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2021-160-Minutes for Meeting April 05,2021 Recorded 4/21/2021C��}T E S CMG 44, BOARD OF COMMISSIONERS 1300 NW Wall Street, Bend, Oregon (541) 388-6570 1:00 PM Recorded in Deschutes County CJ2021-160 Nancy Blankenship, County Clerk Commissioners' Journal 04/21 /2021 3:28:21 PM ES C,�G i a 2021-160 Z�: /��u�,',IM� FOR RECORDING STAMP ONLY Barnes Sawyer Rooms Live Streamed Video Present were Commissioners Patti Adair, Anthony DeBone, and Phil Chang. Also present were Tom Anderson, County Administrator; David Doyle, County Counsel; and Samantha Pepper, BOCC Administrative Assistant (via Zoom conference call). Attendance was limited in response to Governor's Virus orders. CALL TO ORDER: Chair DeBone called the meeting to order at 1:00 p.m. PLEDGE OF ALLEGIANCE ACTION ITEMS: 1. Federal Land Partners Administrator Anderson introduces HollyJewkes with Deschutes National Forest and Dennis Teitzel with BLM- Prineville. Commissioner Adair thanks Mr. Teitzel for the fuels reduction in the McKenzie Canyon. Fuels Reduction/ Wildfire Preparedness Ms. Jewkes states that the Redmond fire center is ramped up and everyone is hired for the upcoming fire season. Prescribed burning has occurred out east of Bend. She also mentions through NRCS the Forest Service did receive joint BOCC MEETING APRIL 5, 2021 PAGE 1 OF 4 chiefs funding for fuels restoration on public and private lands. Deschutes County was ranked number one for Collaborative restoration work which did not have funds this year but will return next year. Mr. Teitzel mentions that fuels reduction funds come from wildlife habitat money. He adds that Steelhead Falls received funding to do an environmental assessment and the decision will come early May with all fuels reduction work to commence next winter. Mr. Teitzel states that the public better understands the need for and support of fuels reduction. Ms. Jewkes adds the last litigation concerning Forest Service land was over a decade ago. Commissioner DeBone asked how the fuels reduction contractor pool is. Commissioner Adair asked if there was any catch-up prescribed burning happening since there was not any last year. Ms. Jewkes states that they want to progress forward but be sensitive of smoke. Mr. Teitzel adds BLM has stopped burning for this year. Commissioner Chang mentions his concern for funding to do thinning and burning projects. He also asks what funds are currently used for fuel reduction projects. Ms. Jewkes notes the Joint Chiefs program as well as the Federal Forest Program and Good Neighbor Authority with additional timber sales. Mr. Teitzel states that the BLM has a fuels reduction budget along with wildlife and habitat funds. He also adds that funding is an issue but personnel is also another to accomplish the appropriate fuels reduction work. Solid Waste & Illegal Dumping Mr. Teitzel states a meeting over a year ago with all agencies that spoke to the homeless issues on public lands. BLM has a couple staff members who are dealing with hazardous waste. They work with partners to get sites cleaned up which are quickly picked up so no waste is added or become a larger problem. It is important that the homeless get the help they need. Sheriff Shane Nelson mentions that it is a group effort to get individuals back on their feet and appreciates all community partners trying to help out. Ms. Jewkes thanks the county for working with them for long term solutions. Recreation Ms. Jewkes states that there are 30%-40% more people recreating on the Deschutes Forest than previous years. There is a balance in respecting wildlife habitat and having recreation trails. The Great American Outdoor act was recently passed for improved infrastructure. 2. PRESENTATION: Commercial Property Assessed Clean Energy (CPACE) BOCC MEETING APRIL 5, 2021 PAGE 2 OF 4 CPACE representatives Paula Latasa, John Eisler and Diane Hodiak explain the program. Commissioner Chang asked what financing this an alternative to. Ms. Latasa explains bank financing compared to owner financing. Commissioner DeBone expresses that debt service for this financing model can possibly end up on the annual tax bill. County Assessor Scot Langton explains how the program would affect his department and reminds the group that collections on the tax bill (with rare exception) are voter approved. Commissioner Chang recommends that CPACE representatives work with Assessor and Tax office to talk through concerns. Commissioner Adair asked how many projects are using this program in Multnomah County. Ms. Latasa replies that there are four projects in Multnomah County and the first started in 2018. Ms. Hodiak mentions that the administrative portion is the most problematic. CPACE members plan to work with Commissioner Chang on details and concerns. 3. Consideration of Board Acceptance of Central Oregon Health Council Mini- Grant, "Move for Better Health" Behavioral Health Program Manager Barrett Flesh explains the Move for Better Health mini grant. Commissioners express support of this small project. ADAIR: Move Board Acceptance of Central Oregon Health Council Mini - Grant, "Move for Better Health" CHANG: Second VOTE: ADAIR: Yes CHANG: Yes DEBONE: Chair votes yes. Motion Carried OTHER ITEMS: • Deputy County Administrator Erik Kropp brings forth a letter in opposition of SB 801 dash one amendment previously discussed at the County's April 2nd Legislative meeting. ADAI R: CHANG: Move Board signature on letter in opposition of SB 801. Second BOCC MEETING APRIL 5, 2021 PAGE 3 OF 4 VOTE: ADAI R: Yes CHANG: Yes DEBONE: Chair votes yes. Motion Carried • Commissioner DeBone mentioned the proposed changes to the AOC yearly dues schedule. It proposes a tiered fee system. Administrator Anderson clarified that there is no longer volunteer contributions. • Commissioner DeBone attended a Terrebonne Advisory Committee meeting last week. Commissioner Adair would like to participate as well. • Commissioner Adair mentions that COIC is in the market for an auditor. • Commissioner Chang states that he is going to be elected co-chair on Deschutes Water Collaborative this week. EXECUTIVE SESSION: At the time of 3:42 p.m., the Board went into Executive Session under ORS 192.660 (2) (i) Employee Evaluation and came out at 4:40 p.m. Being no further items to come before the Board, the meeting was adjourned at 4:40 p.m. DATED this � 1 Day of 2021 for the Deschutes County Board of Commissioners. ANTHONY CHAIR IL CHANG, VICE CHAIR — AaK TTI A AI , COMMISSIONER BOCC MEETING APRIL 5, 2021 PAGE 4 OF 4 �O` ES CO w � Deschutes County Board of Commissioners 1300 NW Wall St, Bend, OR 97703 (541) 388-6570 - www.deschutes.org BOCC MEETING AGENDA DESCHUTES COUNTY BOARD OF COMMISSIONERS 1:00 PM, MONDAY, APRIL 5, 2021 Barnes Sawyer Rooms - Deschutes Services Center - 1300 NW Wall Street - Bend This meeting is open to the public, usually streamed live online and video recorded. To watch it online, visit www. d eschutes. org/meetingss. Pursuant to ORS 192.640, this agenda includes a list of the main topics that are anticipated to be considered or discussed. This notice does not limit the Board's ability to address other topics. Item start times are estimated and subject to change without notice. CALL TO ORDER MEETING FORMAT In response to the COVID-19 public health emergency, Oregon Governor Kate Brown issued Executive Order 20-16 (later enacted as part of HB 4212) directing government entities to utilize virtual meetings whenever possible and to take necessary measures to facilitate public participation in these virtual meetings. Since May 4, 2020, meetings and hearings of the Deschutes County Board of Commissioners have been conducted primarily in a virtual format. Attendance/Participation options include: Live Stream Video: Members of the public may still view the BOCC meetings/hearings in real time via the Public Meeting Portal at www.deschutes.org/meetings. In Person Attendance: Limited due to Virus restrictions. Please contact Sharon Keith at sharon.keithC@deschutes.org prior to the meeting to request in person attendance. Citizen Input: Citizen Input is invited in order to provide the public with an opportunity to comment on any meeting topic that is not on the current agenda. Citizen Input is provided by submitting an email to: citizen in putftdeschutes.org or by leaving a voice message at 541-385-1734. Citizen input received before the start of the meeting will be included in the meeting record. Zoom Meeting Information: Staff and citizens that are presenting agenda items to the Board for consideration or who are planning to testify in a scheduled public hearing may participate via Zoom meeting. The Zoom meeting id and password will be included in either the public hearing materials or Board of Commissioners BOCC Meeting Agenda Monday, April 5, 2021 Pagel of 3 through a meeting invite once your agenda item has been included on the agenda. Upon entering the Zoom meeting, you will automatically be placed on hold and in the waiting room. Once you are ready to present your agenda item, you will be unmuted and placed in the spotlight for your presentation. If you are providing testimony during a hearing, you will be placed in the waiting room until the time of testimony, staff will announce your name and unmute your connection to be invited for testimony. Detailed instructions will be included in the public hearing materials and will be announced at the outset of the public hearing. PLEDGE OF ALLEGIANCE ACTION ITEMS 1. 1:00 PM Federal Lands Partners - Holly Jewkes, Deschutes National Forest and Dennis Teitzel and Jeff Kitchens, BLM 2. 2:00 PM PRESENTATION: Commercial Property Assessed Clean Energy (CPACE) - Tom Anderson, County Administrator 3. 2:30 PM Consideration of Board Acceptance of Central Oregon Health Council Mini -Grant, "Move for Better Health" - Barrett Flesh, OTHER ITEMS These can be any items not included on the agenda that the Commissioners wish to discuss as part of the meeting, pursuant to ORS 192.640. EXECUTIVE SESSION At any time during the meeting, an executive session could be called to address issues relating to ORS 192.660(2)(e), real property negotiations; ORS 192.660(2)(h), litigation, ORS 192.660(2)(d), labor negotiations; ORS 192.660(2)(b), personnel issues, or other executive session categories. Executive sessions are closed to the public, however, with few exceptions and under specific guidelines, are open to the media. Executive Session under ORS 192.660 (2) (i) Employee Evaluation ADJOURN Board of Commissioners BOCC Meeting Agenda Monday, April 5, 2021 Page 2 of 3 To watch this meeting on line, go to: www.deschutes.org/meetings Please note that the video will not show up until recording begins. You can also view past meetings on video by selecting the date shown on the website calendar. Deschutes County encourages persons with disabilities to participate in all programs and activities. This event/location is accessible to people with disabilities. If you need accommodations to make participation possible, please call (541) 617-4747. FUTURE MEETINGS: Additional meeting dates available at www.deschutes.or2/meetingcalendar (Please note: Meeting dates and times are subject to change. All meetings take place in the Board of Commissioners' meeting rooms at 1300 NW Wall St., Bend, unless otherwise indicated. If you have questions regarding a meeting, please call 388-6572.) Board of Commissioners BOCC Meeting Agenda Monday, April 5, 2021 Page 3 of 3 Deschutes County Project/Activity Briefing Bureau of Land Management — Prineville District — Deschutes Field Office 2020 Fire Season: Central Oregon had a very busy fire season. Central Oregon Dispatch recorded 428 wildland fire incidents in addition to responding to over 300 false alarms. Of the 428 fires recorded, 214 were human caused and 147 were because of lightning strikes. Almost 12,000 acres were burned. Although the number of incidents recorded was close to the 10-year average (-450), the acres were significantly down (-65,000 acres). The Prineville District, Deschutes Field Office (DFO) supported a number of significant incidents in Deschutes County, though the fires that directly impacted BLM-managed public lands were Type 3 or lower in complexity. We continue to address impacts from the large fires of the 2018 season and are supporting burned area rehabilitation efforts on fires that affected public lands in areas outside of Deschutes County. Greater Sage Grouse Management & The High -Desert Shrub Steppe project: Goals include restoring and enhancing sage -grouse habitat, reducing hazardous fuel loading, and improving rangeland health. To date, contractors and district staff have thinned about 112,582 acres of juniper from 2008 through today in the Twelve -mile Table, Paulina and Brothers Priority Areas for Conservation. The district has burned over 8,500 acres to reduce fuel loading from cut junipers and will continue through the winter of 2020 as weather conditions allow. Next Steps: thinning/burning will focus on the Brother's area, due to the Greater sage -grouse protected centers hitting a "hard trigger" as a result of population decline. Staff and contractors are planning to thin and lop another 10,021 acres in FY21, 10,521 acres in FY22 and 9,635+ acres in FY23. We are also planning to jackpot and hand pile burn approximately 2,000 - 4,000 acres per year in areas that had a high density of trees to lower the fire hazard in dense areas. The main challenges are having cultural clearances completed so implementation can continue to treat approximately 10,000 to 15,000 acres per year. Another challenge is having the weather and fuel conditions to complete the jackpot burning between November and the end of February each year to help mitigate the hazardous fuels during the dry summer months. This project was listed as the number one priority for the Deschutes Field Office. Illegal Dumping & Hazardous Material Management: Several areas throughout Deschutes County have seen a significant increase in illegal dumping on public lands. Many of these include hazardous wastes such as chemicals, gas cylinders, and human waste. Some are associated with camps where those that are houseless are residing temporarily. We are starting to work out some initial plans in the areas of La Pine, Lower Bridge Road south of Crooked River Ranch, and around Mayfield Pond to address the extensive dumping. We are also facing the same social issues as Deschutes County with camps on public lands. Lands, Realty, & Urban Growth: The DFO has seen exponential increases in land sales, land developments, and requests for additional access routes on private lands adjacent to the public lands. City expansions (Bend, Redmond, La Pine, etc.) continue happen and be a key focus of ours for prioritization with. In addition, our office has received applications for numerous communication sites, new rights -of -ways, leases, etc. being proposed throughout Central Oregon. F substantial percentage are in Deschutes, many of which are tied to utilities. We plan to revisit our "Realtor Training on Public Lands" in 2022. We did this back in 2018 to help realtors in Central Oregon understand the issues associated with buying and selling property next to public lands and why surveys are so critical. La Pine Area: Several forestry related projects including Doghair, Prairie, and Outback are continuing 2021. Hundreds of acres were treated commercially in 2020; improving habitat and reducing hazardous fuels. Additionally, we continue to collect data to support grazing permit renewals throughout the La Pine Area. Several of these will involve considering impacts to Spotted Frog Habitat. Coordination and consultation with various partners and agencies including the United States Fish and Wildlife Service have begun. April - 2021 La Pine Outback Fire Hazard Reduction project: Covers 5,200 acres and includes a timber sale, thinning, mastication, mowing, hand or machine piling, and hand/machine pile prescribed burning. • Unit 1- 721 acres is completed. • Unit 2- 456 acres with possible machine/hand piling remaining on portions of the unit and mowing along roads. • Unit 3- 812 acres. Timber Sale and machine and hand piling completed. All machine and hand pile burns were complete in the Fall of 2020. • Unit 4- 1564 acres. Timber Sale in process and is due after current fiscal year once logging operation is completed. • Unit 5-1651 acres. Timber Sale that has not been started. Fuels work will begin The main challenge with this project is the timing of the timber sale, which still has a couple years to complete. All fuels planning and treatments in Units 4 and 5 will be postponed until FY22-24. This project is currently listed as the number five priority for the Deschutes Field Office, since the project is in a holding pattern for hazardous fuels reduction work. Cline Buttes Recreation Area Management: The BLM continues to do trail maintenance with public groups throughout the Cline Buttes Recreation area including finish numerous trailheads and trails. In the last few years, we have finished up trails for horses and hikers in the rest of the Tumalo Canal Historic Area. near the Buttes, in around Cascade View and areas near Eagle Crest, and numerous other locations. We have been working in partnership with students from Redmond High School, along with Central Oregon Trail Alliance, Oregon Equestrian, Oregon Military Dept./Youth Challenge, and others. 