Assessment Protection Act
        • HOUSE: HR 5766 (Thompson); 48 co-sponsors
        • SENATE: S 3642 (Boxer); 5 co-sponsors
      • “ To ensure that the underwriting standards of Fannie Mae and Freddie Mac facilitate the use of property assessed clean energy programs to finance the installation of renewable energy and energy efficiency improvements”
      • Legislation would require Fannie Mae and Freddie Mac to issue PACE underwriting standards that are consistent with US DOE guidelines
    • 14. Legislative Strategy
      • Four key steps
        • Make a priority for Congress overall
        • Oversight committee support
          • Senate Banking Committee (Sen. Dodd)
          • House Financial Services Committee (Rep. Frank)
        • Republican co-sponsors in House and Senate
        • Attach to appropriate vehicle to get done this year
      • How to help
        • Sample resolutions and other materials at: www.pacenow.org
        • State/Local Governments
          • Adam Byrnes, [email_address] , 510-350-3733
    • 15. Solutions for the Interim
      • CEC is proposing a clearinghouse of finance options that will include secured and unsecured products
    • 16. Energy Upgrade California
    • 17. The Program
              • State-wide energy and water efficiency and renewable energy generation retrofit program for single- and multi-family residential and commercial buildings
              • Collaboration between Energy Commission, Public Utilities Commission, utilities, local governments and private sector
              • One-stop resource for information on building retrofit benefits, financing and incentives, finding a qualified contractor, workforce training and home energy ratings
              • Coordinates federal, state, utility and local government retrofit program outreach, incentives and contractor and participant qualifications
              • Creates a foundation for AB 758 and Home Star
    • 18. Energy Upgrade California Financing Program
      • Administered by California State-wide Community Development Authority
      • Competitive solicitation will be offered for interested financial institutions offering residential and commercial retrofit loan products
      • Low rates expected as the program will offer standard underwriting, comprehensive program roll-out (contractor qualification, quality assurance, etc.) and bundling of State-wide building stock
      • Offered State-wide through Energy Upgrade California web-site application, subsidized with interest rate buy-down and loan loss reserve in leadership counties that commit local resources
    • 19. EnergyUpgradeCalifornia.org
    • 20. Contractor Training
    • 21. Annie Henderson | annie@renewfund.com | (510) 451-7911

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