Last week, I wrote about wineries using sustainable practices, including solar panel systems. As a follow-up, I would like to discuss a new program that the County will be running, which will offer loans at attractive rates to help property owners fund solar projects. The benefits of this program are not only financial—for those who wish to add solar systems to their properties—but also include helping the environment, creating jobs, and conserving energy. In this week’s column, I will examine this program and highlight some of the key features and benefits of the program for the county and for you and me!
On July 21, 2008, California enacted Assembly Bill (AB) 811, authorizing the establishment of contractual assessment programs to finance the installation of solar photovoltaic panels and energy efficiency upgrades that are permanently affixed to real property. Under this program, voluntary participants can install a wide variety of approved improvements and finance those improvements over time through a supplemental assessment on their property tax bill. On July 21, 2008, California enacted Assembly Bill (AB) 811, a law enabling cities and counties to set up local finance programs to incentivize property owners’ ability to make energy efficiency upgrades to their property and install renewable energy technology. Through AB 811, contractual assessments on local property tax bills are used to pay for these improvements.2 In doing so, AB 811 aims to minimize the upfront costs of improvements by providing property owners with a pay-as-you-go funding option, which includes a longer repayment period than might otherwise be possible with conventional financing.
In June of 2009, the County Board of Supervisors directed a team of County staff members to examine the feasibility of a County municipal energy finance program. Feasibility has been defined as the ability for the program to achieve desired outcomes, while paying for itself over time, thereby ensuring minimal impacts to other County programs. Based on extensive analysis provided in this report, the project team has concluded that financially feasible options exist to establish a municipal energy finance district. It appears that this program is not only feasible, but plans are in process to implement the program shortly.
Since contractual assessments run with the property, program costs and benefits can be transferred to subsequent owners when the property is sold. This helps address many property owners’ reluctance to install higher-cost solar and energy efficiency upgrades, since the cost of those improvements may not be fully recovered in the price of the home or commercial building upon resale. As part of AB 811, all improvements must be permanently affixed to pre-existing residential, commercial, industrial or other real property. This debt is land secured, and applies to existing real property. The provisions of the program do not apply to new development.
According to the “Guide to Energy Efficiency & Renewable Energy Financing Districts For Local Governments” prepared by University of California, Berkeley, buildings account for 72 percent of electricity use and over 36 percent of greenhouse gas emissions. Accordingly, buildings are a key focal point of the national policy strategy to simultaneously stimulate economic recovery and incentivize energy savings across communities. Since buildings have useful lives that span many decades, a high-percentage of existing energy-intensive buildings will continue to operate for the foreseeable future. The building improvements capable of effectively reducing, or offsetting energy demand, carry high upfront costs that are discouraging, and often prohibitive, to most property owners.
Consequently, new incentives are needed to help property owners proactively reduce energy consumption and demand in existing buildings. For local governments in California, a municipal energy finance district, pursuant to Assembly Bill (AB) 811, is one way for a city or county to provide property owners with access to capital for residential and commercial clean energy projects. Simultaneously, municipal energy finance districts provide an opportunity to address climate change and strengthen the local economy by adding jobs related to energy efficiency retrofitting and solar installation, while also providing a host of co-benefits that can improve the relative quality of life of local residents. These co-benefits include smaller energy and water bills, and improved indoor comfort. Additionally, these programs offer property owners a convenient, complimentary financing option which can increase home equity.
In November of 2009, the County staff members on the team published their report on the feasibility of establishing a municipal energy finance district in Santa Barbara County. The report concluded that feasible options do exist to establish a municipal energy finance district. This report further concluded that many indicators show that demand will be high and the local workforce is prepared for the scale of the program they intend to establish; that the County is capable of designing and administering an effective regional program, particularly if startup funding is obtained to cover the initial costs of the program’s administration needs; that the program can become self-sustaining and that the County can minimize financial if interim and long-term financing sources are made available; and finally that the program can overcome any legal hurdles that may arise.
The program will be called, the “Central Coast Energy Independence Program,” and will be housed under the County Housing and Community Development Department and will include all interested incorporated cities. Initial funding could come from a variety of sources, but the California Energy Commission (CEC) has made $95 million available through the State Energy Program (SEP) in support of ongoing state and local efforts to launch AB 811-type programs.
The federal Department of Energy has made over $6 billion in American Recovery and Reinvestment Act (ARRA) funding available to fund energy conservation related initiatives nationwide through the Energy Efficiency and Conservation Block Grant (EECBG) and the SEP. The County is eligible for several of the state funding pass-through opportunities provided by the CEC. In addition, the County has been allocated over $772,000 in EECBG funds from the CEC, which can be used to offset administrative costs for program implementation, and the County plans to allocate the full amount towards program administration.
It is important to note that ARRA resources are provided through the CEC on a “reimbursement” basis, meaning that the County must first pay for the necessary programmatic start-up and administrative costs, and then submit follow-up documentation for reimbursements to the CEC. Accordingly, to address the need for upfront resources, a short-term County General Fund advance receivable for approximately $1 million pay for bond counsel, hire personnel, establish a reserve fund, develop marketing materials, and open the storefronts needed to generate positive cash-flow. The County will direct the $772,000 in proceeds from the EECBG grant, along with any funding awarded by the SEP funds, to reimburse the General Fund in a timely manner.
Dave Matson, Director of Housing and Community Development, states that the program has the potential to restore up to 40% of the jobs lost in the construction industry and related trades within the COunty, and could bring as much as $150 million in economic development between now and 2020. The County has dedicated roughly 15 employees to this program, and it will be one of the first ten programs of its kind in the nation. All cities within the County of Santa Barbara have agreed to participate, so all businesses and residential property owners within the County are eligible to participate. Earth Day is the expected official launch date for the program and two store fronts will be open by the end of April, assuming the program is approved by the Board of Supervisors on April 13th. The program has broad support among politicians in town as well so approval should not be a problem.
The process of running the program will involve loans to property owners who wish to add solar systems to their properties, with the spread between the loan rate and the cost of funds rate going to support the ongoing operations of the program, although initially the program will rely on grant funding to get things going. Hopefully the County can expand the program over time to not only generate enough income to sustain the program itself, but to also make a meaningful impact on the County’s carbon footprint and reliance on fossil fuels.