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Property Assessed Clean Energy (PACE) ProgramPlanning & Economic Development MEMORANDUM TO: Mayor and City Councilmembers Mike Mornson, City Manager FROM: Addison Vang, Economic Development Intern DATE: September 9, 2014 SUBJECT: Property Assessed Clean Energy (PACE) Program Background The Property Assessed Clean Energy (PACE) Program is a financing option supporting clean energy efficient and renewable energy improvements for businesses, non -profits, religious institutions and residential multi -family properties. The PACE program allows local governments to bond for revenue to loan to property owners to make energy improvements to their properties. The loans are then paid back through special assessments on the property over time. Joint Powers Agreement PACE has been authorized by the State Legislature for a number of years, but the cost of bonding to create the pool of lending dollars made the program burdensome for individual communities. Last year the State Legislature authorized the Saint Paul Port Authority to secure financing to support the PACE program throughout the State of Minnesota. The funds can be used within the boundaries of any municipality in the State provided the city has an approved Joint Powers Agreement (JPA) with the Saint Paul Port Authority. This eliminates the need for individual cities and counties to sell bonds. By signing the JPA, it is agreed that the Saint Paul Port Authority will manage the program and will approve individual projects. The Port Authority includes a 0.5 percent administration fee into their interest rates, which are generally below five percent. Process Property owners within communities that have signed a JPA can apply for a loan from the Saint Paul Port Authority to make energy improvements to their building. Improvements can include solar panels, HVAC upgrades, and things that generally see a high rate of return on investment. Once approved, the property owner then petitions the city to have a special assessment added to the property that will pay the loan back. PACE loans can only be paid back by special assessments against the property by State Statute. The city then holds the public hearing and includes the property in the assessment rolls that are sent to the county typically in November each year. The city is then responsible for collecting the revenue and providing it to the Port Authority, though they are working on an automated system with Hennepin County that would remove this step. Cities/Counties that have signed the JPA Eagan, Eden Prairie, Cottage Grove, Minneapolis, Minnetonka, Sherburne County, Becker County, Wright County, Oakdale, Falcon Heights, Bridgewater Township & Mankato. Cities/Counties working towards signing the JPA Edina (passed but not signed yet), Hennepin County, Washington County, Carver County, Stearns County, Woodbury, Stillwater, Saint Cloud, Saint Paul, Duluth, Roseville. Current Barriers to Renewable Clean Energy Improvement and Infrastructure • Limited capital and financing options available • High upfront costs • Perceived risk that the improvement won't pay for itself within the lifetime of the loan Key Impacts/Benefits of the PACE Program • Properties typically net an immediate cash positive on the improvement through reduced utility costs, which increases net profit over time • Improves property values • Improves Minnesota Energy Initiatives • Promotes local construction jobs • Repayment obligation can be transferred with the property Hopkins as Clean Energy City Hopkins can utilize the PACE program as incentive for businesses, multi -family housing, non- profits and religious institutions to access energy efficient and renewable energy improvements with low cost, long term financing. There is no cost to the City and virtually no risk. The JPA must be approved annually so the City can opt out at any time. In addition, Hopkins will gain access to an already secured financing pool to approve projects and support the state of Minnesota's Energy Initiatives. Requested Action Staff is requesting that the Council discuss the PACE program and provide direction on whether or not to pursue a JPA with the Saint Paul Port Authority to implement the program in Hopkins.