2020 saw a substantial increase in use across all of Cline Buttes. Staff worked with Eagle Crest and other communities to continue reducing fuels, maintaining recreation sites, and coordinating grazing and range use in the urban interface. In FY21 we will be working with Oregon Department of Transportation to look at potentially expanding use of Site N, a mineral materials site of key importance to road projects in Central Oregon. The DFO applied for and was successful in getting two Oregon Recreation Trails Program grants in 2019 for continued implementation of the Cline Buttes Recreation Plan. Planning for this work will be completed in early 2021 and implementation is planned for late 2021. Cline Buttes Fire Hazard Reduction proiect: (32,000 acres) is within the triangle of Redmond, Sisters and Bend. The district has cut 3,102 acres, hand piled 2,400 acres and jackpot/hand pile burned 2,821 acres. The wood was collected by both commercial and public firewood where appropriate. The BLM burned an additional 281 acres of hand piles in January 2021 in the Southwest block of the Cline Buttes project area and the larger boles are available for a wood cutting through permits. Badlands Wilderness & Horse Ridge Area: Work has progressed on the implementation of the Badlands Wilderness Plan including updating various signs and finalizing the NEPA for the Larry Chitwood Trailhead construction and development. We plan to implement this project in 2021. Visitation in the Badlands Wilderness in 2020 was some of the highest on record based upon anecdotal information. The field office intends to implement more extensive use monitoring through this year. Mayfield Pond Area: The DFO continues to work with the grazing permittee and residents surrounding the Mayfield Pond area east of Bend. This area is identified as motorized on designated routes only and shooting is allowed except in the area directly around the pond. The area is also an active grazing allotment. Currently, there are numerous user -created routes, which causes confusion, and many visitors cannot figure out what is open and what is closed. In addition, residents have added access gates and/or cut the fence around the edge of the area to allow personal access. The permittee is continually repairing the fence and dealing with open gates. Visitors are also shooting around the pond and many spots are popular for dumping/transiency. April - 2021 To begin repairing this situation, the field office has mailed a letter to all adjacent residents asking for their help and educating them about appropriate use of roads/routes throughout the area. The Range Mgmt. Specialist is working with the permittee to install a variety of signs including "keep gates closed" "do not cut fences," and "no shooting" for the pond area. Recreation staff will also be updating the motorized access signs and other information boards to help educate users about the area. Williamson Creek Area & Fire Hazard Reduction Proiect: Surrounding Juniper Acres Subdivision near the Crook and Deschutes County line is a joint project between Forestry and Fuels. To date, 1,511 acres have been cut and firewood removed and either jackpot burned, or hand piled and burned the remaining slash. Next phase of the hazardous fuels reduction includes 532 acres in Unit 4 that is planned to be cut and hand piled this spring and burned Fall of 2021. The main challenge for this project is coming up with Forestry funds to help supply future firewood cutting areas for the public. This project was listed as the number three priority for the Deschutes Field Office. Dingell Act Implementation/Steelhead Falls Area Hazardous Fuel EA: On March 12, 2019, the John D. Dingell, Jr Conservation, Management, and Recreation Act was signed into law. The act included a boundary adjustment of the Deschutes Canyon -Steel head Falls Wilderness Study Area north of Redmond, OR, which was modified to exclude 688 acres of public BLM land in order to manage the land with the objective of improving fire resiliency and reducing the risk of wildfire to the Crooked River Ranch community. This project requires an environmental assessment that will authorize thinning hazardous fuels on the released acres as well as other BLM acres the surround Crooked River Ranch totaling 1026 acres. The Interdisciplinary Team (IDT) has developed a draft Environmental Assessment and the public comment period for that document closed on April 4th. We hope to issue a final decision and finding of no significant impact by the end of the month. April - 2021 v1 E S C0& o� Deschutes County Board of Commissioners 1300 NW Wall St, Bend, OR 97703 (541) 388-6570 - Fax (541) 385-3202 - https://www.deschutes.org/ AGENDA REQUEST & STAFF REPORT For Board of Commissioners BOCC Monday Meeting of April 5, 2021 DATE: March 31, 2021 FROM: Tom Anderson, Administrative Services, 541-388-6565 TITLE OF AGENDA ITEM: PRESENTATION: Commercial Property Assessed Clean Energy (CPACE) ATTENDANCE: Paula Latasa, in person and via ZOOM conference call Diane Hodiak and John Eisler cn CU C CU cu (U U W Boa Q- cco t a ® c LLJ cu o O N L U O OCu N co co on Ei _Z� ® co CL N O U N O Uco ca .0 O ®a��.. BEEN= co m U O O a--+ N L O :4-J 3 a`� LA Ln tCS J ;V 4-J a..+ E N Qj s O E o Ln o 4-aA o . co:4-J U E u w u E p L oa a � 4-J O 3 m w 3 an CA ,N i_ CLn C: UA C r 4 O Ls -v •�' E m Q a- . f®! q . UI L U � Z -, Co U. 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M - AA w tA w to to to to O o O O O S O o 0 0 CD,c 0 0 00 tO Oo O o� O Qm to - O In O M M O to M O M O h N V 4A w Y - o z � � S w 6 z Z Q z y w U z o z a O O W K O O _ W LL F- � n O Q 4 m ,A to to 0 to to `a � V � w � Z n N > N K ~ 2 N 2 W tn Q J � Q Y V w G Ln wy Z Q N ~ 7- Z Q O = Q m 2 2 z to Lij > Q ic w Z 0 o 0 Q O v C v Z v', lL W oU d 0 �+ o 0 Z3 m m i U Ei � Q IL C O c O a-' 4+ O 'V L > O a) o- O �, C o O �- u LL O o. o Deschutes County Commissioners Deschutes Services Building 1300 NW Wall Street, 2nd Floor Bend, OR 97703 March 31, 2021 Dear Deschutes County Commissioners, On behalf of Deschutes County commercial property owners and citizens, 350Deschutes encourages you to authorize a Commercial Property Assessed Clean Energy (C-PACE) Ordinance for Deschutes County. Across the nation, local governments are stimulating economic development and sustainability by authorizing C-PACE financing. Deschutes County can adopt a C-PACE ordinance to provide commercial building owners and developers supplemental financing options for performance improvements on new and existing buildings. C-PACE will drive private investment that simultaneously helps address economic recovery, COVID and fire safety measures and requires minimal government time and resources. Authorizing C-PACE will give property owners access to private financing that removes barriers to building performance and renewable energy investments in the commercial sector. C-PACE is an ideal opportunity for the county to help the commercial sector improve and increase property values, reduce operating costs, create jobs, improve public health and opportunities for affordable multi -family housing improvements. Process for Authorizing C-PACE 1. C-PACE was enabled in Oregon in 2015 (ORS223.680), allowing for the use of property -based tax assessments for energy, water, and resilience. 2. Tax -collecting municipalities within the state can pass local ordinances to establish programs, using the Benefit Assessment Lien and Local Improvement District processes. 3. Programs can be administered by a local government or contracted to an independent third -party administrator. 4. Projects can be financed by government bonds or private C-PACE capital providers. For these reasons and more, we request that the Deschutes Board of County Commissioners pass an ordinance to authorize C-PACE. (C-PACE flyer attached). Thank you for your consideration, Diane Hodiak Executive Director She/Her/Hers 206-498-5887 talk or text dhodiakL350Deschutes.org Supplemental Information and Resources For Reference: 1. Central Oregon C-PACE Flyer 2. C-PACE Letter of Support City of Redmond 3. Central Oregon C-PACE on-line Endorsement print-out 4. C-PACE Path to Implementation White Paper 5. Elements of a Well Designed C-PACE program 6. Commercial PACE Financing and the Special Assessment Process 7. Bonds and Direct Financing 8. MEI PACE testimonial 9. MEI Municipal SMP Flyer 10. MEI 2016 PACE Report cs S Ro, 11"i I, hii, P, E Financing for sustainable, value -generating capital improvements to commercial & industrial properties Across the nation, Local Governments are stimulating economic development and recovery by enabling CPACE lending programs. Central Oregon can aid economic recovery and resiliency by implementing CPACE Ordinances to provide building owners and developers supplemental lending options for financing performance improvements on new and existing buildings. On average CPACE business participants realize: • 13.6% reduction in operating costs for new buildings and 8.5% for retrofits 10.9% increase in building values for new buildings and 6.8% for retrofits • 9.9% increase in return on investment for new buildings and 19.2% for retrofits "These improvements are boin� to he transformational in the way the building works for us and sibnifcuntly imps°ove the safety and efficiency of the structure for our employees and clients." Tom Kelly, President Neil Kelly Company, Portland office CPACE benefits property owners, tenants, and the Central Oregon economy 1. Property owners enjoy decreased operating costs & increased asset value. 2. Both business and multi -family residential tenants may enjoy lower energy costs. 3. Workforce productivity increases an average of 16% higher than code built buildings. 4. Workers and tenants have fewer sick days when they live and work in healthy buildings. 5. Addresses climate change and helps achieve community conservation goals. 6. Stimulates sustainable economic growth for Central Oregon. We are here to help Central Oregon implement and execute CPACE enabling ordinances to take advantage of the Commercial Property Assessed Clean Energy (CPACE) Program which was approved by the State of Oregon, ORS223.680. CPACE is not a traditional loan. CPACE is a low -risk, long-term financing tool that leverages security through a Benefit Assessment Lien, filed as part of a Local Improvement District, to increase access to private capital for building resiliency improvement projects. CPACE creates public and commercial benefits by reducing greenhouse gas emissions, improving public health and creating affordable multi -family housing opportunities. Building owners can transform capital expenditures into investments in building performance with CPACE financing. Cities and states across the U.S. are enabling CPACE programs to stimulate economic development for commercial & industrial properties. am ffe IM 91 RETAIL OFFICE MULTIFAMILY HOTEL (5+ UNITS) I, Property Owner C0,1W it 1 I Mortgage Holder HEALTHCARE INDUSTRIAL+ NON-PROFIT MANUFACTURING • Economic stimulus designed to reduce barriers to investment in resiliency and performance • Up to 100% financing, no out-of-pocket costs or personal guarantee required for building owners • Low -risk for property owners (loan follows the building, not the owner) • Low -risk for lenders (less than 1% foreclosure rates) • Competitive financing, amortized up to 30 years, assessments cannot accelerate • Positive cash flow, operation & maintenance savings typically more than annual assessment • Turns an expense into an investment, increasing the market value of a property • Benefits multi -family affordable housing, operational savings can be shared with tenants • Supports community energy efficiency, water conservation, resiliency & transportation goals Support implementation of Central Oregon CPACE Ordinances to make it more affordable for property owners to invest in building performance improvements. CPACE provides monetary incentives and assistance to stimulate sustainable development in the business sector while increasing property values, reducing costs, creating jobs, and affordable multi -family housing improvements. CITY OF REDMOND Office of the Mayor April 1, 2021 Deschutes County Board of Commissioners 1300 NW Wall Street Bend. OR 97703 Dear Deschutes County Commissioners: 411SW9.':St Redmond OR 97756 (541) 948-32 I 9 fax (541) 548-0706 george.end ieott'ii dredmond.or.us wv,�+.ci.redmond.or.us On behalf of the City of Redmond, we would Like to express our support for exploring authorization of the Commercial Property Assessed Cleau Energy (C-PACE) program. C-PACE is a voluntary program that could provide commercial and multifamily property owners in Redmond access to private financing. "Phis financing could help remove barriers to investments in building operational performance and resilience and also help stimulate our local economy. businesses and jobs. We appreciate the County considering the breath of benefits the federal program could provide. Our understanding is it could require minimal time and resources from our respective organizations. City staff would be willing to participate with any forthcoming stakeholder engagement or processes. Thank you for your consideration. Sincerely. George Endicott Mayor Redmond, Oregon L �lon 13u11ocl. City Councilor Redmond, Oregon Central Oregon Elected Officials, 25 people have signed a petition on Action Network telling you to CPACE Endorsement. Here is the petition they signed: We endorse the authorization of Commercial Property Assessed Clean Energy (CPACE) by local governments in Central Oregon. Across the nation, local governments are stimulating economic development and recovery by enabling CPACE financing. Central Oregon elected officials can aid economic recovery and resiliency by implementing CPACE ordinances to provide commercial building owners and developers supplemental financing options for performance improvements on new and existing buildings. CPACE enables private investment that simultaneously helps address economic recovery, COVID and fire safety measures. ORS223.680 enables local governments to authorize CPACE to: 1. Create economic stimulus through private investment 2. Reduce barriers to investment in building resiliency and performance 3. Provide low -risk opportunities for lenders, business owners and local governments 4. Support public health, energy efficiency and water conservation goals CPACE gives commercial property owners access to private financing and technical assistance to stimulate sustainable and equitable development while increasing property values, creating jobs and encouraging affordable multi -housing improvements. For these reasons and more, we request that Central Oregon governments pass ordinances to authorize CPACE. You can view each petition signer and the comments they left you below. Thank you, 350 Deschutes 1. Amber Vick (ZIP code: 97702) 2. Ashley Bice (ZIP code: 97759) 3. David Morman (ZIP code: 97701) 4. Erick Petersen (ZIP code: 97702) 5. Chloe Halvorson (ZIP code: 97756) 6. Children's Museum of Central Oregon (ZIP code: 97702) 7. Jay Lyons (ZIP code: 97702) 8. Joe Mazzarella (ZIP code: 97702) 9. Karen Rugg (ZIP code: 97759) 10. Laurie Harrer (ZIP code: 97702) 11. Linda Bonotto (ZIP code: 97703) 12. Liz Rink (ZIP code: 97708) 13. Paul Israel (ZIP code: 97701) 14. Perry Brooks (ZIP code: 97702) 15. Paula Latasa (ZIP code: 97703) 16. REBECCA KAY (ZIP code: 97703) 17. Robert Hamerly (ZIP code: 97759) 18. Romy Mortensen (ZIP code: 97703) 19. Shane Hoey (ZIP code: 97702) 20. Sharla Chittick (ZIP code: 97708) 21. Stacyanna Fritz (ZIP code: 97703) 22. Teresa Schader (ZIP code: 97703) 23. Tom Kelly (ZIP code: 97217) We would consider CPACE for solar on our Bend building. Tom Kelly Neil Kelly Inc 24. Tori Guest (ZIP code: 97701) 25. Zechariah Heck (ZIP code: 97703) C-PACE & ALLIANCE C-PACE Legislation Passed... So What's the Path to Implementation? June 11, 2018 When launching a C-PACE program, policymakers naturally focus on the statute as the first step. However, this note emphasizes the importance of carrying the thinking through to the local level where program implementation occurs. Without a local ordinance and a program administrator, the C-PACE program is only one-third of the way toward activation. The slippage between C-PACE policy goals and implementation is significant: while 34 states and Washington, D.C. have enacted authorizing legislation, roughly 20 states have active programs and only 10 states (including D.C.) have closed more than $15 million in C-PACE transactions. Clearly, there is an enormous opportunity to improve the awareness and user -friendliness of C-PACE programs to achieve their full potential.' State policymakers can provide valuable support and guidance to make implementation of a C-PACE program easier on localities. Some states establish an authority or specify a department to develop the rules and protocols that standardize implementation throughout a state, without micro -managing the local decision making. Other states rely on local governments, regional NGOs, and the private sector to develop the program. Where to place the emphasis —on statewide leadership or on grassroots -up programming —depends on whether there is support and infrastructure to put a statewide model in place or a preference for locally -driven programs led by counties or municipalities. With or without state guidance, local governments are responsible for two crucial implementation tasks: 1. Enacting a local C-PACE ordinance, which may be accomplished by joining a statewide program (if one was created), by adapting a model ordinance (e.g, one drafted by a state agency, advocacy coalition, or peer local government), or by developing a wholly local version. Attorneys with public finance expertise are an invaluable resource in this task, as are real estate and capital markets experts. Statewide consistency is critical to the successful and rapid scaling of a C-PACE program. Adopting a model ordinance, or the same ordinance as a neighboring local government, has significant benefits by lowering costs for property owners, capital providers, engineers and contractors. Assigning responsibility to manage the C-PACE program, called the "program administration" (PA) function. Program Administration involves two skills: document review to ensure compliance with the ordinance; and recordation of special revenue assessments on the property. Local governments typically hire an independent third party for the PA role. If local governments hire the same PA across a state —assuming the PA is effective and efficient —it encourages consistency and lowers costs. 1 This paper complements the C-PACE Alliance white paper, Elements of a Well -Designed C-PACE Statute and Program to Attract Private Investment and Foster Greater Transaction Volumes, and the report from the U.S. Department of Energy, Lessons in Commercial PACE Leadership: From Legislation to Launch. The best PA choice will be an organization with focus, resources, and staff with expertise in compliance for public financing programs. Some of the typical entities that manage C-PACE programs include: • Private third parties: nonprofit organizations (Texas, Ohio and Missouri), for -profit entities (Michigan, Washington, D.C. and Maryland), multi -state for -profit providers (Utah). • Statewide entities: Green Bank (Connecticut), New Energy Improvement District (Colorado). • Local government or quasi -government agencies: port authorities (Ohio and Minnesota), joint powers authorities (California, Florida and Wisconsin), council of governments (California), county governments (California). STAKEHOLDER PROGRAM COMMITTEE Stakeholder input should be solicited for the local C-PACE ordinance and the program guidelines. Some PAs create a stakeholder committee to help flesh out the operational details. Stakeholders should include policy experts, capital providers, real estate experts, and public finance attorneys. PROGRAM ADMINISTRATION FUNCTIONS The PA's primary purpose is to ensure compliance for the public -private partnership so that the parties are enabled to close quality C-PACE financing transactions. The essential PA functions are to: 1. Ensure the local program rules and processes are predictable transparent and efficient. This function typically requires the PA to: a) Set the minimum qualifications for capital providers and other parties in the transaction; b) Identify the project -level information to be submitted to the PA; c) Provide templates for the tax assessment and related documents; d) Describe the process for filing the assessment lien; e) Act as the liaison for capital providers, local government and the tax assessor empowered to collect the C-PACE assessments. Alternatively, allow the Capital Provider to bill and collect from the Property Owner directly. Certify proiects that are eligible. This task requires the PA to review documentation and determine if a project demonstrates compliance with the ordinance and program rules. C-PACE Alliance recently commended a PA for operating according to these best practices: statewide consistency; transparency; fair and level playing field; low cost; public service orientation; independent third -party review of anticipated energy and water savings; continuous improvement.2 THE PROGRAM ADMINISTRATOR'S ROLE IN MARKETING PA marketing should be viewed in the context of the overall need to keep PA fees low, while assuring compliance and the PA's financial sustainability. Some practitioners support a role for the PA in "priming the pump" through educational seminars for energy engineers and contractors. In smaller markets where capital providers do not have staff on -the -ground, PAs call on interested property owners. 