TO:
Honorable Mayor and Members of the City Council
THROUGH:
Mark Danaj, City Manager
FROM:
Anne McIntosh, Community Development Director
Dana Murray, Environmental Programs Manager
SUBJECT: Title
Request by Councilmember Montgomery to Discuss adding Ygrene Energy Fund as an Additional Option for Property Assessed Clean Energy (“PACE”) Financing in Manhattan Beach (Community Development Director McIntosh).
ADOPT RESOLUTION NOS. 17-0123 AND 17-0124
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Recommended Action
RECOMMENDATION:
Adopt Resolution No. 17-0123 approving associate membership in the Golden State Finance Authority and consenting to the inclusion of properties within the City’s jurisdiction the Golden State Finance Authority Community Facilities District No. 2014-1 (Clean Energy) to finance renewable energy improvements, energy efficiency and water conservation improvements, electric vehicle charging infrastructure and other improvements; and
Adopt Resolution No. 17-0124 consenting to the inclusion of properties within the City’s jurisdiction in the Golden State Finance Authority (GSFA) Program to finance renewable energy generation, energy and water efficiency improvements, electric vehicle charging, general infrastructure and other improvements.
EXECUTIVE SUMMARY:
The City of Manhattan Beach has taken steps towards reducing its impact on the climate by implementing various energy efficiency measures, adopting a Sustainable Building Ordinance, Green Code Amendments for Zoning and Public Rights-of-Way, a Green Purchasing Plan, a Climate Action Plan, and conducted a Level III energy audit to identify how best to make our buildings and facilities more energy efficient. These actions show the community that the City can be a leader in energy efficiency and emission reductions.
To help residents and businesses find ways to reduce their energy use, the Manhattan Beach City Council authorized the City’s participation in the Home Energy Renovation
Opportunity (HERO) through Resolution 6256 on June 15, 2010 as part of the County’s Property Assessed Clean Energy (PACE) program. HERO is a provider of services and resources that connect home and building owners with incentives and rebates through PACE. PACE is a financing program for homeowners who want to install energy efficiency, renewable energy and water-saving improvements to their properties. PACE financing enhances home values, lowers homeowners’ energy bills, reduces greenhouse gas emissions and creates green jobs stimulating the economy.
Staff supports authorizing an additional PACE service provider, Ygrene Energy Fund, to operate in Manhattan Beach. Authorizing an additional PACE provider offers multiple competitive financing mechanism options that provide benefits for residential and commercial property owners and the City with minimal resource impacts on the City, as well as a seismic retrofitting financing option. In order to authorize additional PACE providers, the City must be a member of the Joint Powers Authority (JPA) that oversees the PACE provider’s operations and adopt a resolution to authorize the PACE provider to operate within the City.
FISCAL IMPLICATIONS:
There are no direct financial impacts associated with adoption of this resolution. All PACE administrative costs are covered through an initial administrative fee included in the property owner’s voluntary contractual assessment and an annual administrative fee which is also collected on the property owner’s tax bill.
BACKGROUND:
Assembly Bill 811 (AB 811) was approved by the State Legislature and signed by the governor in 2008, authorizing local governments to provide financing option to qualified property owners for the installation of energy and water efficiency improvements that are permanently fixed to their respective properties. In 2010, the City of Manhattan Beach passed Resolution 6256 to authorize Los Angeles County’s PACE program, HERO, as a provider of services and resources that connect home and building owners with incentives and rebates. In recent years, PACE programs have expanded throughout the State of California as a simple and effective method to finance sustainable upgrades in buildings. Specifically, they target upgrades that enhance a project’s energy and water efficiency, facilitate the installation of renewable energy and electric vehicle infrastructure, and improve seismic strength for residential and commercial buildings.
There are currently PACE programs being operated in Manhattan Beach that are administered by Los Angeles County. Since the authorization of HERO in Manhattan Beach, 37 residential property owners have had solar photovoltaic, water, or energy efficiency projects approved for PACE financing, valuing $1,144,264 in total. The projects provide hundreds of thousands of dollars in energy savings and water savings, as well as reducing greenhouse gas emissions. The County’s commercial PACE program uses one program administrator - The Energy Network, whiles its residential PACE program includes two designated administrators - Renew Financial LLC (administering CaliforniaFIRST) and Renovate American (administering HERO). The City Council may wish to offer more options to Manhattan Beach property owners.
Recently, the City was contacted by Ygrene Energy Fund, a potential private administrator seeking authorization to do business in Manhattan Beach. If the City wishes to move forward with Ygrene, we would be allowing for a JPA to administer a PACE program within the City’s boundaries. That means the JPA will finance certain improvements on private properties, which are repaid through contractual assessments recorded against the properties and collected on the tax bills. The JPA contracts with a private program administrator to run the PACE Program. The private administrator is Ygrene.
