AGENDA ITEM #6B
March 31, 2015
Action
MEMORANDUM
March 27, 2015
TO:
FROM:
SUBJECT:
County Council
Amanda Mihill, Legislative
Attomey~
Action: Bill 6-15, Commercial Property Assessed Clean Energy Program -
Established
Transportation, Infrastructure, Energy and Environment Committee recommendation
(3-0): enact Bill 6-15 with an amendment to confonn to state law.
Bill 6-15, Commercial Property Assessed Clean Energy Program - Established, sponsored by the
Council President at the request of the County Executive, was introduced on February 3,2015. A
public hearing was held on March 3 at which representatives from the County Executive and the
Apartment and Office Building Association (AOBA) supported the bill. A Transportation,
Infrastructure, Energy and Environment Committee worksession was held on March 18.
Bill 6-15 would:
• establish a Commercial Property Assessed Clean Energy Program to assist qualifying
commercial property owners to make energy improvements;
• allow private lenders that provide capital for a commercial loan provided under a local
clean energy loan program to have annual loan payments collected by the County as a
surcharge on a real property tax bill;
• establish that the surcharge on a real property tax bill is treated as all other taxes and
charges and that an unpaid surcharge shall be, until paid, a lien on the real property on
which it is imposed; and
• generally amend the environmental sustainability law.
Background
As Committee members may recall, in 2013 the Council enacted (and the Executive later signed)
Bill 11-13, which required the Executive to prepare a plan for implementing a Commercial
Property Assessed Clean Energy Program (PACE). The Executive delivered the Plan to the
Council on May 19,2014. Bill 6-15 would implement that Plan.
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Issue/Committee Recommendation
Owner's ability to repay.
Subtitle 11 of the Local Government Article of the Maryland Code
authorizes a county or municipality to establish a clean energy loan program. Section 1-1104 of
that law requires that one of the eligibility requirements for participation in this program be that
the county must "give due regard for the property owner's ability to repay a loan provided under
the program." This requirement is not in Bil16-15 as introduced. Committee recommendation
(3-0): amend Bill 6-15 to include this requirement (©7, lines 145-149 and ©8, lines 176-178).
Outstanding Issue for Council Discussion
Loan to value ratio.
Bill 6-15 would limit the loan amount under the PACE program to no more
than 20% of the cash value of the property and be no more than 90% of the full cash value of the
property (together with the outstanding mortgage balance) (©7-8, lines 159-165). Bracken
Hendricks, on behalf of Urban Ingenuity, which is the private administrator of the District of
Columbia PACE program, urged the Council to set a higher loan to value threshold for properties
that have little or no debt.
Mr.
Hendricks noted that for these properties, the effective cap on these
properties is 20% instead of90%. Mr. Hendricks suggested that this would be especially beneficial
for non-profits and other "community-based institutions" that have more limited access to
traditional capital markets (©27-29). In response, the Department of Finance consulted with its
consultant who developed the County's proposed PACE program. The consultant noted that 20%
is generally the upper limit of PACE programs. Both the consultant and the Department raise
concerns that raising the limit too high raises the possibility of default. The Department of Finance
strongly recommended retaining the 20% limit (©30-32). Council staff notes that while many
programs limit the loan to value ratio to 20%, at least one jurisdictions has a higher limit.
Connecticut's PACE program guidelines provide for a 35% loan to value ratio (though that cap
can be exceeded under certain conditions), but has a cap of 80% total debt.
The Committee did not make a recommendation on this issue, but preferred to discuss it at this
seSSIOn.
This packet contains:
Bil16-15
Legislative Request Report
Executive transmittal memorandum
Fiscal and Economic Impact statement
Public Hearing Testimony
County Executive
Apartment and Office Building Association
County Attorney Memorandum
Hendricks letter
Finance response
Circle
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11
13
14
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21
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27
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Bill No.
6-15
Concerning: Commercial
Prooertv
Assessed Clean Energy Program ­
Established
Draft No. 2
Revised:
3127/2015
Introduced:
February 3. 2015
Expires:
August 3, 2016
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date: --:..:.No=n:-=e'-----:-:---_ _ __
Ch. _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Council President
at
the Request ofthe County Executive
AN
ACT
to:
(1) establish
a Commercial Property Assessed Clean Energy Program to assist qualifying
commercial property owners to make energy improvements;
(2) allow private lenders that provide capital for a commercial loan provided under a local
clean energy loan program to have annual loan payments collected by the County as a
surcharge on a real property tax bill;
(3) establish that the surcharge on a real property tax bill is treated as all other taxes and
charges and that an unpaid surcharge shall
be,
until paid, a lien on the real property on
which it is imposed; and
(4) generally amend the environmental sustainability law.