2 See Open Letter Regarding the Texas Commercial and Industrial PACE Program, March 8, 2018. The C-PACE Alliance is cautious about endorsing a marketing role for the PA over the long-term. In the near -term, an informative C-PACE program web page with qualified capital providers and contractors is essential. If resources and time permit, the PA can usefully raise local community awareness of the program through speaking engagements, flyers and local press. The PA scope of duties should be defined and limited, because funds spent marketing can drive up PA fees to cover that expense. If a marketing budget is established for the PA, it is recommended to be modest and limited to general program awareness. Any extra services offered by the PA —for example, a review of the project design or an assessment of energy savings —should be priced a la carte to promote competition with the private sector. C-PACE Alliance encourages PAs to be especially cautious in setting property owners' expectations. It may be helpful to coordinate with qualified capital providers and others to understand what kinds of improvements and projects are workable. The most effective marketing combines that information with specific statutory and program knowledge to generate a consistent message upon which owners can rely. PROGRAM ADMINISTRATION FEES PA fees should be reasonable and appropriate in light of the size and maturity of the state's C-PACE market. If the local government provides services, it should be reimbursed for its actual costs. Many successful programs operate with relatively low one-time fees, capped per -transaction. For instance, some programs have fees set at 1 percent or less, with per -transaction caps. Low fees can help new C- PACE markets grow faster, enabling the PA to reach financial sustainability more quickly. Interest rate "add-ons" during the life of the C-PACE financing should be discouraged or be limited to actual costs. In order to keep fees reasonable, the PA should perform only the functions necessary for project approval and administration. The administrator should not charge additional fees to capital providers or property owners for services that can be provided by the private sector, or that are otherwise outside of the scope of what the administrator must do for the local government. For example, deal sourcing, private capital placement, and engineering review are services readily available in the private sector. The C-PACE Alliance believes that property owners, not the government selected administrator, should decide which services they desire, and property owners should be free to work with the service providers they choose. C-PACE ALLIANCE AS A RESOURCE The C-PACE Alliance is a network of capital providers and service providers committed to the growth of the commercial PACE industry. Our members stand ready to consult with state or local policymakers or respond to questions. More information is available at www.c-paceaIliance.com or through Cliff Kellogg, Executive Director, ckellogg@c-pacealliance.org. 3 FC-PACE $ El1.-L 1 A N C E Capital Providers CleanFund Counterpointe SRE Inland Green Capital PACE Loan Group Petros PACE Finance Twain Financial Partners Law Firms Bricker & Eckler Chapman and Cutler Hirschler Norton Rose Fulbright Winston & Strawn Accounting Firms Novogradac & Company FinTech Partner T REX Disclaimer: The paper is based on research that is believed to be accurate as of the publication date. Modifications and updates to state statutes, local ordinances and program rules will certainly occur. Readers should not rely on this information for investment decisions. The C-PACE Alliance welcomes comments and factual corrections. ELEMENTS OF A WELL -DESIGNED C-PACE STATUTE To ATTRACT PRIVATE CAPITAL AND FOSTER GREATER TRANSACTION VOLUMES sl As more states, counties and municipalities launch Commercial Property Assessed Clean Energy (C-PACE) programs, the C-PACE Alliance (CPA) is pleased to share the elements of a C-PACE statute and program that are essential to attract private capital, foster greater transaction volumes, and achieve the policy goals of sustainability, resiliency and economic growth. The CPA is comprised of capital providers and transaction experts who have invested in or professionally advised on C-PACE transaction closings in almost twenty states for hundreds of millions of dollars. The CPA members frequently receive requests from state and local governments for input on how C-PACE programs and statutes should be designed. In this paper, the CPA seeks to help jurisdictions increase the volume of high -quality C-PACE projects and to more fully realize the potential benefits to their communities in terms of energy savings, job creation, and commercial revitalization. BENEFITS OF C-PACE FINANCING C-PACE financing provides property owners with an alternative source of capital to pay for property improvements that improve energy efficiency, generate renewable energy and/or achieve other vital public benefits. C-PACE financing can be used for improvements that may significantly increase the value of property, such as lighting, roofing, HVAC systems and automated controls, boilers and chillers, insulation, glazed windows, hot water heating systems, building envelope improvements, renewable energy systems, and much more. Some states have authorized property improvements for seismic retrofits, storm resiliency measures (e.g., wind and flood), fire hardening, storm water management and water -efficiency projects. Collectively, the improvements authorized by state law for C-PACE financing are referred to as eligible improvements. To create a C-PACE program, a state must enact C-PACE legislation. Some statutes create a statewide program. Other statutes allow localities to opt -in to the program established by a neighboring locality, or a locality may create its own individual program. In most cases, a state or local jurisdiction selects one or more Program Administrators (PAs) to operate its program. C-PACE transactions are typically funded entirely by private capital providers. C-PACE financing offers a variety of advantages over other forms of capital because it is repaid through a voluntary special tax assessment. The government entity that levies property taxes will then assign its rights to the C-PACE payments to the capital provider. Assessments are enforced in the same manner as real property taxes. Under this arrangement, C-PACE capital providers can offer up to 100 percent, non -recourse financing that has a repayment term equal to the weighted average useful life of the improvements. Interest rates are usually fixed throughout the term. C-PACE financing runs with the title to the property and is automatically conveyed to the next owner upon a sale of the property. In many cases, property owners with commercial leases will pass -through C-PACE property tax payments, along with the related energy savings, to tenants. C-PACE Page 1 Version 2.0 (As of July 19, 2019) Property owners, government entities, PAs, and capital providers are all stakeholders in a successful C- PACE program. CPA's view is that C-PACE stakeholders share common goals. 1. Achieve the greatest overall environmental and economic development benefits. Through the installation of eligible improvements, stakeholders aim to reduce energy and water usage, install health and safety measures, and spur economic growth, job creation and commercial revitalization. 2. Deliver to property owners on the advantages of C-PACE financing as a special assessment. The voluntary special assessment enables capital providers to offer long-term, lower -cost financing. Payments are paid by the current titleholder who benefits from the improvements. 3. Foster a vibrant, large and growing market for C-PACE financing. An increased volume of quality C-PACE projects, including a deep and active secondary market, will result in healthy and resilient buildings that improve communities' resource management and ability to adapt to climate change and natural disasters. 4. Create an excellent customer and stakeholder experience. An efficient, transparent and user- friendly C-PACE financing industry helps achieve the program's goals by enhancing the program's appeal to property owners who will spread awareness of C-PACE by word-of-mouth and to capital providers that will look for more transactions in the jurisdiction. These shared goals are the foundation of the CPA's core principles of well -designed C-PACE programs: 1. Open -market philosophy / freedom of choice. C-PACE programs should encourage open and free-market competition among capital providers, project developers, and contractors. 2. Input from stakeholders on lessons learned. As state policymakers craft the law and local officials draft the program manual (or guidelines), they should engage a broad group of stakeholders and seek to adopt best practices learned from C-PACE programs nationwide. 3. Focus on implementation. Once a well -designed statute is enacted, policymakers and other stakeholders should monitor whether local governments adopt the program and property owners use it. Following industry best practices and using documentation that can be easily customized for individual transactions aids the program implementation. 4. Continuous collaboration. C-PACE stakeholders should be consulted periodically and before any changes to the program rules or the law. 5. Converge on standards. By adopting the recommendations in this paper, C-PACE stakeholders will enable the industry move toward voluntary standards to ensure efficient and flexible access to capital and the creation of a liquid secondary market for C-PACE assets. C-PACE Page 2 Version 2.0 (As of July 19, 2019) Lft Drawing on these common goals and core principles, the following key elements comprise a well -designed C-PACE program. 1. An open market for qualified capital providers, project developers and contractors to compete for C-PACE projects. The statute should not favor or disadvantage a party in a C-PACE project, however, programs should set reasonable minimum qualifications for capital providers as well as PAs. The statute should avoid undue regulation of or interference in the commercial transaction. 2. Strong payment obligation and collateral protection. The C-PACE statute must establish that C- PACE financing is based on a voluntary special tax assessment with the attributes necessary to create a strong form of payment obligation and credit security: a. Includes a legislative finding that the financing of energy efficiency, renewable energy projects and other eligible improvements is a valid public purpose and is in the public interest. b. Provides that the special assessment: i. Levies tax installment obligations over the life of the financing that constitutes a first and prior lien on the real property with seniority over all privately secured forms of indebtedness, provided that prior mortgage holders acknowledged or consented to the C-PACE financing. ii. Possesses the same priority status as a lien for other ad valorem taxes. If this is not possible due to political realities, the C-PACE assessment may be subordinate to property taxes but senior to other state and local government assessments. iii. Becomes effective as of the funding of a project, that is, the special assessment is recorded with the close of financing, not after the project construction is complete. iv. Once approved by the PA and recorded, the assessment may not be contested on the basis that the improvement is not an eligible improvement or the project is not a qualified project. V. Is non -extinguishable, non -rescindable and non -accelerating in the event of any foreclosure, tax lien sale, or forfeiture. (Note: the special assessment may be accelerated only in the event the property is condemned by the government.) vi. Shall be enforced by the local government in the same manner that a property tax payment default is enforced (or more quickly, if allowed). Some states or local governments offer capital providers the option to directly enforce the assessment. This transfer of enforcement power requires careful legal drafting to clarify which enforcement powers derive from the assessment and which derive from side agreements with the capital provider. c. Does not allow for partial payment of property taxes or C-PACE payments (except in the case where C-PACE payments are subordinate to real property taxes), unless such partial payment represents a voluntary prepayment. C-PACE Page 3 Version 2.0 (As of July 19, 2019) Note: States treat the priority of liens in different ways. PAs should be familiar with enough detail to explain to capital providers and their counsel what the C-PACE assessment and lien provide under that state's laws and local rules. 3. Industry best practice is to obtain lender consent from all mortgage lenders prior to closing. The capital provider and/or property owner should obtain written consent or acknowledgement to the C-PACE assessment from all lenders with a secured interest in the property due to indebtedness. Mortgage lenders' acknowledgement should include a description of the C-PACE financing and a certification from the mortgage lender that the financing does not create an event of default under the terms of the mortgage. 4. No Savings -to -Investment (SIR) requirement or alternatively, more flexible alternatives. A well - designed program should not impose an SIR test that caps the amount of C-PACE financing for a project. C-PACE commercial financing transactions involve knowledgeable counterparties who use complex objective and subjective criteria to evaluate a project's viability. Government -designed SIR requirements often generate counterproductive results. The CPA recommends against an SIR test based on several flaws discussed below. a. In general, an SIR test does not capture all of the benefits from C-PACE financing to property owners (such as a lower cost of capital, increased tenant retention, and the increased value of the property) and to the public (such as resiliency, productivity improvements, increased building code compliance, healthier work environments, and the societal value of environmental benefits). b. In states where the price of energy is low and fluctuating, complying with an SIR test is difficult; however, C-PACE still fulfills valuable public policy goals, such as lowering the use of fossil fuels and promoting greater energy conservation goals. c. In states where new construction is eligible for C-PACE, the marginal energy savings over a hypothetical baseline may be inadequate to cover the cost of those improvements. d. Property owners may be able to achieve greater marketability and higher valuation for their properties (e.g., by charging higher rents for highly energy -efficient space) than is adequately captured by an SIR test. e. An SIR test does not measure a property owner's ability to pay. Instead, financial underwriting metrics that capital providers employ consistently -- such as debt service coverage ratio -- are more appropriate to assess creditworthiness. These metrics are often what a mortgage lender utilizes to evaluate whether project to provide consent or acknowledgement for a project. For these reasons, the PA or local government should be empowered to approve projects based on more simple and effective metrics than an SIR threshold. If an SIR test is required by the C-PACE legislation, officials should consider measuring savings versus an accommodating energy efficiency standard so that more savings are counted in the numerator. Similarly, program officials might consider excluding the interest cost of C-PACE financing from the definition of "investment," which decreases the denominator in the SIR ratio. ' Page 4 Version 2.0 (As of July 19, 2019) 6-PACE If political realities require a cost -benefit analysis, the savings of the project should include: L Utility savings. ii. Operations & maintenance savings ("net avoided spending" attributable to the property improvements). iii. Financial savings where the C-PACE funds displace higher cost capital. iv. Avoided fees or penalties from non-compliance with building codes. V. New revenues from renewable energy sources. vi. Other monetized benefits such as tax credits, utility incentives and rebates. vii. Savings on societal costs imposed by greenhouse gas emissions and particulates. The capital provider should be the party that calculates the SIR or a Cost -Benefit Ratio based upon program requirements and a consistent approach. The PA should review the calculation, but the PA should not duplicate the efforts of the capital provider. 5. No contractor guarantees of energy savings. Contractor guarantees raise the cost of implementing energy saving measures and reduce the number of contractors willing to participate in the program. Any such guarantees should be left to the property owner and contractor, not imposed by the statute or program. 6. New construction projects should be eligible for C-PACE financing. New construction projects meet several important C-PACE policy objectives and should be permitted. The CPA has published a separate white paper related to new construction projects, The Case for Encou�C-PACE Financing for New Construction Projects: CPA's Recommended Guidelines. 7. Flexibility in financing terms. The statute and program should: a. Establish that the property owner is paying the assessment only during the useful life of the property improvements. Some states limit the maximum term to 20-30 years. We discourage an arbitrary limit to the length of the term. For projects involving multiple improvements, the term should not exceed the weighted average of the useful life of the improvements. b. Allow power purchase agreements (PPAs) or leases to be considered eligible improvements for C-PACE financing, because doing so promotes adoption of renewable energy technology. Property owners should negotiate these complex financial structures with assistance from experienced capital providers and attorneys. c. Refrain from setting qualifications for property owners. Instead, allow capital providers to use their own underwriting standards. It is important to stress that, for programs that require lender acknowledgement or consent to C-PACE financing, there are three independent underwritings performed on the property. The first is the initial underwriting performed by the senior lender in the context of the mortgage loan. The second is the underwriting by the C-PACE capital provider. The third, and final, is the senior lender's underwriting in the context of reviewing the potential C-PACE financing and its impact on the senior lender's collateral. Adding more financial gating requirements makes C-PACE costlier and more burdensome for property owners. d. Allow C-PACE financing to include the cost of materials and labor, warranties, maintenance and service contracts, interest reserves, capitalized interest, and all fees and costs necessary C PACE Page 5 Version 2.0 (As of July 19, 2019) to complete the project. C-PACE financing should include the cost of any ancillary measures that may be necessary to installing the eligible improvements. 