DISCUSSION
PACE providers assist property owners with funding and consumer protections, and support contractors with certification, marketing, and administrative software. PACE loans are overseen by Joint Power Authorities (JPAs), cities, and counties. Each JPA administers its PACE program through one or more program administrators. They are facilitated by large JPAs that offer the program only to their member agencies, after being authorized by official resolutions to do so. JPAs provide all assessment administration, bond issuance and bond administration functions for PACE programs.
As a participant in a JPA, the City is not obligated to repay the bonds issued by the authority, or collect or pay the assessments levied on the participating properties.
PACE financing addresses two key issues that often prevent property owners from installing energy efficiency, water efficiency and renewable energy projects: 1. PACE eliminates the need for property owners to pay out of pocket up-front costs for improvements; and 2. PACE establishes a loan obligation that is attached to the property and not to the individual borrower.
The availability of PACE financing supports the local economy by creating energy retrofit jobs and stimulating construction activities. Energy retrofit improvements to existing buildings in the City will allow property owners to reduce energy and water use as well as greenhouse gas emissions. Participating property owners reduce operating costs for electricity, natural gas and water and improve the comfort and safety of their homes and businesses. Increasing renewable energy and energy efficiency improvements in the City is a critical component of the City’s Climate Action Plan. The benefit of adding providers to the PACE program in Manhattan Beach is to increase competition thereby reducing costs to property owners, increasing the chance of eligibility for participants, and potentially expanding the type of projects that can be financed with PACE.
Many other jurisdictions have seen an increase in solar energy and energy efficiency installations once PACE financing is made available. Ygrene is listed by the Bay
Area Regional Energy Network as prominent PACE provider operating in the region. Ygrene Energy Fund (“Ygrene”) is a PACE administrator facilitated by the
California Home Finance Authority (CHFA), a JPA established in 1993. Ygrene allows for financing of both residential and commercial renewable energy generation, energy and water efficiency improvement, and seismic strengthening projects. Ygrene operates in 36 cities in Los Angeles County, including the Cities of Los Angeles, Santa Monica, El Segundo, and Redondo Beach. As of July 31, 2017, Ygrene’s projects in Los Angeles County have resulted in more than 4,764 residential projects and 123 commercial projects, for a total value of $147,532.982. According to Ygrene’s PACE impact model based on data sourced from UC Berkeley and ECONorthwest Economic Impact Analysis of PACE Programs, these projects have resulted in 168,594 metric tons of CO2 reductions, 607 million gallons of water saved, and 954M kWh of energy saved, while producing 8.78 megawatts of energy and creating 2,107 new jobs. In the South Bay alone, Ygrene has completed 465 residential projects at a value of $9,955,207 in eight cities (Redondo Beach, Gardena, El Segundo, Hawthorne, Torrance, Rolling Hills Estates, Carson, and Lomita) as of July 31, 2017.
Authorizing additional PACE providers to operate within the City of Manhattan Beach would provide additional benefits to the property owners.
1. Competition: Additional PACE providers would compete to provide the best service and rates for property owners. Property owners would have more financing options and the ability to shop for their desired price and service.
2. Increased impact: The HERO program has already shown success in providing financial and greenhouse gas emissions savings during its years in Manhattan Beach. The addition of more PACE providers would provide more opportunity for property owners to save money and add to the City’s sustainability.
3. Loan loss reserve: Some PACE providers, including Ygrene, participate in risk mitigation vehicles such as California’s PACE Loss Reserve Program (“the Program”), which allows for loan loss reserve. In 2013, seeking to address the concerns of mortgage lenders who opposed the fact that PACE loans were senior to mortgage loans, the State enacted SB 96, which directed the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) to develop the $10 million Program, which mitigates the potential risk to mortgage lenders associated with residential PACE financing. Specifically, it makes first-time mortgage lenders whole for any losses in a forced sale or foreclosure that are attributable in any way to a PACE-related lien. Effectively, it aims to put first-time mortgage lenders in the same position they would be in without a PACE lien.
If the City Council was to take no action, LACEP and HERO would remain as the only two PACE providers for commercial and residential property owners in Manhattan Beach. Alternatively, property owners could utilize other existing financing options for renewable energy, energy and water efficiency, and electric vehicle charging installation projects, including home equity loans, business lines of credit, and consumer credit. Financing for energy efficiency is also available through the Energy Upgrade California Program. Additionally, financing plans, leases, and power purchase agreements (PPAs) are commonly offered by solar installation companies. Currently, there are no financing options available to property owners related to seismic retrofit other than PACE.
The City’s Risk Manager has raised a number of issues, which have been addressed.
PUBLIC OUTREACH/INTEREST:
The City Council may wish to conduct public outreach prior to or subsequent to adoption of this program. The City and Ygrene can inform property owners and contractors of the availability of additional PACE financing. In partnership with providers, the City could begin education, outreach and marketing to raise awareness to the community.
ENVIRONMENTAL REVIEW
This is not a project pursuant to the California Environmental Quality Act. (CEQA.)
LEGAL REVIEW
The City Attorney’s office has reviewed the model resolutions presented by Ygrene.
Attachment/Attachments:
1. Resolution No. 17-0123
2. Resolution No. 17-0124