California Launches Massive Green Upgrades Effort
SACRAMENTO, Calif. — California recently launched the nation’s largest implementation of the Property Assessed Clean Energy (PACE) financing model with 14 counties and 126 cities entering into the largest joint powers agreement in state history, to form CaliforniaFIRST.
The program will allow property owners to use municipal bonds to finance upgrades to structures that increase the use of renewable energy or improve energy or water efficiency. CaliforniaFIRST was created by the California Statewide Communities Development Authority (CSCDA) and will allow owners of commercial, industrial, or multi-family housing developments to participate. The CSCDA is a joint powers authority co-sponsored by the California State Association of Counties and the League of California Cities. The program is the first multi-jurisdictional effort of its kind to launch with so many local governments participating.
The program’s public-private partnership will use private capital for upfront funding of projects, which will keep it from burdening local government budgets. Owners will repay the bonds through a special yearly assessment, which will appear on their property tax bills. The effort will roll into effect for various areas over time, with 14 counties starting their participation by the beginning of October. The program will also be compatible with federal income tax credits.
In a statement by CaliforniaFIRST, they argued the program would lead to massive savings for businesses over time. “According to U.S. Department of Energy researchers, if all U.S. businesses and institutions conducted cost-effective upgrades, they could reduce their average energy use by 25 percent. The total cost of this work would be more than $100 billion – which would be offset as a result of lower energy bills.”
The document also contended the effort would satisfy demand for green financing. “Numerous studies, including the Johnson Controls annual Energy Efficiency Indicator, and market analyses in recent years have pointed to the lack of attractive financing options as one of the key barriers that prevent owners from making deep energy efficiency upgrades on their buildings. With the CaliforniaFIRST program, many people view the state of California as the state with the greatest potential to unlock the promising energy efficiency market.”
Oakland, Calif.-based company, Renewable Funding will administer the program after running the first major PACE program in the state for the city of Berkeley in 2008. That effort focused entirely on residential structures and led the format to spread across 22 other states by 2010. The Berkeley residential program ran into trouble when the Federal Housing Finance Agency (FHFA) essentially ordered federal banks Freddie Mac and Fannie Mae not to participate in the program in 2010, arguing that the funding structure introduced too much risk into the mortgage market. The U.S. District Court for California’s Northern District ruled that the FHFA’s stance violated federal rules in 2011, but the agency has continued to steer Fannie and Freddie away from participating in the residential program. Commercial programs like CaliforniaFIRST have encountered no such difficulties, and have spread across the country. Renewable Funding has worked with the U.S. Department of Energy to spearheaded new PACE commercial initiatives and operates programs from San Francisco to Melbourne, Australia.