8. Billing, collection and remittance of current payments. The statute should: a. Identify the representative of the local government and the tax authority required to bill and collect the C-PACE assessments (without incurring personal liability), or alternatively, allow the capital provider to bill and collect from the property owner directly. CPA discourages assigning billing and collection duties to PAs because they generally do not have staff capacity or local expertise, and will therefore need to hire (or contract with) an institutional payment agent, increasing the cost and the number of hands touching the C- PACE payments. b. Minimize the timeframe for remitting funds to capital providers, which should be less than 30 days from the statutory tax payment due date. Long remittance periods increase interest costs to the property owner. Additional recommendations on the payments process are in the section on "Best Practices in Program Administration," item #12. 9. Foreclosure process for special assessment. The statute should provide clarity and visibility into the foreclosure process, with a legal mechanism to ensure timely commencement of foreclosure. Foreclosure should be done by the same public body and in the same manner as the foreclosure for unpaid real property taxes, provided that such enforcement occurs within a reasonable amount of time following default. Otherwise, the statute should allow the capital provider to assume the authority of the government entity that normally enforces unpaid property taxes, and the statute should permit the capital provider to foreclose accordingly. 10. Refinancing of projects should be considered eligible for C-PACE financing. Refinancing and reimbursement of eligible improvements stabilizes their long-term financial viability. These projects demonstrate the value of energy saving measures, helping to market the program and leading to future C-PACE projects. (Note: For comparison, refinancing is a common use of private activity bonds.) 11. Encouraging standardization in a state's C-PACE programs can foster efficiencies, reduce transaction costs and speed up local governments' adoption of the program; on the other hand, standardization that is achieved by a program administrator with a statutory statewide monopoly can potentially result in negative outcomes when there is less pressure for customer service and cost control. Successful C-PACE programs balance the benefits of standardization while being cautious of the risk of creating unnecessary regulation and bureaucracy. One solution is to write into the state's legislation the standards applicable to any C-PACE program and to allow local governments to select one or more PAs to operate consistent with the statute. Local governments may choose from competing C-PACE programs offered by a state agency/instrumentality, a private third party, or an intergovernmental collaboration or joint powers authority. Statewide program standards typically cover items 1-10 above. A partial list of standards includes: • eligible property types; C-PACE Page 6 Version 2.0 (As of July 19, 2019) U • eligible project types, such as energy efficiency or water efficiency improvement, renewable energy, resiliency, stormwater management, wildfire prevention, seismic retrofits; • any requirements for qualifying an eligible project; • authorization for any qualified capital provider to provide C-PACE financing; • authorization for C-PACE financing in the form of direct financing and bond financing; • the eligible use of proceeds; • establishing the maximum loan term as the useful life of an eligible project or, if more than one eligible project is financed, the weighted average useful life of all the projects in the transaction; • any limitations on the amount of C-PACE financing relative to property value; • the requirement for consent from mortgage holders on the property; • the billing, collection and remittance procedures; • enforcement procedures. Some statutes delegate the writing of standards to a state agency or instrumentality, which requires careful drafting to avoid confusion and delay over whether the agency or instrumentality must determine if local ordinances comply with its standards. The legislature should consider inserting a statement to the effect that local governments and their PAs should not add requirements beyond what the legislation calls for, and that in implementing the C-PACE program, local governments and their PAs should take into account feedback from the parties being affected. Once a program is established, changing the rules without advance notice causes hardship on the parties closing transactions and reduces the likelihood of having a robust program. EST PRACTICES IN PROGRAm ADMINISTRATION These practices in program administration may be set forth in the local ordinance or report, or they may be included in the program manual (or program guidelines). Clarity of roles. The PA and the capital provider should be clear about their roles and responsibilities, often memorialized in a signed agreement. The PA's scope of work should focus on three essential functions: a. Organize the process of drafting of a program manual or guidelines. b. Approve projects that are eligible and compliant. c. Promote the program to stakeholders. Capital providers should perform four key functions: a. Originate a pipeline of projects for C-PACE financing. b. Apply project underwriting standards consistently and efficiently. c. Coordinate with PAs in the approval, closing, and collection process. d. Provide capital to fund projects at competitive rates. F4--1 Page 7 Version 2.0 (As of July 19, 2019) PACE �1 ..I 2. Publish a program manual (or program guidelines). The PA should publish a program manual setting forth the application process; the qualifications for capital providers and energy assessment professionals; the arrangements for billing, collection and remittance of current payments; and the collection of delinquent payments and enforcement of the assessment. The PA should consider convening stakeholder advisory groups to solicit input on this manual. 3. Minimize documentation requirements and avoid extraneous requirements. C-PACE projects are typically funded entirely by private capital, with no public funding. Therefore, documentation and qualification criteria beyond the statutory language should be carefully considered because they discourage participation. 4. Program Administrators should consider pricing services a la carte, rather than requiring every property owner to pay for a broad range of services that may not be used. a. Consulting services for property owners should be priced separately. b. Services that the property owner can buy locally — such as estimating energy savings, overseeing project development, or evaluating alternative equipment installations — can be priced individually. Separate pricing encourages competition and choice, which ultimately benefits property owners. c. S PA should disclose any financial interest it has in related service providers, and property owners should have the option of purchasing these services from any qualified provider. 5. Program Fees should cover actual and reasonable costs. a. PA fees should be reasonable and appropriate in light of factors such as the size and maturity of the C-PACE market in the subject state. To keep fees reasonable, the PA should perform only the functions necessary for project approval and administration. Low fees help new C-PACE markets grow faster, enabling the PA to reach financial sustainability more quickly. PA fee structures marketed as "no cost to the taxing district, paid for by the borrower" can de -rail C-PACE transactions if these fees are too high. Many successful programs operate with relatively low administration fees, capped per - transaction. For instance, some programs have fees set at 1 percent or less, with per - transaction caps of $75,000 or less. b. Interest rate "add-ons" should be discouraged or be minimal; when financially possible, a PA's fees should decline over time as project volume increases. c. PAs will need financial support to cover staff costs until the transaction volume is sufficient to offset these expenses. A reliable funding source during start-up is part of a successful launch. Possible resources include state funding; grants from philanthropies, utility companies or the state; loaned executives; donated offices; or consulting revenue. �C-SPACE Page 8 Version 2.0 (As of July 19, 2019) 6. Collaborate with capital providers to create the program documents and the application process, and before changing any of the documentation requirements. The legal documentation must provide a clear description of the rights, responsibilities, and remedies of the parties, including: a. An unconditional obligation from the property owner to pay the special assessment; b. An irrevocable assignment of revenues from the special assessment from the taxing authority to the capital provider; c. An obligation from the property owner to use the C-PACE financing proceeds exclusively for the purpose of purchasing and installing eligible improvements and related authorized expenses; d. The obligations of the taxing authority to enforce the special assessment on default and related processes and timelines; e. A description of which liabilities will be repaid through the special assessment and the remedies applicable to those obligations that are not; f. The payment dates, prepayment make -whole provisions, late payment penalties; and g. A description of the parties' duties in the collections process, including the role of any government collectors or collection agents. The format of the legal documents may vary depending on the preferences of counsel. Generally, the documents fall into these categories: • Standard Form of Special Assessment Document or Petition between the local unit of government and the property owner evidencing the property owner's request for the special assessment. The repayment schedule must also be included in the form of special assessment. • Program Agreement(s) that memorialize the roles of the property owner, local government, government collectors or collection agents, and the capital provider. Some attorneys prefer a single document signed by all the parties, while other attorneys prefer to divide the documents into two-party agreements that state the duties of each party and to whom that duty is owed. • Financing Agreement (Loan Agreement) and related documents. A program should permit a capital provider to tailor its financing agreement to meet the needs of the property owner and institutional investors, as long as the agreement complies with statutory and program rules. • Lender Consent or Acknowledgement. Some programs create a template form of lender consent or acknowledgement to evidence compliance with state law or program rules. The format may vary according to local requirements or capital provider preferences. Page 9 Version 2.0 (As of July 19, 2019) C-PACE 'h--i The Special Assessment document or petition or some other element of it is typically recorded in the land records so that future property owners are aware an assessment exists and to protect the capital provider's enforcement rights upon foreclosure. Some attorneys record all or portions of the other legal documents for the convenience of future titleholders; however, financing agreements and material economic terms are typically not recorded, or they are redacted to preserve confidentiality. 7. Certification of project compliance. The PA or the local unit of government should provide a written statement on request that the C-PACE financing for a particular property meets the program requirements. 8. Fair access by capital providers. a. The PA should do business impartially with any party that submits an application. A capital provider should be able to submit applications to any PA on equal terms and conditions, including situations where the PA is itself affiliated with a capital provider. b. PAs should not guide a property owner to any specific capital provider. PAs should refer property owners to a list of qualified capital providers using a standard protocol. c. If the PA is affiliated with a capital provider, the capital provider/PA should deal with all other capital providers on an impartial basis, taking special care to avoid appearance of conflicts of interest and to protect confidential business information. 9. Property owners should be encouraged to obtain an energy savings estimate. Programs should encourage an energy analysis for the property owner's information rather than as a mandatory requirement for determining eligibility. The PA may set the qualifications for the energy analysts qualified to perform this work. The PA should review the completeness of the analyst's technical work but not become enmeshed in the project design or require energy assessment beyond a demonstration that minimum eligibility requirements are met. 10. Financial underwriting by capital providers. The program should allow capital providers to perform the financial underwriting to confirm the property owner's ability to repay the assessments. PAs should not perform any financial underwriting, because it duplicates the capital providers' work with no marginal benefit. 11. Efficient closing process. The C-PACE program should establish a closing process that is predictable, transparent and efficient. Some programs require approval from town councils or local government bodies that meet infrequently. Approvals by public bodies may be necessary but it slows down the process. The optimum arrangement is for the local government to designate an official who is accessible and authorized to approve C-PACE transactions. A closing process that is time-consuming or unreliable imposes a cost of doing business that especially deters smaller transactions. The steps in the closing process must be in a proper sequence, for example, the special assessment must be recorded before (or contemporaneously with) the C-PACE funding. When the PA and capital providers can set reliable closing dates, planning and efficiency improves significantly. Predictability is crucial for capital providers and investors. Delayed closing can C-PACE Page 10 Version 2.0 (As of July 19, 2019) increase the interest costs charged to property owners. Many capital providers transfer the C- PACE financing to another institutional investor after closing, so a smooth transfer process is also important. 12. Payments process (billing, collection and remittance). A well -designed program operates a thoughtful system of billing, collection and remittance (BCR) of C-PACE payments to the capital provider, with appropriate management of accounts. The design of a BCR framework should ensure that funds will not be commingled (if possible), lost, stolen or displaced. a. The BCR process is straightforward when the capital provider directly bills and collects the installment payments, which is why this is one of the preferred arrangement. If C-PACE repayments are billed with the regular property tax bill, tax authorities should establish timeframes for receipt repayments and for remittance of C-PACE payments to the capital provider. The procedure and timeline for the remittance of funds should be included in the enabling C-PACE law, or in the special assessment recorded with the land records, or both. Tax authorities should also establish reasonable servicing fees to keep costs low and encourage broader participation. c. Placing the BCR duties with the PA is discouraged because the PA typically lacks sufficient capacity and track record to satisfy a credit rating agency. In such cases, the PA must hire a financially experienced firm for BCR services, increasing the cost and the number of hands that touch the payment. 13. Contract with Program Administrator. The PA should organize the design and periodic review of the application and approval process. PAs should avoid creating rules that are impractical, high -cost, or extraneous to the statutory language. Contracts between the municipality and PAs should specify minimum acceptable levels of service performance. Contracts should include the ability to replace a PA for repeated failure to deliver services in a timely manner or adhere to the program guidelines, roles and responsibilities (preferably as outlined in this document). Any contracts between the PA or other relevant government entity and third parties should be made available to capital providers upon request for purposes of meeting underwriting needs. 14. Procedures for delinquencies and enforcement. The best practice is to establish a reliable and predictable process for curing delinquencies and commencing the foreclosure process to enforce the C-PACE assessment and rights. Ideally, enforcement responsibility involves a statutory obligation to foreclose or sell a tax lien certificate with minimal delay. The statute or the program rules should allow the tax enforcement body to assign the right to pursue remedies to the capital provider at the capital provider's request. In some states, the local government's enforcement obligation is discretionary, which obscures the legal protections that capital providers depend on to deliver the favorable financial terms possible under proper C-PACE legislation. When the statute is unclear on the foreclosure obligation, capital providers may request contractual assurance that the locality will enforce the assessment. PAs should become acquainted with the details of this subject because states and localities rules on tax enforcement vary. PAs should understand the enforcement process well C PACE Page 11 Version 2.0 (As of July 19, 2019) enough to explain it to capital providers and their counsel. The program manual should set forth the collection and foreclosure processes and timelines. 15. Post -installation reporting (measurement and verification). CPA recommends that property owners not be required to obtain expensive measurement and verification services. Reporting requirements that seem reasonable when considered one at a time can accumulate to a point that deters property owners from participating. Accordingly, CPA recommends that reporting requirements be as minimal as possible. Marketing the availability and features of C-PACE is crucial, especially in the early years of a new program because C-PACE financing is unfamiliar to most property owners. The CPA believes that program costs should be controlled by co -marketing C-PACE alongside other economic development initiatives sponsored by local government, utilities, and public finance professionals. Due to concerns about the cost of marketing, CPA is reluctant to say that a PA has a permanent marketing role in this area. 1. Message. The marketing message should emphasize that C-PACE is an alternative financing tool, as well as a means to promote the adoption of renewable energy and efficiency projects. 