ANN ARBOR: PACE program helping to finance energy projects in local businesses

Five area businesses will soon kick off projects that will help reduce energy expenses and boost property values, thanks to Ann Arbor’s Property Assessed Clean Energy (PACE) program.

Energy-efficient lighting, high-efficiency heating and cooling systems, upgraded cooking equipment, roof and wall insulation, and solar shingles are just some of the projects that will receive financing through the first PACE program to launch in Michigan.

PACE financing, which is made available through the sale of a bond and repaid by property owners through annual special assessments, features long-term, low, fixed interest rates.

“PACE is a direct $560,000 investment in the local economy that will result in annual energy savings for local businesses of more than $56,000,” Mayor John Hieftje said. “The annual electricity and natural gas savings of the first five PACE projects will be equivalent to the electricity used by more than 50 homes in a year. Our city’s Climate Action Plan calls for reducing greenhouse gas emissions 8 percent from 2000 levels by 2015, and these projects – and others like them – are an important part of helping Ann Arbor reach its sustainability goals.”

The Ann Arbor City Council authorized the sale of PACE bonds during its Feb. 19 meeting. The first bond sale was completed with Ann Arbor State Bank, which had been awarded the bond during a Request for Quotes process that opened in January.

With this successful sale, the City of Ann Arbor is the first Michigan municipality to sell PACE bonds, joining dozens of municipal governments across the country in taking advantage of this financial tool to improve energy efficiency.

Proceeds from the sale of the PACE bond, estimated to be approximately $560,000, will be assigned to owners of five commercial properties within the city that have completed a thorough eligibility and application process in order to participate in the program. These properties include: Arrowwood Hills Cooperative Housing, Big Boy Restaurant, Bivouac, Goodyear Building, and Kerrytown Market & Shops.

Energy project work, which ranges in size from $16,000 to $245,000, is expected to begin immediately and be completed within 90 days. While the property owners are entering into financing reservation agreements with the city now, the funds will not be disbursed until energy projects are completed and inspected.

Property owners will repay PACE assessments annually, beginning in June 2014. As determined by the terms of the bond sale, property owners have 10 years to repay assessments at 4.75 percent interest.

“Besides the immediate impact of employing area contractors and energy experts, PACE will have a lasting benefit in the years to come,” said Peter Schork, president of Ann Arbor State Bank. “We anticipate that property values will increase with these investments, utility expenses will decrease, and the improved, energy-efficient properties become an asset for the entire community.”

In 2010, with the assistance of local state lawmakers Senator Rebekah Warren and Representative Jeff Irwin, the State of Michigan enacted the Property Assessed Clean Energy Act (Public Act 270 of 2010), enabling local governments to create special assessment districts to offer financing to commercial and industrial property owners for eligible energy efficiency improvements and renewable energy systems.

Under Ann Arbor’s program, interested property owners completed a thorough application process to ensure their properties complied with eligibility requirements regarding project size, scope, and payback period; property value; and debt ratios. Energy assessments were also performed on the properties to identify project and savings opportunities.

The Ann Arbor PACE program was developed and administered through a partnership between the city and Clean Energy Coalition. Funding for program development was made possible by the U.S. Department of Energy’s Energy Efficiency and Conservation Block Grant  Program, through the American Recovery and Reinvestment Act. For information about PACE, visit a2energy.org/PACE.

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