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Debt review presentation qecb-power saver, march 2012


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Matthew H. Brown presented to the Salt Lake County Debt Review Committee about a structural option for using Qualified Energy Conservation Bonds, the proceeds of which would be used to fund energy efficiency loans supported by a Title 1 PowerSaver loan insurance project. The Debt Review Committee sent the proposal on to the County Council with a positive recommendation, subject to a review of certain alternatives.

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Debt review presentation qecb-power saver, march 2012

  1. 1. CLEAN ENERGY FINANCING: QECBs WITH POWERSAVER Presentation to Debt Review Committee Matthew Brown, Principal March 29, 2012
  2. 2. OVERVIEW 2
  3. 3. VISION FOR SALT LAKE COUNTYLaunch residential energy upgrade market with affordable interest rates and scalable designThe Salt Lake CountyQECB/PowerSaver model can sparkconsumer demand for residentialenergy upgrades, including solar andcost-saving energy efficiency.Demand can be met with localequipment vendors andcontractors, creating not just local jobsbut a market as the offering scales.Creation of the market will attractsubsequent investors, thereby allowingthe Salt Lake region to become a hubof energy upgrade activity 3
  4. 4. WHAT ENERGY EFFICIENCY LOOKS LIKELow cost, high return upgrades with immediate savings and increased value and comfort Before upgrade After upgrade• Wasted heating and cooling • Balanced, efficient HVAC• High utility costs • Reduced utility costs• Hot/cold zones and low comfort • Liveable space and high comfort• Average resale value • Marketing advantage on resale 4
  5. 5. ELIGIBLE UPGRADESMost measures will be available locally and can be installed by local contractors Insulation  Water Heater Duct sealing (gas, propane, electric, tankless)  Energy Star Roofs Storm Doors  Ground Source Heat Pump Window Replacement  Water Heater (Solar) Storm Windows  Fuel Cells Heating System  Micro-turbines Gas/Propane/Oil Boiler / Furnace  Solar Panels Air Conditioner  Small Wind Turbines 5
  6. 6. ENGAGING THE LOCAL COMMUNITYSt. Louis County and others have seen tremendous contractor support • Over 60 contractors were approved within the St. Louis program. • Many contractors paid for independent marketing, including one that spent over $30k promoting the program. • These projects are primarily initiated by contractors. Rollout strategy for integrating contractors with PowerSaver lender will be critical. Contractors need to understand financing and be enabled to originate projects. Fannie Mae lenders have used this “dealer loan” model successfully for years. 6
  8. 8. BENEFITS OF QUALIFIED ENERGY CONSERVATION BONDS (QECBS) • Well below-market interest rates • Up to 70% interest subsidy from IRS • Consumers benefit directly from low rates • Boulder County – 1.1 to 2.9% for commercial loans • St. Louis County – 3.5% for residential loans • Available for qualified energy conservation purposes • Renewable energy • Energy efficiency • Certain transportation projects • “Green community programs” • Exempt from the 30% private activity cap • Salt Lake County has approximately $4.49MM of available QECB allocations 8
  9. 9. POWERSAVER SUMMARY• FHA-based private mortgage insurance product designed to result in low-cost lending for residential energy upgrades• HUD has approved 17 PowerSaver lenders to date• The mortgage insurance guarantees up to 90% of each qualifying loan and up to 10% of the lender’s Title 1 portfolio• The maximum loan amount is $25,000 • Loan must be secured if over $7,500• Credit requirements include: • FICO ≥ 660; Debt-to-income ≤ 45%; Loan- to-value ≤ 100% • Employment and income verification requirement (2 years) 9
  10. 10. POWERSAVER APPROVED LENDERSAt least 7 PowerSaver lenders would be available to partner with the CountyHUD Approved and Utah Licensed:AFC First Financial - Allentown, PABank of Colorado - Ft. Collins, COCity of Boise - Boise, IDNeighbors Financial Corp. - Sacramento, CAParamount Equity - Roseville, CASun West Mortgage Co. - Cerritos, CAWJ Bradley - South Jordan, UT 10
  11. 11. ADVANTAGES OF COMBINING QECBS WITH POWERSAVER• QECB interest rate subsidy combined with HUD PowerSaver’s mortgage insurance could allow Salt Lake County to launch a below-market rate financing program for residential energy upgrades• PowerSaver mortgage insurance may allow pure conduit structure without credit support from Salt Lake County for the bond issuance• Establishing a relationship with a PowerSaver lender could allow the program to scale as QECB proceeds are expended, resulting in a sustainable, low cost model 11
  13. 13. CONDUIT ISSUANCE QECB WITH SALT LAKE COUNTY SUPPORT AGREEMENT Bond Purchasers DSR for benefit of bond Principal purchasers and interest Bond proceeds paid to investor IRS: Interest Conduit Issuer Created Rate Subsidy Up to 70% by Salt Lake County Capital supplied P&I passthrough to fund loans FHA: 90%/10% Mortgage PowerSaver Lender (with optional Administrator) Insurance P&I payments Loans are originated with made to the funding to contractor Lender 5% Borrower Residential Property Funded DSR Capitalized Owners Fee = Capital Inflow = Capital Outflow = Credit Enhancement 13
  14. 14. QUESTIONS 14