2. Marketing (General Awareness of C-PACE). If resources and time permit, the PA should raise local community awareness of the C-PACE program through websites, flyers and local media. The private stakeholders should help market C-PACE as well. . 3. Education (Explanation of C-PACE Financing and Approval Process). The PA should offer seminars and speak at public events to explain the program to property owners, contractors, and economic development organizations. Stakeholders should assist with education. 4. Training (For Qualified Energy Savings Analysts or Project Developers). If the PA keeps a list of qualified third -parties to conduct energy savings analysts or project development, then the PA must take responsibility for organizing technical training for contractors and engineers. These services can be paid for with a separate fee to contractors and engineers to cover the PA costs. For more information on C-PACE financing or the C-PACE Alliance, please visit www.c-pacealiiancce.com or call Cliff Kellogg at 202-744-1984 I Page 12 Version 2.0 (As of July 19, 2019) C-PACE Commercial PACE Financing and the Special Assessment Process: Understanding Roles and Managing Risks for Local Governments Greg Leventis and Lisa Schwartz, Lawrence Berkeley National Laboratory Executive Summary This issue brief is for local governments that are well -positioned to participate in a commercial property assessed clean energy (C-PACE) program but are looking to inform a decision about whether to join or create a program. This resource addresses two specific barriers these local governments may face regarding C-PACE programs: (1) uncertainty about the likelihood of tax foreclosure on properties in default of C-PACE payments and the risks local governments bear, and (2) uncertainty about the staff labor commitment associated with administering the program, including the execution of the special tax assessment process. Key findings from this issue brief include: To date, defaults and tax foreclosures happen very rarely, but delinquencies do occur. ® Since 2008, only one C-PACE project has defaulted —out of about 1,870 completed projects. Delinquencies (i.e., late payments) are more common; however, lenders and program administrators can work with property owners, mortgage holders, and other creditors to get payments back on track. This issue brief includes some important considerations and lessons learned to help local governments better prepare for possible defaults. ® Unless the local government has directly provided capital or credit enhancement for projects, a foreclosure will not impact the jurisdiction's financial standing. Local governments are not responsible for making C-PACE payments to third -party lenders, even if the participant misses payments (PACENation 2017). A trend toward third -party administration signals reduced local government effort. ® Increasingly, C-PACE program `,sponsors are adopting program administrative structures in which third parties take on many or most administrative responsibilities, even those traditionally the responsibility of local governments. This can include recording, billing, collections, remittances, and even enforcement (although any delegation of enforcement authority should be confirmed). The implication of delegating these tasks is a reduction in required local government effort. Commercial PACE Working Group Issue Briefs This issue brief is the first in a series of U.S. Department of Energy (DOE) and Lawrence Berkeley National Lab (LBNL)-produced briefs intended to inform state and local governments about specific barriers to adopting or implementing C-PACE programs. The issue briefs are informed by input from participants in DOE's C-PACE working Group, which includes state and local governments, third -party program administrators, capital providers, and many other organizations. This issue brief addresses the complex topic of special property assessments. For readers unfamiliar with C-PACE and the role of state and local governments, consider starting with a foundational C-PACE resource prepared by DOE and LBNL, Lessons in Commercial PACE_ Leadership: The Path from Legislation to Launch. The resource aims to fast -track the setup of C-PACE programs by capturing best practices and lessons learned from early adopters. The report includes a glossary of terms, summarizes interviews and anecdotes from leading practitioners, and provides key additional resources. Learn more about the C-PACE Working Group: energy.gov/eere/slsc/commercial-pace-working-group Download Lessons in Commercial PACE Leadership: The Path from Legislation to Launch: energy.gov/eere/slsc/downloads/ lessons -commercial -pace -leadership -path -legislation -launch 'Minor changes were made in January 2020. Recording, billing, collections, and remittances are the main C-PACE special assessment tasks. • Third -party program administrators or lenders often carry out some or most of these tasks, and the market is trending toward increased third -party (and decreased local government) responsibilities. ® Even where local governments take on these tasks, C-PACE assessments will generally require similar, or the same, effort as other special assessments. ® In general, C-PACE assessments only make up a small fraction of the overall number of special assessments a local government will process in a given year. The enforcement process follows existing law (same as other special assessments). ® An emerging development in some states and local governments is allowing enforcement to be carried out by third parties, which could expedite the resolution of nonpayment for capital providers and limit local government involvement. However, there must be a state and local legal framework for allowing third parties to carry out enforcement and a clear process for enforcing the lien.' Delinquencies in C-PACE payment have occasionally occurred, but are usually resolved through coordination among the taxing authority and the affected parties to bring payments current. Commercial property assessed clean energy (C-PACE) financing can provide multiple benefits for states, local governments, and the communities they serve, including economic development, job creation, increased property values, and advancement of energy goals. However, local governments may be cautious about joining or creating C-PACE programs, due to (1) uncertainty about the staff labor commitment associated with administering a C-PACE program, and (2) uncertainty about the likelihood of tax foreclosure (or tax sale) on properties, triggered through default of C-PACE payments. By considering the Special a s-,sessrutsrr( , pe s,,;the o tions: for pxpgra(Xt ac ioistrotiw struFttite;'a d howa e two. itexac , local governments can estimate the potential commitments associated with joining or creating a C-PACE program.' `lUse thrce„factors'vary according to jurisdiction, andthis ssue'br efprovides.a framework for,local go�erirrnerts.to assess tlreir,speci�ic oircumstances The framework addresses how C-PACE may affect local government operations, the roles a local government may play, and what that means for local government's staff and resource commitments. The following questions are important for each jurisdiction to keep in mind while reading this issue brief. What does existing law say? How does the special assessment process work? Who is responsible for performing the special assessment? How long does the special assessment take? Are statewide or regional C-PACE programs avail- able to opt into? What are the implications for the level of effort and risk the local government must take on? This brief first covers the C-PACE process and administrative models. Next, it covers the special assessment process and then homes in on C-PACE assessments. The conclusion summarizes key findings and lessons learned. Overview of the C-PACE Process and Administrative Models This section describes key points in the C-PACE process, different program administrative models and why they matter, and explains the roles that various entities may play, which can directly impact the level of effort required for a local government participating in C-PACE. C-PACE Process Enabling C-PACE statutes —passed at the state level —describe the role of local governments in a C-PACE program. Existing law typically vests statutory authority to impose, bill, collect, and enforce special assessments or other taxes with local governments (i.e., municipalities, counties, or both). C-PACE statutes "piggyback" on these existing authorities. The state legislature must determine energy improvements constitute a public benefit similar to other public improvements (e.g., roads and water lines), which the local government secures through levying special assessments. Enabling C-PACE law generally dictates that, in accordance with the state's existing laws for collection of special assessments, local governments will collect C-PACE special assessments in the same manner as real property taxes or special assessments in the state. Figure 1 illustrates one way the C-PACE process might unfold for a participating project, including the entities that may be involved and potential transactions among them. Many variations on each of these steps exist, as program models and legal and policy contexts may differ greatly. For example, in some jurisdictions the property owner may apply for funding and seek the mortgage holder's 'Some states that aim to allow third party enforcement "have attempted to address these concerns by making changes to their state and/or local enabling legislation to clearly differentiate the legal classification for the C-PACE assessment and also describing alternative enforcement procedures by which the C-PACE assessment may be legally enforced by a private party" (Coleman, 2019). 'A special assessment is a recording of a liability to the local government (i.e., payment obligation) in exchange for an investment that benefits the property owner. In the case of C-PACE, a property improvement usually involves energy enhancements. A lien on the property secures the assessment and obligates the property owner to repay the investment in the improvement (LBNL 2016), C-PACE assessments are voluntary and typically viewed as special tax, assessments because they are separate from actual real property taxes and are voluntary rather than mandated —they do not apply to all properties in a jurisdiction. Property Owner Consent 1 Mortgage Holder Sponsoror Tax Authority Contractor N,N," "lay ®, Senior C-PACE lien Alft assign lien •� "OEM K � N RIP, Capital Provident Figure 1. A simplified overview of one C-PACE process model. Flows of funds are shown in green, with flows of goods and services in orange. consent to secure the special assessment with the mortgaged property.',' When consent is granted and the project is approved, a capital provider —a third -party capital provider, the district itself, or the local government, depending on how the program is set up — furnishes the project funds to make the approved property improvements. The property owner repays the project funds through the sponsor or tax authority (i.e., the local government, an outsourced program administrator, or a regional or state government -sponsored entity), who, if they are not the capital provider, remits the payments to the capital provider. The administrative structure of a C-PACE program determines which entities (e.g., local government, higher -level administrative entity, or a third party) take on various program roles and responsibilities and can significantly impact the level of effort required from a local government. The administrative structure is often determined in the state's enabling statute, particularly for statewide programs, as described below. Table 1 describes various program models and provides examples of where each model has been employed. For example, under the limited or no state support model, the Sonoma County Energy Independence Program (SCEIP) manages all aspects of the program, an approach that was more common when C-PACE first began. In contrast, the strategic state support model in Texas authorizes program administrators to perform nearly all program tasks. Local governments only need to perform three tasks: record the lien on the prop- erty, include a notice of the assessment with the property tax bill and, if necessary, collect past -due assessments (Heydinger, 2017). The industry is trending away from local government administration of programs and toward more standardized programs adminis- tered by third -party entities, such as a statewide program administrator or joint powers authority. If a third party administers a program (e.g., a nonprofit organization, state -sponsored administrator, or private sector administrator), a spectrum of involvement can exist for the local government, from significant involvement, such as taking on all special assessment process tasks, to nearly no involvement. This brief next looks at the general special assessment process (responsibilities of a local government, regardless of its involvement in a C-PACE program) then revisits the process, examining the implications and considerations of adding a C-PACE program. Because both the special assessment process and the structure of C-PACE programs can differ significantly, the focus is on the essential parts of each —high-level tasks that will be a part of any special assessment or C-PACE process. °Obtaining mortgage holder consent is not required in every program but is best practice. 'Another potential variation from the model depicted in Figure 1 is how funds may be disbursed. In some jurisdictions, lenders provide project funds to the property owner; in others, funds may be disbursed to the contractor. Project funds may be disbursed as an upfront payment or in tranches as project milestones are completed (usually for larger projects). Table 1. C-PACE Program Administrative Structures (adapted from NASEO 2016) Model Description Statewide One statewide administrator (government agency or affiliated entity); may hire a third party to take on some or many of the program administrator roles; Local governments opt into the statewide program, as no locally administered programs exist; Structure directed by enabling legislation; Examples: Colorado, Connecticut, Rhode Island, and Utah. State and Local Statewide program coexists with locally or privately administered programs; Option Structure directed by enabling legislation (often allows multijurisdictional or joining programs); Implementation may or may not be statewide but is open to any locality that opts in; Examples; Michigan and New York. Strategic State State gives guidance (e.g., technical assistance and model forms) to local and private program Support administrators; Following the state guidance is not required; programs can access resources developed at the state level or operate as they see fit; and State agencies or state -level actors may be involved in stakeholder engagement. Texas launched under this structure, and several other states have expressed interest. Limited or No State No (or limited) state -level involvement; Support Programs are locally or privately driven; Examples: California and Ohio. Regional Programs from multiple states collaborate to coordinate program standards across states; The Mid -Atlantic PACE Alliance is in the process of coordinating for consistency across multiple programs in Maryland, Virginia, and Washington, D.C.; and To date, this has been voluntary and has not involved changes to existing administrative structures. Special Assessment Process Overview Special assessments (which are separate charges from real property taxes) pay for specific, publicly owned goods and services that provide public value, such as fire protection, sewer systems, schools, and sidewalks' The tasks of levying (i.e., adding), billing (i.e., invoicing), collecting, and enforcing special assessments —collectively, the special assessment process --can vary widely from state to state and by local jurisdiction. These differences can include how jurisdictions carry out special assessments and what entities are responsible for the overall process, as well as specific tasks within the process. For example, different tasks may be the responsibility of the treasurer's office, assessor's office, tax collector's office, or recorder's office. For the local government to charge a property a special assessment, the property must be in a special assessment district. Although practice varies, certain tasks will be a part of any special assessment process, as described below. Recording Recording is the process of formalizing an assessment on an individual property by documenting the existence of a lien on the local government's public land records.' This may be in the form of a certificate, memorandum, or a full agreement. The process serves as evidence of the existence and terms of a special assessment on the subject property, allowing any party reviewing the title record of that property to see the assessment. These processes create a legal obligation on the property, involving filling out forms with infor- mation about the special assessment district, the participating property, and the obligation, and entering that information into a system used to maintain the public record (e.g., the tax roll).' 6C-PACE, in contrast, works through the special assessment process as away to pay for privately owned goods (e.g., building energy improvements) that provide public value, such as energy savings and associated benefits (SCEIP, 2012). 