By amending
Montgomery County Code
Chapter
18A,
Environmental Sustainability
Article 5
Sections
18A-33,18A-34, 18A-35, 18A-36,
and
18A-37
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface bracketsD
* * *
Heading or defined term.
Added to existing law by original bill.
Deletedfrom existing law by original bill.
Added by amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unaffocted by bill.
The County Council for Montgomery County, Maryland approves thefollowing Act:
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BILL NO.
6-15
1
Sec. 1. Sections 18A-33, 18A-34, 18A-35, 18A-36, and 18A-37 are amended
as follows:
Article 5. Commercial Property Assessed Clean Energy Program
18A-33. [Commercial Property Assessed Clean Energy Program] Definitions.
(a)
Definitio~.
2
3
4
5
In
this Section, the following words have the meanings
6
7
indicated:
Commercial property
means any real property located in the County that
is either not designed for or intended for human habitation, or that is used
for human habitation as
~
multi-family dwelling of.4 or more rental units.
8
9
10
11
Commercial Property Assessed Clean Energy Program
or
Program
means a program that facilitates energy improvements and requires
repayment through a surcharge on the owner's property tax bill.
12
13
14
15
County designated lender
means
~
person who may be selected .by the
County through
~
competitive process to offer financing, and if offered
and accepted.by the County, related funding for administrative services
for the Program.
16
17
18
19
County designated program manager
means
selected .by the County through
~
~
person who may be
competitive process to provide
administrative and management services for the Program.
20
21
Department
means the Department of Finance.
Director
means the Director of the Department or the Director's
designee.
22
23
24
Energy efficiency and/or renewable energy improvement
or
improvement
means any equipment, device, or material that is intended to decrease
energy consumption or expand use of renewable energy sources,
including:
25
26
27
ill
insulation in any wall, roof, floor, foundation, or heating and
F~BILLS\1506
Commercial
Property
Assessed Clean Energy\BiIl2.00cx
t2-\
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BILL
No. 6-15
28
cooling distribution system;
29
30
31
32
33
34
35
36
37
ill
~
stonn window or door, multi-glazed window or door, heat­
absorbing or heat-reflective glazed and coated window and door
system, or additional glazing, reduction in glass area, and other
window and door system modification that reduces energy
consumption;
ill
ill
ill
®
an automated energy control system;
~
heating, ventilating, or air-conditioning and distribution system
modification or replacement;
caulking, weather-stripping, and air sealing;
replacement or modification of
~
lighting fixture to reduce the
energy use ofthe lighting system;
38
39
40
41
42
43
44
45
m
tID
(2)
an energy recovery system;
~
day
lighting system;
the installation or upgrade of electrical wiring or outlets to charge
~
motor vehicle
that is fully or partially powered
.by
electricity;
aID
~
measure that reduces the usage of water or increases the
efficiency of water usage;
46
47
.Q.D
any other installation or modification of equipment, device, 'or
other material intended to decrease energy consumption or expand
the use of
~
renewable energy source;
.Q1}
any measure or system that makes use of or expands
~
renewable
source of energy, including solar water heater, solar thermal
electric, photovoltaic' s, wind, biomass, hydroelectric, geothermal
electric, geothennal heat pumps, anaerobic digestion, tidal energy,
wave energy, ocean thennal, fuel cells using renewable fuels, and
geothennal direct-use; or
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Property
Assessed Clean Energy\BiII2.Docx
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49
50
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52
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54
t3J
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BILL No. 6-15
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@
any renewable energy system that is g fixture, product, device, or
interacting group of fixtures, products, or devices on the
customer's side of the electricity meter that uses at least one
renewable energy source to generate electricity. A renewable
energy system includes g biomass system, but does not include an
incinerator or digester.
59
60
61
Private lender
means
~
lender selected
!2y
the property owner to provide
loan funds to the property owner for an improvement.
