Modesto explores energy efficiency loans for home, business

Modesto BeeSeptember 25, 2012 

MODESTO -- Mayor Garrad Marsh is backing a program for improving the energy efficiency of homes and commercial buildings in Modesto.

Under the Property Assessed Clean Energy Program, or PACE, property owners could receive low-interest financing through the city for making upgrades such as dual-pane windows, insulation, energy-saving water heaters, solar panels, lighting or other installations.

Those participating in the voluntary program would make annual payments on the improvements when paying their property tax bills. Marsh envisions creating a citywide community facilities district, thereby making the program available to any property owner in Modesto.

Monday, the City Council's finance committee heard a presentation from Jenine Windeshausen, treasurer-tax collector of Placer County. That county has done about 20 residential and six commercial projects through its PACE program in 2½ years, the official said.

Placer has used local government debt issued through an assessment district as the mechanism for financing the energy-saving upgrades for constituents.

Marsh said a local PACE program could benefit business owners and homeowners and serve as an economic stimulus. Others suggested at Monday's meeting that it could help the city meet requirements for reducing carbon emissions.

The council subcommittee, including Dave Cogdill Jr. and alternates Dave Geer and John Gunderson, ordered staff to explore more details and bring a proposal to the full council. Marsh said he'd like to see a program up and running by this time next year.

Cities and counties in California were given authority to establish PACE programs by Assembly Bill 811, signed into law in 2008. A Senate bill that took effect in January allows local governments to issue debt for energy-saving improvements through Mello-Roos districts.

To finance projects in Modesto, Marsh said, the program would use a small percentage of the city's investments pool, or the money from assessment districts, the employee benefits fund, the water and sewer funds, and myriad other funds that are invested in money market accounts.

The city would devote perhaps $10 million for financing PACE projects for the next five years. Participants would agree to pay for the upgrades as an addition to property taxes over 10 to 20 years.

Placer and Sonoma counties and Palm Desert are among local agencies in California with PACE programs.

Windeshausen said the projects in her county have ranged in cost from $25,000 to $300,000. She said that some business owners have been eager to improve their profit margins through energy savings. "The contractors are all over this," she added.

Making it work

She said Placer County self-administers its PACE program, although local agencies can consider hiring a third-party administrator. The county checks the credit history of applicants and liens are placed on participating properties to make sure the county is made whole in event the homeowner or business owner stops making payments.

The county treasurer made sure to tell Modesto officials about one sticking point. Local agencies in California are in a legal dispute with the Federal Housing Finance Agency over the liens required for the PACE program.

Placer County and its partners in the lawsuit won a recent court decision, but the federal agency that oversees Fannie Mae and Freddie Mac has appealed. Placer has suspended the residential part of its program until the case is resolved.

Windeshausen advised Modesto officials to talk with lenders about whether they would allow PACE liens on mortgaged property.

Councilman Cogdill said the city should consider setting up a PACE program for commercial and industrial properties and start a residential program when the legal issues are settled.

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