'A lien is a "legal right to a property in the event of nonpayment of an assessment or other obligation (e.g., mortgage). A taxing authority places the lien to secure a special assessment and may assign the lien to another party" (Levends, Schwartz, Kramer, & Deason, 2018). ""The [tax] roll serves as legal evidence of tax liens. Components included in the tax role [sic] may include: valuation date, taxable status date, property location and class, total as- sessed value of the property (including land and improvements), full market value, assessor's oath, etc." (hops://www.investopedia.com/ierm5/t/ta>: roll asp). For example, the County of San Mateo, California, requires information about the special assessment district, total amount of the assessment, total number of parcels in the district, current contact information for property taxpayers, the resolution authorizing the charges, and the compensation agreement with the county (https://control lei,smegov.org/special-assessments-taxes-or-charges). Billing Once a local government officially records an assessment on a property, it can bill and collect taxes for the purposes of the different assessments on that property (i.e., property tax and special assessments). The jurisdiction will determine the amount to charge each property based on criteria such as the needs of the district and the assessed value of the property. Billing involves invoicing the owner of the property for the assessed amount owed. Administrators may assign each special assessment district a code to identify and distin- guish it from other charges. Usually, a billing software system generates invoices that include the property tax assessment, plus any special assessment charges. The owner receives the bill by mail or electronically. Frequency varies by jurisdiction but is commonly once or twice a year. Collections and Remittances Bills include due dates for payment to the local government. If the local government receives payment after that date, the owner is delinquent. Often, a grace period comes after the deadline, during which the local government assigns no penalty.9 The responsible government department deposits remittances (i.e., payments sent) into the accounts of each of the special assessment districts, often automated through the software system. Enforcement If a property is delinquent on its taxes or special assessment payments after a certain period (which varies by jurisdiction), the property is in default. Depending on the underlying statutes for how local governments enforce special assessment liens, the lienholder may enforce the lien through a tax sale. A tax sale may be a tax deed sale (i.e., a direct foreclosure on the property), whereby proceeds from the sale of the property cure the delinquent assessment, or a tax lien sale (i.e., selling the assessment lien on the property), whereby proceeds from the sale of the tax lien cure the delinquent assessment.10 Tax lien sale and foreclosure practices differ by state. Generally, after a certain period of delinquency, a notice of default is filed with the recorder's office, with any other lienholders, and with the public (e.g., in the newspaper) (Loftsgordon, n.d.). The borrower then has a grace period to pay delinquent obligations. If the property owner does not pay off the arrears (i.e., the amount owed), the lienholder or local government registers a notice with the recorder's office, and the property or lien goes to auction." The proceeds pay off the creditors in order of seniority. C®PACE in the Special Assessment Process Just as the special assessment process may vary widely by jurisdiction, C-PACE program administration models and task delegation vary by jurisdiction, with important implications for the participation of local governments. State -enabling legislation governs the C-PACE process. Such statutes may also reference other applicable state laws and local require- ments: �-gouernnients may;be;requir d,ta:appt ye-ordinataoes.Ga:iQra»ally:adopl C•i?AG ;the(r jurisdiction; Where enabling legislation, other laws, and local ordinances do not provide specific guidance; the pxogranmadmin(st tc�r,;th c pitai prttvadct, god the property, owzter typieallyse'contracts to settle how they will carry out unaddressed aspects of the process (Sherman, 2018). A significant implication is that enabling legislation and other laws may directly delineate whether local governments are authorized to delegate process tasks (and what part of those tasks) to third parties. Of particular importance is whether a local government may assign the C-PACE assessment lien. Examples of third -party assignment exist for each of the C-PACE process steps, in whole or in part. Some programs (e.g., Missouri, Texas, and Arlington County, Virginia) use third parties for all or nearly all tasks. C-PACE-enabling legislation and other laws may also dictate the processes themselves (e.g., whether the lender can bill the C-PACE charges directly and separately or whether they must appear on the property tax bill, requiring the local government to take some part in billing).12 Delegating these tasks gives rise to important considerations at each stage of the process. 'Once assessment payments are delinquent, local governments may apply penalties in the form of significant interest charges to the delinquent amount. In some states, local gov- ernments may auction outstanding tax debts to third parties, sometimes known as a "tax lien sale." In these cases, the auction winner pays the outstanding debt, collects the penalty interest, and can take ownership of the property after a certain amount of time —see the Enforcement section later in this brief. Depending on state laws and local requirements and processes, the time between a payment being delinquent and a tax foreclosure could be several years. 10Twenty-nine states conduct tax lien sales: https://www.investol)eclia.com/terms/t/tax-salc.asp. Once the lienholder sells the tax lien, the taxing authority should be able to recoup unpaid taxes. Tax lien sales may eventually lead to foreclosure and transfer of the property to the party that buys the lien. "Iiups://www.zi low.com/foreclosures/overview/what-is-a-foreclosure/ "In Massachusetts, for example, a C-PACE charge must appear on the property tax bill, meaning that the program cannot delegate billing to a third -party lender (O'Malley, 2018). Program Administration A local government may need or elect to be involved in one or more of the following program administration tasks: • Program marketing • Funding projects • Generating project leads • Engaging third parties • Determining eligibility • Overseeing third parties. Whether and how the local government participates in these tasks determines their required effort level. Typically, other entities perform portions of these tasks. For example, determining eligibility can include underwriting (usually by the lender); processing applications and additional documentation to ensure that applicants meet any minimum program requirements (usually outsourced to the program administrator); and verifying that an applicant can legally enter into a contract on the property —which can some- times be less straightforward and require more time to confirm (e.g., if the property has multiple owners). Where local governments engage third parties as program administrators, they may identify and recruit potential candidates that are a good match for the program and oversee their work.13 Even where local governments are not the C-PACE program administrator, they may encourage building owners to participate through promotion of the program (e.g., through traditional marketing, a website, or social media). As illustrated in Table 2, a local government's level of effort to participate in C-PACE may be gauged by three factors: (1) how much of the process the local government can and will delegate; (2) the number of projects per year; and (3) effort to complete an individual project, if the local government is in charge of developing projects. Following Table 2 is an outline of the major steps of the assess- ment process and the local government's role in and responsibilities for each step. Table 2. C-PACE Process Tasks: Drivers of Required Level of Effort Potential Issues (1) How Local governments often delegate much of the C-PACE process to third parties, depending on what program Much of administrative structure allows and what they feel is appropriate and necessary; the Process What parts of the process may be delegated depend on existing law and the C-PACE program structure; For some programs, the local government manages all process steps (e.g., SCEIP); for others, the local government the Local has virtually no involvement (e.g., Show Me PACE, Missouri) (Carlock, 2018; Campbell, 2018); and Government For programs administered at state or regional levels, local governments tend to assume at least some process Can and Will roles when they opt into the program. The industry trend is toward programs in which local governments take on Delegate fewer of the special assessment process responsibilities. (2) How Many Although most C-PACE programs are growing, most process only a few projects per year; Projects a For programs administered over a wide geographic area with multiple participating local governments, only a Program portion of projects will be in any individual jurisdiction —even for programs with a significant project volume; In 2017, the median number of projects per program was two (i.e., half of all programs in 2017 had two or fewer Does Each projects)14 (PACENation, 2018); and Year A program's number of projects varies by year. (3) How Larger projects and projects in which the ownership structure of the property or mortgage holder is complex (e.g., Much Work an LLC or trust where the decision maker is not immediately apparent, or legal authority to enter a contract must an Individual be determined) take more time;15 Sales of C-PACE portfolios or individual projects may mean projects must go through the recording stage multiple Project Will times to ensure the public record accurately reflects the current lienholder; Take Enforcement actions could require added staff time and, potentially, effort by legal counsel. A few programs allow delegation of enforcement to a third party (e.g., a lender or program administrator)(Campbell, 201-9). Because lenders have made the vast majority of C-PACE loans in jurisdictions in which local governments are directly or operationally responsible for enforcement (many jurisdictions that allow third party enforcement are newer programs and most have not yet closed projects), some capital providers are "cautiously evaluating... markets [that allow third party enforcement]" (Coleman, 2019). The time spent recording, billing, collecting, and remitting payments can be minimal. It should be approximately the same level of effort as special assessments more generally. Local governments may charge fees to cover costs of the process. 13Missouri's Show Me PACE program, for example, has a representative from each participating local government on an advisory board for the program (Campbell, 2018). 14Programs range from those limited to and run by a single local government, to statewide programs involving dozens of local governments, to program administrators operating in multiple states. `Each project will be different in terms of staff time required. SCEIP, in which Sonoma County is responsible for all aspects of the program, reports spending around 6-8 hours on straightforward projects, which turn around in a few weeks; more complex projects could take several months to turn around (Carlock, 2018). Boulder County, which participates in Colorado's statewide program and handles C-PACE special assessment tasks for the program, says that each project takes minimal time (Weissmann and Allshouse 2018). Establishment of Assessment Lien The local government must first legally establish the assessment, depending on any requirements laid out in the enabling state statute or local statutes, as well as the guidelines and documents adopted by a program administrator. Typically, the local government or its representative legally establishes assessment in the following ways: ® Enters into some form of contract with the property owner ® Imposes a special assessment on a particular property through the adoption of a resolution ® Adds the special assessment payment amount as a charge on the property tax bill. Recording Recording for C-PACE is generally similar to recording for other special assessment districts, where the local government is the entity responsible for adding information about a special assessment to the public record, regardless of C-PACE program structure. Depending on the enabling statutes or documents adopted by a program administrator, to perfect the legal validity of a lien, it may be necessary to add ("certify") the relevant assessment payment installments (or schedule of payment installments) to the tax bill. Typically, the local government receives documents and enters the information into the public record. If a local government uses an online system, however, adding that documentation to the public record is essentially delegated to a third party (e.g., the lender or third -party program administrator). For a traditional special assessment district, recording is a one-time task; however, C-PACE lienholders may sell their C-PACE loans to other parties or into secondary markets. If a third -party lender is the original party listed to receive assessment payments, the local government will need to record the reassignments so that it knows where to direct remittances if it is responsible for that task.16 This takes about the same time as the original recording (Dykes 2018; Weissmann and Allshouse 2018). Billing, Collections, and Remittances Together, billing, collections, and remittances (i.e., segregating and distributing the C-PACE portion of the property tax payment to the right lender) are the main ongoing tasks in the C-PACE process. In most jurisdictions, these activities occur once or twice per year. Upon receipt of a C-PACE assessment payment from a property owner, the responsible government department remits the amount received into the appropriate account designated by the program administrator (i.e., the local government, an outsourced program administrator, a statewide entity, or a capital provider). Tax bills typically break out C-PACE special assessments as a separate line item (or charge) from the real property taxes and other special assessments, although the C-PACE assessments may appear in a sepa- rate bill. In addition, the amount of an individual C-PACE assessment installment is not calculated based on a mill rate like property taxes, but is simply a reflection of the fixed annual payment of principal and interest on the original C-PACE financing amount." In other words, local governments do not calculate C-PACE special assessment installment amounts, but rather, the program adminis- trator typically provides the local government a schedule for the fixed payment amounts, for a specified term, for each subject property to add to the property tax bill. If the C-PACE statute specifies that delinquent C-PACE assessments should be treated like other delinquent property taxes, the local government with the statutory right to bill and collect, or its assigned representative, can collect C-PACE special assessments as part of its regular billing and collection procedures for real property taxes and other special assessments. Enabling legislation and local requirements dictate what is possible. For example, Massachusetts law requires that the C-PACE charge appear on the property tax bill (O'Malley, 2018), whereas in Texas, lenders generate and send their own bills to participants.19 Local governments often use information technology (IT) to manage billing, collections, and remittances. Types of IT systems vary widely, from custom systems made specifically for one entity, to off -the -shelf systems that come with technical support 20 Some systems have not been able to accommodate a flat payment and may not be able to break out the difference between principal and interest. Local governments may need to modify these systems manually or enlist a third party to carry out these tasks (Gabrielson, 2018). The capacity to add these features is system -specific —for example: "In some cases, the program administrator oversees remittances and is listed in the public record, so the local government would not need to record a sale of the loan. "In some jurisdictions, authorities may remit C-PACE payments much more frequently (for example, up to 12 times per year in Colorado) (Weissmann and Allshouse 2018), 11"The mill rate is the amount of tax payable per dollar of the assessed value of a property. The mill rate is based on 'mills.' It is a figure that represents the amount per $1,000 of the assessed value of property, which is used to calculate the amount of property tax" (littl)s://www.investopedia.com/terms/m/miIliate.asp). "if a lender collects payments, there is no need to remit the payments to another party. In some programs, the local government remits payments to the third -party program admin- istrator, who in turn remits payments to participating lenders. Either approach has advantages from a lender's perspective. Direct billing gives the lender more flexibility and control, whereas including the C-PACE charge on the property tax bill could potentially lead to higher repayment rates in jurisdictions that do not allow partial payments of tax bills. 20In some states, one software company may dominate the market, serving many local governments' IT system needs for the special assessment process. In Connecticut, this has worked to the program's advantage; one software company serves most local governments in the state. The Connecticut Green Bank, the statewide C-PACE program administrator, worked with this company to create an adder that handles the C-PACE assessments so most local governments are able to include them in their billing (Dykes, 2018). ® Sonoma County, California, has an older, custom system but was able to add C-PACE to bills through the system in the same way it adds a charge for other special assessment districts, such as fire stations or school districts (Carlock, 2018); m Arlington, Virginia, decided to minimize its role in private C-PACE transactions and has delegated responsibility for billing and collections to capital providers. In the process, the county avoided significant costs to modify its IT systems for a small volume of C-PACE transactions annually (Dicke, 2018); and ■ In Colorado, the statewide program administrator provides the C-PACE payment amounts to local governments. The local govern- ments annually add the charge to the tax bill once the statewide administrator gives them the amount to charge (Weissman and Allshouse, 2018). Local governments commonly hire third parties to perform or support these process steps for C-PACE, just as they may already use third parties to handle other tasks, or parts of other tasks, in the property tax assessment process.21 Local governments may charge their normal fees to perform these tasks or may recover costs in other ways (Leventis, Schwartz, Kramer, & Deason, 2018). Enforcement Enforcement is the action taken to recover outstanding C-PACE payments, ultimately through a tax sale or tax foreclosure. Underlying C-PACE statutes typically bar extinguishing C-PACE assessment liens, even in a foreclosure.22 Local governments recover the amounts owed in arrears through the proceeds of the tax sale or foreclosure process; the future balance and schedule of C-PACE assessment payment obligations transfer to the new owner. Nonpayment situations mark an important difference between C-PACE and Residential PACE (R-PACE). C-PACE arrangements generally involve more sophisticated borrowers (i.e., commercial property owners), for whom a foreclosure will not directly impact their personal finances or living situation. Commercial properties also tend to have multiple lienholders who, through loan covenants, must be informed of and agree to building owners securing other debt with the property, and who require notification of a property tax delinquency to make a protective advance to preserve their security interest. C-PACE enforcement follows existing laws and local protocols, so the process will be the same as for other special assessments. Enforcement rights often travel with the lien (i.e., the lienholder has the right to initiate tax sale proceedings; in some programs the lien is assignable to a third party, such as a lender) (Dykes, 2018). If rules allow assignable liens, a third -party lender may be the cred- itor on a C-PACE project —not the local government, as in the case of a normal special assessment. In that case, the third party is the entity with an interest in initiating a tax sale or tax foreclosure in the event of nonpayment. Depending on the state, the enforcement process may be carried out through the local government (i.e., judicial) or independently (i.e., non-judicial).23 Program sponsors and administrators should confirm whether state and local laws authorize a third party to initiate an enforcement action." If laws and program structure allow assignable liens and nonjudicial foreclosures, the role of local governments in this aspect of the process may be more limited.25 Unless the jurisdiction has directly provided capital for projects or some credit enhancement, a foreclosure will not impact the jurisdiction's financial standing, P-1ion h�s.IiQlc,.