62
63
64
Property owner
means
~
person who owns qualified property or has
~
ground lease or glong-term lease
of~
or more years on qualified property.
65
Qualified property
means any commercial real property that meets the
eligibility criteria for the Program.
66
67
68
69
70
71
Renewable energy source
means g source of energy that naturally
replenishes over
~
human, not g geological, time frame and that is
ultimately derived from solar power, water power, or wind power.
Renewable energy source
does not include petroleum, nuclear, natural
~
or coal. A
renewable energy source
comes from the sun or from
72
73
thermal inertia of the earth and minimizes the output of toxic material in
the conversion of the energy and includes:
74
75
ill
non-hazardous, organic biomass material;
solar electric and solar thermal energy;
wind energy;
geothermal energy; and
methane gas captured from
~
landfill.
m
ill
8:)
76
77
78
79
80
ill
Surcharge
means the annual repayment of g loan, including principal,
interest, and related charges, that funds an improvement and is collected
through the real property tax billing process.
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t4=l
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BILL
No.
6-15
82
83
[(b)
The Executive must, by May 19,2014, prepare a plan for implementing
a Commercial Property Assessed Clean Energy Program that analyzes
and provides recommendations on the following elements:
(1 )
(2)
(3)
standards for eligible energy and environmental improvements;
energy audit or project design review requirements;
procedures for monitoring project progress and post-installation
inspections;
(4)
(5)
(6)
(7)
(8)
program funding sources;
lending standards and priorities;
minimum and maximum loan amounts;
interest rates, terms, and conditions;
application
procedures,
including
necessary
supporting
84
85
86
87
88
89
90
91
92
93
94
documentation;
(9)
(10)
criteria for adequate security;
procedures to refer applicants to other public and private sources
of funds and incentives;
(11) procedures related to decisions on loan acceptance and denial, or
loan terms and conditions;
(12) procedures for nonpayment or default;
(13)
disclosure requirements for real estate transactions;
95
96
97
98
99
100
101
102
103
(14) criteria for loan disbursement; and
(15)
any additional requirements necessary for program operation or
security of loan funds identified by the Executive.]
[[18A-34
104
105
=
18A-37. Reserved.]]
Established.
The Director must create and administer
Property Assessed Clean Energy Program.
~ILLS\1506
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Property Assessed Clean Energy\BiII2.Docx
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106
107
108
18A-34. Commercial Property Assessed Clean Energy Program established.
W
Commercial
~
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BILL
No. 6-15
109
110
(hl
Third-party lender.
The Director may enter into an agreement with
f!
third-party lender that is either
f!
County designated lender or
f!
private
lender that funds
f!
loan for an improvement. The agreement must provide
for the repayment of the loan for the improvement and any cost of
administering the Program through
f!
surcharge on the qualified property.
The loan may include the cost of materials and labor necessary for
installation, any permit fee, any inspection fee, any application or
administrative fee, any bank or lender fee, and any other fee that the
property owner may incur for the installation of the improvement. The
third-party lender must submit
f!
request for collection of each surcharge
amount to the County designated program manager
QI,.
111
112
113
114
115
116
117
118
119
if there is no
120
121
122
123
County designated program manf!ger, to the Department no later than
April
1
of each year.
.(£1
County designated program manager.
The Director may enter into an
agreement with
f!
County designated program manf!ger. The County
designated program manager must notify the Department of the amount
of the surcharge for each account to be collected on the real property tax
bill for that year's
kIT.
no later than May
1
of each year, and in
f!
format
approved
by
the Department. The County designated program manager
will receive the collections from the County, reconcile the collected and
billed surcharge for each account, and remit the surcharge amount to the
County designated lender or private lender. The County designated
program manager must report annually to the County on the participants
in the Program
by
name, property address, property
tax
account number,
amount ofeach surcharge billed, collected
by
the County, and remitted to
the lender, description of project, any administrative fees, the amount of
each loan, the amount of each loan balance, and the term of each loan.
124
125
126
127
128
129
130
131
132
133
134
135
t6-\
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BILL
No. 6-15
136
137
This report must be submitted to the Department no later than February
12
of each year pertaining to activity in the prior calendar year.
@
The Director may enter into an agreement with one person who provides
both County designated lender and County designated program manager
servIces.
18A-35. Eli2ibility.
