New program would help fund energy-efficiency upgrades

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A lot of older commercial buildings could definitely use some energy-efficiency upgrades, as evidenced by this business in downtown Billings, photographed earlier this winter.

Depending on what happens during the legislative session now underway, Montana could join 32 states that offer their residents an innovative, low-cost method of financing energy-efficiency projects for houses and businesses.

The method is known as Property Assessed Clean Energy, which enables property owners to obtain no-money-down loans and pay them off over many years as part of their county property tax assessments.

A key part of the program is that most projects—adding insulation, on-site renewable energy sources, new heating and cooling systems, etc.—are expected to yield annual energy savings that are equal to or greater than the increase in property taxes.

“It basically creates its own ability to pay, in a sense,” said Ed Gulick, a principal at High Plains Architects in Billings and a member of the PACE Jobs Coalition.

Gulick made a presentation on the concept last week during a meeting of the board of the Downtown Business Improvement District, as part of a campaign to build support for the idea before a bill authorizing a PACE program is introduced in the Montana Legislature.

Gulick said a key supporter of the program is Gov. Steve Bullock, who is working with a potential sponsor, an unnamed Republican senator.

“This is a big priority for him in terms of his energy blueprint,” Gulick said of the governor.

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Ed Gulick

Gulick said the unnamed senator supports the concept but still needs to talk about particulars with affected groups, including country treasurers, county commissions and the Montana Bankers Association.

“The sponsor is getting pretty comfortable but is not yet fully committed,” Gulick said.

Gulick told the downtown group that 32 states have already passed PACE-enabling legislation and 16 of those states have active PACE programs.

The way the program works, traditional private financing agencies, including banks, credit unions and investment funds, provide loans for projects that improve a building’s energy or water efficiency.

The loan is then repaid over up to 20 years as part of the building owner’s property tax assessment—with the loan treated just like special assessments for sidewalks, lighting and sewer or water projects. The program is completely voluntary and the assessments are on individual properties.

The benefit of the program for property owners is that it eliminates upfront costs. For lenders it reduces risk because the buyers own property and are already paying annual taxes on it. For the same reason, no credit checks would be necessary.

If the Legislature were to pass enabling legislation, the PACE program would be set up only in counties where it was formally adopted by the county commission. The county treasurer’s role would be to place the assessment on an individual parcel of property, collect property taxes and send payments either to the private lenders or to a statewide program administrator.

The Montana PACE website said the preferred system is to have a statewide administrator, for reasons of efficiency and cost-effectiveness. Other states have imposed economic development fees on each project—typically 2 percent, with half the proceeds going to the county and half to the administrator.

Missoula County Treasurer Tyler Gernant, a supporter of the program, said that as far as he knows, most treasurers don’t want to be in the loan processing business, but if their role is just to collect another special assessment, there shouldn’t be any objections.

“If that’s what we’re doing, I think we’re comfortable with that,” he said.

Gernant, who also chairs the legislative committee for the Montana County Treasurers Association, said the bill language is still being drafted, and the goal is to tailor it to make it workable in Montana.

If the program in Montana didn’t have a statewide administrator, Gernant said, some treasurers might balk at taking on the extra duties of collecting the assessment and remitting payments to lenders. But that shouldn’t be a problem, either, he said, since each county would have to decide whether it wants to participate in the program.

The goal of the program is “quite noble,” Gernant said, and easy to support in the abstract.

“The overarching goal is one that is shared by everybody I’ve talked to in our county,” he said. “How we get there is the question.”

A fact sheet Gulick passed out at the meeting last week said financing is permanently attached to each property, not to the property owner if he or she sells the building, and each project has to be shown to save money for the property owner.

That would be done by conducting an energy audit to determine what energy updates are needed and how much money they could be expected to save on an annual basis. A follow-up audit would be conducted to make sure the improvements yielded the projected energy savings.

Eligible properties would include homes and commercial businesses, industrial and agricultural property and property owned by nonprofit groups. Buildings owned by state and local governments would not be eligible.

Rhyno Stinchfield, of Billings, is a representative of the Sustainable Energy Funding Program, a national nonprofit agency that funds large projects that improve energy efficiency and provide a public benefit.

The program makes loans through money market managers only for projects of at least $2.5 million, Stinchfield said, “so this is not for homeowners.” But the program could be one of the lenders in the statewide pool and could help with big projects involving nonprofits, like hospitals or community centers finding new uses for abandoned schools or other buildings formerly owned by a government entity, he said.

There is also the possibility of pooling projects to reach the $2.5 million threshold. On the East Coast, Stinchfield said, the Sustainable Energy Funding Program is lending money to a Catholic diocese making energy-efficiency improvements to a variety of church-owned buildings.

Gulick said members of the PACE Jobs Coalition have been talking to legislators in both parties to build support for the program. If all goes well, he said, a bill to enable a Montana PACE program could be introduced by mid-February.

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