`°Ati©` iltne is the loco governtn ett responslbl,'e to mlal�e C-I'AG�'.asse'ssment payinentks tip tlje. SPACE finders" (PACENation, �4I 7):,, Enforcement Process Once a property owner has missed an initial payment, the lienholder may want to exercise its rights by initiating a tax sale or fore- closure. If the local government holds the lien, it may be required or choose to allow significant time before initiating a tax sale.26 If a third party, such as a private lender, holds the lien and is authorized to initiate foreclosure, it may want to begin proceedings much sooner (e.g., within 60 to 90 days of the date when a tax sale is authorized), depending on what the lienholder feels is appropriate and what is allowable by law. The first step is giving notice to the stakeholders involved. Next, the process generally allows a grace period for the property owner to pay any outstanding amounts owed (missed payments and penalties).27 If the grace period passes without the property owner paying off the debts, the lienholder may move to conduct a tax sale through an auction. The auction may be a tax deed sale (in which the property itself is put up for auction) or, in some states, a tax lien sale (in which the lien is sold)." If it is a judicial foreclosure, the lien - 'For example, SCEIP hires a third party to track assessments, payoffs, amortization, and billing amounts, and submit the information to the assessor's office (Carlock, 2018). '-'A tax sale involves selling a property (tax deed sale) or lien on a property (tax lien sale) to generate funds to pay outstanding taxes or special assessment arrears. "Nonjudicial processes can be significantly shorter than judicial processes, which can take up to several years. "'In Virginia, an Attorney General's opinion clarified the power local jurisdictions have in delegating process tasks. "For example, the local government may have to assign the lien, but will not manage the enforcement process (see page 10 under "Programs are moving toward third -party administration"), 16Existing law may require the local government wait a specified amount of time before initiating a tax sale. The waiting period can be up to several years. "Unlike loans, C-PACE does not accelerate —that is, the full amount of the C-PACE obligation does not come due if the participant defaults. Only the delinquent payments are due; the balance of the lien owed passes on to the next property owner (https://pacenation.us/wp-content/uploads/2012/07/PACE-Benefits-Concerns-Solutions-Webinar-Presentation.pdf). In Colorado, a debate is occurring as to whether the amount of a C-PACE obligation should accelerate if the property holder is delinquent and the property is part of a tax lien sale (Weissmann 2019). °The responsible party may hold the auction live or, where available, online. holder must petition a court —often through the local government —for authorization to take the property to auction. In a nonjudicial process, the lienholder may conduct the auction without court authorization or local government support.29 Proceeds from the auction pay arrears to the lienholder. Enforcement Experience C-PACE programs have funded about 1,870 projects since 2008 (PACENation, n.d.). Based on interviews with experts conducted for this brief, only one project has defaulted.30 At the same time, most C-PACE projects have closed in the last two to three years. Although default rates are likely to remain low relative to the total number of C-PACE projects, stakeholders should prepare for the possibility of defaults increasing as more projects are completed. Delinquencies are more common; in most cases, lenders and program administrators can work with property owners, mortgage holders, and other creditors to get payments back on track —for example: Connecticut, with one of the largest C-PACE programs in the country, has had a few delinquencies. The Connecticut Green Bank is the C-PACE program administrator and the lender on some projects. It has modified loan terms to help two property owners get back on schedule with payments (Dykes, 2018). In California, C-PACE program administrator Dividend Finance notified the mortgage holder of a delinquency on a property -se- cured obligation. The mortgage holder made a protective advance to cure the delinquency and to preserve its security interest. The property was subsequently sold privately to another investor that has resumed timely payments. Because Dividend Finance had previously obtained the mortgage holder's consent to the C-PACE assessment, the mortgage holder could move quickly to resolve the delinquency. Enforcement Preparation To prepare for the eventuality of a default and foreclosure, program sponsors, program administrators, and other C-PACE stakeholders can take the following steps: 1) Consider, understand, and communicate to participants and stakeholders: a. The role of the local government in the tax sale process: • Can the local government assign the responsibility to a third party? • If so, does the local government want to be involved in the process —and in what ways? b. The tax sale process, timelines, and options: ° Are both judicial and nonjudicial foreclosures possible? Does the process include a tax lien sale or just a tax deed sale? What are the implications (e.g., how fast is the process)? 2) Obtain mortgage holder consent when putting together C-PACE deals, leverage relationships with the mortgage holder, and foster the mortgage holder's understanding of the C-PACE process. 3) Be in touch with other lienholders on delinquent properties (e.g., the mortgage holder) to gain insight into borrower's situation. Consider the following questions: Is the borrower behind on other obligations? ° Is there a problem with the underlying business? General Themes and Trends With the emergence of C-PACE financing throughout the United States, driven in part by demand from property owners and developers, local governments will continue to ask questions about benefits and potential risks before creating or joining a C-PACE program. This issue brief focuses on`"htseotetitil"risks frquently;,cateA: �s ;oncrn by local; govcimztnt-inereasd staff#inc coininitment, ngncla rlsks,.aridicxeased=taxfor�closuresaudds"they;u�lleitherc�ccucuerytatelyor,canine.r»ai�aged.thrtggli:oareftlprogram;eSi'gn;arid; '�In a judicial foreclosure, the local government may need to conduct the auction. In a nonjudicial process, the third -party lienholder is responsible for conducting the auction. 30In the case of the one reported default, the property owner began missing payments a year and a half after the C-PACE project was completed. The program administrator (a party to the enforcement) and the third -party lender for the project (the lead on the enforcement) worked with the mortgage holder, the owner, and other creditors to try to avoid the default. Working with the mortgage holder and other creditors on the property, the C-PACE lender found out the property owner was delinquent on all its obligations and that, due to the failure of an essential piece of equipment, the business was failing. planning . pportirig ihls niig isrendtwaadsreasesrponsttittes,#or rc par'.arratprntntsatc�rs apdap> ti xoytdW wipeh Ogttificantlytcciues>ucal gca'eriuYie3txepSrbitr,.artt3 tlac`are'cdocf defaii ors*PA3 :assessrr�itts tct datel Several themes and trends emerge from our research: C-PACE is not R-PACE for commercial buildings. Consumer protection issues for C-PACE differ from those for R-PACE. This is because C-PACE projects generally involve more sophisticated property owners and other creditors with interests in the property, who often have covenants that require notice and consent for the property to secure another obligation. In addition, most jurisdictions have far more residential than commercial properties. Nationally, annual project volume for C-PACE has been far lower than for R-PACE. Project timing and scope are also different, which has implications for the program process." Prpgraras ;are mor?ng toward third party:adrlunistrat�on .The ipdustry l�a� s�en,sou�e,p�pgram adt�ittlstraltve structures tp tivligh> tit O partiesl (as Qppose,�t;to local gciverninexits� tyke ozi ad pa stxattve,responsibilities, such as x cQrdiiag ,billipg,-coiiections, azid zentitting payirientsto, rile capltai prodex and other servlee,prpttders dome loi ai �urtscicttotis ,have authorized tlXrd parley enfcirmeiit, ,which can` expedite the resolution, ofxipnpayent,butsoe. -.tallprciu�deis:nay be :hesatarit to invest in;prograrns unless the local government asi r�spgz�silile far enfQxFeme�t (see above).,; Potential Local Government Burdens "For example, to protect consumers, R-PACE programs may require that contractors only receive payment once a project is completed. Commercial projects could last several months and may incur far higher costs, which could be untenable for contractors. 10 Lessons Learned We draw the following conclusions from our research and interviews: Acknowledge rn ents The authors thank Sean Williamson, Eleni Pelican, Jenah Zweig, and AnnaMaria Garcia of DOE's Office of Weatherization and Intergovernmental Programs for their support of this project. For participating in interviews and providing input for this brief, we thank Alycia Allshouse, Josh Campbell, Craig Carlock, Mike Centore, Scott Dicke, Mackey Dykes, David Gabrielson, Peter Grabell, Michael Karlosky, Wendy O'Malley, Elyssa Rothe, Genevieve Sherman, Marco Velotta, and Paul Weissmann. For reviewing a draft of this brief and providing comments, we thank Josh Campbell (ShowME PACE), Jessa Coleman (PACE Financing Servicing), Scott Dicke (SRS), Mackey Dykes (Connecticut Green Bank), Peter Grabell (Dividend Finance), Clifford Kellogg (C-PACE Alliance), Wendy O'Malley (Massachusetts Development Finance Agency), Brian McCarter (SRS), Genevieve Sherman (Greenworks Lending), and Paul Weissmann (Treasurer, Boulder County, Colorado). Thanks also to Kristan Johnson for her help in initial formatting. "Paul Weissmann and Alycia Allshouse of the Boulder County, Colorado, Treasurer's Office see even that low level of risk as shifted to the statewide C-PACE program in which the county participates (Weissmann and Allshouse 2018). 11 Campbell, Josh. Show Me PACE Clean Energy District. Email communication with Lawrence Berkeley National Laboratory (LBNL) and DOE. August 14, 2019. Carlock, Craig. Sonoma County, California Energy Independence Program (SCEIP). Interview by LBNL. October 1, 2018. Centore, Michael, PACENation. "C-PACE by Program and City." December 12, 2018. Coleman, Jessa. PACE Financial Servicing. Email communications with LBNL and DOE. September 23, 2019. Dicke, Scott. Sustainable Real Estate Solutions (SRS). Interview by LBNL. October 4, 2018. Dykes, Mackey. Connecticut Green Bank. Interview by LBNL. November 5, 2018. Gabrielson, David. PACENation. Interview by LBNL. November 8, 2018. Heydinger, Charlene. Texas PACE Authority. Interview by LBNL. August 21, 2017. Leventis, Greg, Lisa Schwartz, Chris Kramer, and Jeff Deason, Lessons in Commercial PACE Leadership: The Path from Legislation to Launch, February 2018. http://eta-publications.ibl.gov/sites/default/files/lessons_in_commercial_pace_leadership_final.pdf. Loftsgordon, Amy. "Timeline for Nonjudicial Foreclosure." Accessed December 5, 2018. https://www.nolo.com/legal-encyclopedia/time- line-nonjudicial-foreclosure.html. McCarter, Brian. SRS. Email communication with LBNL and DOE. September 10, 2019. O'Malley, Wendy. Massachusetts Development Finance Agency. Interview by LBNL. November 28, 2018. PACENation. "C-PACE Talking Points." November 2017. haps://pacenation.us/wp-content/uploads/2017/11/C-PAC&talking-points-1.pdf. PACENation. "PACE Market Data." Accessed March 5, 2019. https://pacenation.us/pace-market-data/. Rothe, Elyssa. PACENation. Interview by LBNL. October 23, 2018. SCEIP, Property Assessed Clean Energy (PACE) Replication Guidance Package for Local Governments, March 2012. https://www.keeping- paceinteaas.org/does/resources/scei_l .pdf. Sherman, Genevieve. Greenworks Lending and PACE Financial Servicing. Interview by LBNL. September 13, 2018. Paul Weissmann, email to LBNL, February 13, 2019. Weissmann, Paul, and Alycia Allshouse. Boulder County, Colorado, Treasurer's Office. Interview by LBNL. December 13, 2018. Wikimedia Commons. (n.d.). File:US Navy 100809-N-8863V 061 Construction workers install new energy -efficient windows and lighting in Bldg. 519 at Naval Surface Warfare Center.jpg. Retrieved from https:Hcommons.wikimedia.org/wiki/File:US Navy_100809-N-8863V 061_ Construction workers install new energy -efficient windows_and_lighting_in_Bldg._519_at Naval_Surface Warfare Center jpg This document was prepared as an account of work sponsored by the United States Government. While this document is believed to contain correct information, neither the United States Government nor any agency thereof, nor The Regents of the University of California, nor any of their employees, makes any warranty, express or implied, or assumes any legal responsibility for the accuracy, completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its use would not infringe privately owned rights. Reference herein to any specific commercial product, process, or service by its trade name, trademark, manufacturer, or otherwise, does not necessarily constitute or imply its endorsement, recommendation, or favoring by the United States Government or any agency thereof, or The Regents of the University of California. The views and opinions of authors expressed herein do not necessarily state or reflect those of the United States Government or any agency thereof, or The Regents of the University of California. Ernest Orlando Lawrence Berkeley National Laboratory is an equal opportunity employer. This manuscript has been authored by an author at Lawrence Berkeley National Laboratory under Contract No. DE-ACO2-05CHI1231 with the U.S. Department of Energy. The U.S. Government retains, and the publisher, by accepting the article for publication, acknowledges, that the U.S. Government retains a non-exclusive, paid -up, irrevocable, worldwide license to publish or reproduce the published form of this manuscript, or allow others to do so, for U.S. Government purposes. The work described in this report was funded by the U.S. Department of Energy's Office of Weatherization and Intergovernmental Programs under Lawrence Berkeley National Laboratory Contract No. DE-ACO2-05CHI 123 1. For more information, visit: energy.gov/eere/slsc DOE/GO-102019-5185 • June 2019 12 C-PACE � � k1 1,1ANCE Capital Providers CleanFund Counterpointe SIRE Inland Green Capital PACE Loan Group Petros PACE Finance Twain Financial Partners Law Firms Bricker & Eckler Chapman and Cutler Hirschler Fleischer Winston & Strawn Accounting Firms Novogradac & Company Commercial PACE Financing: Bonds or Direct Financing? Let the Market Competition Begin. February, 2019 Commercial Property Assessed Clean Energy (C-PACE) programs provide Property Owners with a financing tool to improve the energy performance, water efficiency, and resiliency of their commercial buildings. C-PACE programs typically offer Capital Providers two methods to fund a transaction— direct financing or bond funding. Policymakers, municipalities and program sponsors should understand the differences between these two options when considering the design of their C-PACE program. Because the optimum funding method depends case -by -case on many variables, this note urges that both direct financing and bond funding should be allowed, if possible, in order to maximize the overall flexibility and success of the C-PACE program. Overview of the Difference between Direct Financing and Bond Funding Most C-PACE financing can be classified as direct financing or bond funding: In a direct financing, the Property Owner and Capital Provider negotiate the financial terms and the documentation. The Program Administrator reviews the documents to ensure compliance with state law. The Property Owner obtains funds for the property improvement directly from the Capital Provider via a promissory note and financing agreement (or non -bond instrument). In a bond funding, the Property Owner and Capital Provider agree on the financial terms, and then a third party— such as a municipality or a conduit bond issuer— issues a bond purchased by the Capital Provider. The proceeds of the bond sale, in turn, fund the property improvements. C-PACE bonds may be issued by cities, counties, or authorized political subdivisions. Some states indicate which local public authorities can issue C-PACE bonds; when no local issuer is indicated, C-PACE Capital Providers have successfully used a multi -state conduit bond issuer. Regardless of who issues the bond, the Property Owner is responsible for repayment. No public funds are used, and there is no financial obligation by the state or local government. The bond issuer will require other parties to join in the transaction, too, such as the trustee that is responsible for disbursements, collections and payments, and the bond counsel that writes a legal opinion attesting to the validity and enforceability of the bond and the C- PACE financing. Some programs use a transaction structure that is not clearly direct financing or bond funding: funds pass through a government entity, like bond funding, but without that entity issuing a bond. The Capital Provider buys an assignment of receivables or an assignment of the assessment from the government authority (e.g., an energy district entity). The assignment entitles the Capital Provider with legal rights as if it owned the assessment contract directly. With this assignment in hand, the Capital Provider sends its funds to the government entity, which then conveys them to the Property Owner. Direct Financing Offers Lower Closing Costs and Less Complexity, While Bond Funding Promotes Better Liquidity and Potentially Lower Interest Rates Over Time. Most states use direct financing in their C-PACE programs, although bonds are the most prevalent funding method in California, the largest state program. Why is direct funding most common? In most states, bond funding is not a requirement, as is the case for certain PACE statutes in California. The closing costs are higher and the lead time longer for bonds due to the additional parties involved. Second, direct financing has a fairly uncomplicated set of documents and is more readily understandable by Property Owners. Third, by comparison, bond financing requires the development of a specialized set of documents specifically for C-PACE transactions, which costs time and money and requires a well - developed infrastructure at the local government level to process, disburse, collect and