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
In order to be eligible for this Program, the following criteria must be met:
ill}
Eligibility.
ill
ill
The property must be
~
qualified property.
Before any loan is approved under the Program. the County must
give due regard to the property owner's ability to repay a loan in a
manner substantially similar to that required for a mortgage loan
under Sections 12-127. 12-311. 12-409.1.12-925. and 12-1029 of
the Commercial Law Article ofthe Maryland Code.
ill
The property owner must submit the following to the private lender
or the County designated lender at the time of application for
funding:
CAl
express written consent of any holder of an existing
mortgage or deed oftrust on
~
qualified property; and
an
verification that there are no delinquent fees, taxes, water or
sewer charges or other special assessments on the qualified
property.
[[Q}]]
ill
The loan amount under this Program must:
CAl
be at least $5,000 and no more than 20% of the full cash
value of the qualified property. The full cash value is
determined
Qy
the Maryland State Department of
Assessments and Taxation; and
0'J
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BILL
No. 6-15
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
181
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184
185
186
187
188
189
lID
together with the outstanding balance of the mortgage or
deed of trust, be no more than
900/0
ofthe full cash value of
the qualified property.
{Q}
Property assessed clean energy surcharge.
ill
The property owner of qualified property must agree to repay the
amount financed through
~
surcharge levied on the County's real
property tax bill for the qualified property.
ill
ill
A surcharge may be imposed under
~
written agreement between
the County designated lender or private lender and the County.
As
~
condition for entering into an agreement under the Program,
the County designated lender or private lender must provide the
County designated program manager and the Department
~
£Ql2Y
of the loan documents and documents that verify:
(A)
the property owner's abilitv to repay the Propertv Assessed
Clean Energy loan in a manner substantially similar to that
required for a mortgage loan:
!!!.l
there are no delinquent taxes, special assessments, or water
or sewer charges on the qualified property;
[[fID]]
(Q
there are no delinquent assessments on the qualified
property under the Program;
[[{Q}]]
(ill
the property owner has obtained all necessary permits;
[[(Q)]]
!El
the improvement is permanently affixed to the qualified
property and complies with all applicable State and federal
statutes and regulations, as determined
Qy
the appropriate
regulatory authority;
[[ffi)]]
(E)
existing mortgage or deed oftrust lender consent;
H(E)]1
(QJ
loan to value documentation; and
t8J
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BILL
No. 6-15
190
191
192
193
194
195
196
197
198
199
200
201
202
203
204
205
206
207
208
209
210
[[(ill]]
an
any
other [mandaI or program document that the
Director deems necessary.
ill
In
addition to the administrative fees in Section 18A-34Cc), the
County may collect an administrative fee through the surcharge to
cover charges relating to lending, program management, billing, or
collection.
18A-36. Payment
of surcharge;
lien.
ill
The County must collect the amount financed through
~
surcharge on the
property owner's real property tax bill and forward payments received
Qy
the County to the County designated program manager
~
if there is no
County designated program manager, to the lender no later than 30 days
after the payment due dates for real property taxes. Payment due dates for
semi-annual real property taxes are September 30 for the first installment
and December
.ll
for the second installment, and for annual real property
taxes the payment due date is September 30.
®
(£}
Ifthe property owner sells the qualified property, the buyer must continue
to 00 the surcharge levied on the annual property
tax
bilL
The surcharge and any accrued interest or penalty constitutes
~
first lien
on the real property to which the surcharge applies until paid. An unpaid
surcharge will be, until paid,
~
lien on the qualified property on which it
is imposed from the date it becomes payable. The surcharge will accrue
interest and penalty and will be treated and collected like all other County
property taxes. Any delinquency will be collected through the County
Tax Sale process. The provisions of Title 14, Subtitle
Property Article of the Maryland Code that apply to
~
~
211
212
213
214
215
216
of the Tax
=
tax lien will also
apply to the lien created under this law. Any delinquent surcharge
collected through the County Tax Sale process must be forwarded to the
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BILL
No.
6-15
217
218
219
220
221
222
223
224
225
226
227
County designated program manager
Qr,.
ifthere is no County designated
program manager, to the lender no later than 30 days after the payment
was received.
18A-37. Regulations; annual report.
ill}
The Executive may adopt regulations under Method
ill
to administer the
Program.