remit. Finally, some jurisdictions prefer authorizing direct financing to reduce the perceived burden on public officials involved in the levy, collection, enforcement of C-PACE assessments. Direct Financing Bond Funding The Property Owner and Capital Provider negotiate The Property Owner and Capital Provider negotiate the the financial terms and the documentation. The financial terms. The Property Owner obtains funds from Property Owner obtains funds directly from the the proceeds of a bond sale by a third -party bond issuer Capital Provider. to the Capital Provider. • Lower cost of issuance due to greater flexibility The bond issuer engages a trustee to handle certain in documentation and fewer parties. Costs of closing matters, disbursements, collections and bond funding are about 50-to-75 basis points payments. Legal counsel writes an opinion attesting to higher than direct financing, subject to the validity and enforceability of the C-PACE bond. variations on either side. The minimum cost of Certain Capital Providers' investment criteria require issuing a a bond is about $25,000 (recognizing bonding. that in certain jurisdictions it's possible to issue • A bond may be deemed more liquid and marketable. a bond backed by multiple assessments, Liquidity and marketability can be enhanced by the spreading the cost of issuance across multiple reputation of the issuer, trustee and bond counsel, PACE assessments). as well as the standard form of bond indenture. • Fewer parties are involved. Direct financing Bond financing requires an independent trustee to requires no public approval process after the disburse proceeds and collect paymentswhich review by the Program Administrator (although , creates the perception of greater reliability in some jurisdictions require a public approval or servicing the C-PACE Bond. all C-PACE assessments, regardless of funding method). Bonds can facilitate the division of a property assessment into multiple tranches to further enhance liquidity, or to provide for structural 2 Direct Financing Bond Funding • Direct financing programs are often non- elements such as credit support for the senior bond. exclusive, which preserves a CP's choice to issue (This division of one assessment into multiple bonds at a later date through a bond issuer. tranches may be accomplished with direct financing if the Capital Provider issues its own bonds.) • Policymakers may require that the responsibility to levy, collect, and enforce C-PACE • Bonds can be registered and assigned a CUSIP number, which is a standardized method for assessments be performed by the program administrator or Capital Provider and not as identifying securities to facilitate the clearance and part of the regular property tax collection settlement of trading market transactions. This process. Capital markets and rating agencies feature can be valuable for certain investors. will scrutinize the process for collection and (Registration and assignment of a CUSIP number enforcement processes more stringently in an may be accomplished with direct financing if the "off -bill" situation. Capital Provider issues its own bonds.) • Some C-PACE bond issuances allow for an exemption from state and local income taxes. • Bond funding can offer accelerated foreclosure process in some states, e.g., California. The Differences Between Bond and Direct Financing Can Be Moderated The difficulty in quantifying the difference between bond funding and direct financing is that bonds can sometimes work cost efficiently and in other cases the cost is excessive. • The initial start-up cost (and time invested) in the development of standardized documents, and on the due diligence on the issuance and remittance process, requires continued usage by Capital Providers to amortize these costs over multiples transactions. • The parties can control the extra closing costs of bond financing by using the issuer's standardized bond documents without any extraordinary negotiating, assuming the standard documents are acceptable. Regarding the cost of bond counsel opinion, the potential savings from using direct financing may be less than expected because most investors will want transactions to provide some type of legal opinion on enforceability. • While direct financing might seem to be more cost-effective and less burdensome on local government's tax administration, the extra servicing costs of using a Trustee in bond financing can be a delicate topic. Some investors prefer that a local government collect and the Trustee reconcile the assessment payments, because they are neutral parties required to follow the tax law or the indenture. • The other part of servicing is stability. Changes in deal structure can occur post -closing: for example, the Capital Provider may sell the bond or assign the note to a new investor; a Property Owner may sell the assessed property; or the designated servicer might want to exit the PACE business in a few years. These changes in the deal structure can create confusion and disruption. A tax bill serviced by local government plus a financially sound Trustee offers stability for the term of the PACE assessment, assuming the local government and Trustee remain stable themselves. This servicing arrangement may be an extra cost over direct financing, but in the long run, parties may find it worthwhile. Some financial experts believe a hybrid is possible, one based on a low-cost bond structure while employing the servicing stability of a Trustee or County Treasurer. In the near term, this concept is difficult to implement due to a strong tradition in bond transactions of following custom, even when no actual statutory or constitutional limitations prevent this innovation. Conclusion For the long-term health of the C-PACE industry, the issue should be framed in this way: will selecting bond funding or direct financing as the exclusive funding method increase the use of the C-PACE more than permitting both options? Unless there are compelling state -specific political or legal realities that require choosing one approach over the other, this Policy Note urges programs to offer both methods and allow market competition and Property Owners to determine which option becomes prevalent. 4 Testimonial re: firm's use of commercial PACE for energy upgrades via Show Me PACE Cambridge Engineering, Chesterfield, MO Saving energy is not only good for the environment, but is good for a business. A couple of years ago I was introduced to the Property Assessed Clean Energy (PACE) program here in MO. I believe the financial benefits of the PACE program, especially from a financing perspective, are not well known among Controllers and CFO's. Basically, the program provides a unique financing program for clean energy retrofits, allowing the upgrades to be financed through property taxes. In the case of our project, a $600,000 retrofit for lighting, roofing and HVAC upgrades, the advantages were: • Ease of qualification. Working with a consulting firm that specializes in PACE financing, the process was fast and simple 0 100% financing. We were able to finance the entire amount of our project. • Stand-alone financing. The PACE financing had no impact on our already existing term debt, availability of our working capital line -of -credit, or our borrowing covenants with our lender. • Repayment. The loan is re -payed through a property tax assessment, allowing us to extend the loan time frame (10 years) over the normal 5 year balloon for maintenance capital financing. • Transferable. If we ever sell the building, the loan accompanies the building, as it is part of the property tax assessment. We are a growing company, and are constantly evaluating the best way to deploy our working capital. In the case of PACE, it allowed us to make some critical building improvements without impacting the availability of that working capital to fund our future growth. If you are considering energy retrofits for lighting, HVAC or building envelope, I would strongly encourage looking into PACE. Kevin Thompson, CFO — Cambridge Engineering, Inc. N ENGINEERING INC More heat less energy PACE = Property Assessed Clean Energy Economic development through open -market financing for energy efficiency and renewable energy projects PACE financing is all private funds - no taxpayer money used PACE financing is available for: residential, commercial, industrial, agricultural, non-profit, and public properties Eligible projects Lighting Windows IN _: nRoofs FIVAC ®Solar IL _ m Role of local government State statute requires a municipality to pass an ordinance in order for Show Me PACE Clean Energy District* to operate in that jurisdiction. (Municipalities may belong to more than one clean energy district.) Municipalites participate in PACE to promote economic development, create jobs and save energy in their community. There is NO obligation, exposure or liability for the municipality. To avoid placing a burden on county collectors, Show Me PACE uses third -party collection of the annual assessment. Each participating municipality has the option to appoint a representative to serve on the Show Me PACE Advisory Board which meets annually. *Show Me PACE Clean Energy District is a political subdivision Financing provided by Show Me PACE funding partners:' • can pay for 100% of a project's costs . is all private capital no taxpayer funds . is on -demand cash . has`a fixed interest rate . is repaid with an annual assessment up to 20 years . is considered "off -book" on a firm's balance sheet . does not require personal guarantees or out-of- pocket equity investment . can stay with the building upon sale . doesn't require first payment for 12-24 months Financing approvals are simple! To qualify, PACE projects must: Q be permanently affixed to the property Q reduce energy or water consumption or create renewable energy on the property Q save more money than the cost of project Q be located in a participating municipality Consumer Protections required by the Missouri PACE Act 1) PACE projects can only be approved when the estimated economic benefit expected from the project during the financing period is equal to or greater than the cost of the project. 2) PACE projects can only be approved when there are sufficient resources to complete the project. Show Me PACE requires the following to meet that requirement: no real estate delinquencies in past 3 years, no default or foreclosure against property in past 5 years and no bankruptcy in past 5 years. 3) Money for PACE projects is kept in escrow to ensure funds only go for intended improvements. 4) Assessment contracts must be recorded with the County Recorder of Deeds. Additional protections with Show Me PACE On all commercial projects, Show Me PACE requires consent of the primary mortgage holder. The Loan -to -Value ratio must be less than 90% and PACE Loan -to Value ratio must be less than 25%. Show Me PACE Lenders 4 t; P®TROS MEE T W I ICJ FINANCE I�IIIII. P CE quit D I �' I D E N Dg,'CLEANFUND Commercial PACE Capital What makes Show Me PACE unique? . open market program e on -demand cash *nonprofit with low fees *requires lender consent e third -party collection e transparent operation Show Me PACE fees* $50,000 - $500,00 = 1.25% >$500,000 = 1%, w/ $20,000 cap** Annual collection capped at $500 * for standard projects **cap raised to $30,000 effective 111118 For more information: visit www.showmepace.org or contact Program Manager Jan Schumacher jan@moenergy.org, 573-616-1046 SHOW ME PACE � (, is a clean energy district administered by the Missouri Energy Initiative, a nonpartisan, nonprofit association of public and private sector energy entities. MEI works to increase M I* support for energy -related economic development, innovation and education. Missouri Initiative Clean Energy District PACE (Property Assessed Clean Energy) is an innovative, economical way for property owners to pay for energy and water projects s � u h�t;►S��fJ�aled }� F Plro�r"sA+hn�s Y She>�'.14�9 �AC`E wEnmek+�y1 2. $�pfocts ',, . . ... . . . �ggssn�sry Sbo�vl�tb PACs* '� piv)•ds 4 In its first 18 months of operation, Show Me PACE Clean Energy District has established a reputation for getting PACE projects approved. Administered by the Missouri Energy Initiative, the district completed three commercial projects in 2016, bringing its total to six. See details below. E The Moon Ridge Foods hog processing facility SHOW ME PAC �' , �� in southwest Missouri is the largest PACE Clean Energy District agricultural project in the U.S. The other two are in downtown Kansas City - LSP Walnut and the Brookfield Building, which is the first hotel in Missouri to use PACE financing and the first in the state to combine PACE funds with historic tax credits. With a robust pipeline, Show Me PACE is on track to have another outstanding year in 2017. ,Bringing old buildings to life via PACE' New ienders approved for Show Me PACE c°omnaeicW proje t In keeping with its open -market philosophy, Show Me PACE has four new lenders. Those approved are Twain Financial Partners, CleanFund Commercial PACE Capital, Petros PACE Finance and O'Brien Staley Partners. They join PACE Equity, who was the initial lender for the district. Recognizing the economic development benefit of PACE financing, municipalities throughout the state are joining Show Me PACE on an ongoing basis. Currently these St. Louis area cities are members: Chesterfield, Crave Coeur, Wentzville, City of St. Charles, Crestwood, University City, Manchester, Maryland Heights, Park Hills, Shrewsbury, Bridgeton, Bel Nor. These in the Kansas City area have joined: Kansas City, Lee's Summit, Grandview, Belton. Member municipalities in other parts of the state are: Bolivar, Cape Girardeau, Hannibal, Jefferson City, Pleasant Hope, St. James, Mercer County, Sullivan County Show Me PACE 2016 Projects Moon Ridge Foods Pleasant Hope, MO Total PACE financing $4,000,000 Lender: Twain Financial Partners Interest Rate: 6 % Term 10.71 years Energy savings: 2.1 million kwh annually Onsite renewable capacity: 65.52 kw Lender: Twain Financial Partners Improvements: LED lighting, HVAC upgrade, solar PV system, energy -efficient hog harvesting system, a roof upgrade, energy -efficient packaging equipment, boiler upgrade Brookfield Hotel Kansas City, MO Total PACE financing: $2,395,088 Interest rate: 7% Term:20 years Energy Savings: 38 % Lender: CleanFund Commercial PACE Capital List of improvements Lighting retrofit, HVAC system retrofit, temperature controls, water heater improvements LSP, Walnut Kansas City, MO Total PACE financing $622,512 Interest Rate: 6% Term 20 years Lender: CleanFund Commercial PACE Capital Improvements: New R-30 roof, New windows, upgrading from R-4 to R-21 wall insulation & tuckpointing Largest PACE -financed agricultural project in U.S." Moon Ridge foods Hag P,ocessing Pacitlry • Pleasant Hope, MO o �+ _ Property Assessed Clean Energy j Lander: Twain Financial; Consultant: RAHILL Capital 's:,aldNgla eACENN4 M Show Me PACE is administered by Missouri Energy Initiative 238 E. High Street, 3rd floor, Jefferson City, MO 65101 Missouri :;Initiative 573-616-1046 jan@moenergy.org L,ad„imp m, o--gym101 www.showmepace.org ES Z o Deschutes County Board of Commissioners 1300 NW Wall St, Bend, OR 97703 (541) 388-6570 - Fax (541) 385-3202 - https://www.deschutes.org/ AGENDA REQUEST & STAFF REPORT For Board of Commissioners BOCC Monday Meeting of April 5, 2021 DATE: March 24, 2021 FROM: Barrett Flesh, Health Services, TITLE OF AGENDA ITEM: Consideration of Board Acceptance of Central Oregon Health Council Mini -Grant, "Move for Better Health" RECOMMENDATION & ACTION REQUESTED: Staff recommend acceptance of Central Oregon Health Council (COHC) "Move for Better Health" mini -grant funds. BACKGROUND AND POLICY IMPLICATIONS: Health Services has been awarded a Central Oregon Health Council mini -grant, "Move for Better Health," in the amount of $4,847.25. We are requesting approval to accept these funds. Health Services inadvertently applied for this mini -grant without having requested Board approval. This oversight occurred as one manager was delegated to COVID-19 Incident Command and a different manager was asked to complete the grant application. Each manager thought the other had requested approval to apply, and we did not realize until receiving the grant award that the request for approval to apply had not been submitted. We beg pardon for this oversight. Move for Better Health aligns with the Regional Health Improvement Plan priority, "Promote Enhanced Physical Health Across Communities," with the aim and/or goal of equitably and measurably supporting all Central Oregonians to prevent disease by improving health behaviors and reducing risk factors that contribute to premature death and diminish quality of life. This pilot program will be a three-month collaborative effort between medical professionals from Mosaic Medical and behavioral health professionals from Deschutes County Health Services Behavioral Health service area. The goal is to see an increase in the overall health of participants who are living with severe and persistent mental Illness through tracking movement, weight, blood pressure, diet and mental health. The funds will be used to purchase technologies such as Fitbit trackers, pedometers, blood pressure cuffs and weight scales to be provided to participants in the pilot project. Coupled with regular therapeutic groups focused on reducing isolation, education on diet and increasing movement, we hope to see an overall improvement in participants' health. Metabolic Syndrome is defined by the Mayo Clinic as "a cluster of conditions that occur together, increasing your risk of heart disease, stroke and type 2 diabetes. These conditions include increased blood pressure, high blood sugar, excess body fat around the waist, and abnormal cholesterol or triglyceride levels." The pilot program will target individuals identified with hypertension, high blood sugar levels (Al c), and/or high body mass index to participate in the program. Team members will meet with participants weekly to provide education, prevention and awareness of Metabolic Syndrome, blood pressure levels, elevated glucose or Al C, nutrition, and to encourage increased movement and activity. Participants will be asked to meet with their behavioral health and physical health team individually or in a peer -led group setting. The purpose of the meetings is to educate and empower participants, building self - efficacy and confidence. This will improve participants' understanding of how behavioral health and physical health are linked to living a balanced life. Providing access to tracking devices supports more insight for the participants and the providers --promoting self-sufficiency and the opportunity for sustainable efforts around whole health for participants and offering healthcare providers specific metrics on activities impacting participants' whole health, informing future care. FISCAL IMPLICATIONS: The mini -grant funds in the amount of $4,847.25 will be used solely to purchase technologies such as Fitbit trackers, pedometers, blood pressure cuffs and weight scales to assist participants in monitoring their health. There are no other associated costs. ATTENDANCE: Barrett Flesh, Outpatient Complex Care Services Program Manager -- Via Zoom