®
The Executive must submit an annual report to the County Council
Qy
March
li
of each
year describing program participation, number and
dollar value of surcharge billed and collected, and other relevant
information pertaining to the prior calendar year.
Approved:
228
George Leventhal, President, County Council
Date
229
Approved:
230
Isiah Leggett, County Executive
Date
231
232
This is a correct copy ofCouncil action.
Linda M. Lauer, Clerk ofthe Council
Date
233
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LEGISLATIVE REQUEST REPORT
Bil16-15
Commercial Property Assessed Clean Energy Program
-
Established
DESCRIPTION:
The requested legislation amends Article 5, Sections 33-37 of Chapter
18A ofthe Montgomery County Code. The amended sections establish a
Commercial Property Assessed Clean Energy (PACE) Program to assist
qualifying commercial property owners to make energy improvements;
allow private lenders that provide capital for a commercial loan provided
under a local clean energy loan program to have annual loan payments
collected by the County as a surcharge on a property
tax
bill; establish that
the surcharge on a property
tax
bill is treated as all other taxes and charges
and that an unpaid surcharge shall be, until paid, a lien on the real property
on which it is imposed; and generally amend the environmental
sustainability law. Current law, as adopted through Bill 11-13, requires
that the County Executive submit a Commercial PACE Program
Implementation Plan to the County Council on May 19, 2014. The
County Executive submitted an Implementation Plan and is subsequently
submitting legislation to establish the PACE program.
Energy efficiency and renewable energy improvements, for example
high-efficiency heating and air-conditioning systems, may be
prohibitively costly to the property owner. PACE is designed to assist
qualifying commercial properties with financing energy improvements.
The PACE loan from a private lender is paid back through annual
surcharges on the property tax bill. This loan stays with the property and
a subsequent owner continues
to
pay the surcharge until the loan is fully
paid. Moreover, having the PACE surcharge included on the
tax
bill
provides greater security for the lender in the loan repayment as it allows
the charge to be part ofthe
tax
bill and therefore part ofthe tax lien process
ifthe PACE surcharge goes unpaid. PACE also addresses the problem of
"split incentive" where an owner-financed improvement benefits the
tenant through energy savings. Using the PACE repayment process, such
improvement repayments are levied through the property tax bill that in
many cases are paid by the tenant.
PROBLEM:
GOALS AND
OBJECTIVES:
To implement a Commercial PACE program that makes energy efficiency
and renewable energy improvements more affordable and provides
greater security to lenders
in
terms of collection of loan payments. Such
energy improvements provide an environmental benefit to the borrower
and the County.
Department of Finance
COORDINATION:
@
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FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
Office of Management and Budget
Department of Finance
nla
PACE programs have been introduced in various jurisdictions, including
Washington DC, San Francisco, Connecticut and Florida.
In
some cases,
the jurisdiction provides funding, such as in Washington DC, while in
others, for example San Francisco CA, the program relies on private
capital or owner-arranged financing.
SOURCE OF
INFORMATION:
Robert Hagedoom, Department of Finance (7-8887)
APPLICATION
WITHIN
MUNICIPALITIES:
nla
PENALTIES:
nla
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OFFICE OF THE COUNTY EXECUTIVE
ROCKVILLE, MARYLAND 20850
Isiah Leggett
County Executive
MEMORANDUM
January 14,2015
TO:
FROM:
SUBJECT:
George Leventhal, President
Montgomery County Council
Isiah Leggett, County Executive
---~
Expedited Legislation - Commercial Property Assessed Clean Energy
Program
I am hereby submitting expedited legislation for your consideration and
County Council action.
The
legislation amends the County Code to establish a
Commercial Property Assessed Clean Energy (PACE) Program.
The PACE Program assists qualifying commercial property owners with
making energy improvements; allows private lenders that provide capital for a
commercial loan provided under a local clean energy loan program to have annual loan
payments collected by the County as a surcharge on a property
tax
bill; and generally
amends the environmental sustainability law.
Pursuant to current law, I submitted a Commercial PACE Program
Implementation Plan to the County Council by May 19,2014, and am subsequently
submitting legislation to establish the PACE program. I look forward to working with
the Council to implement this important environmental initiative.
cc:
Timothy Firestine, Chief Administrative Officer
Marc
Hansen,
County Attorney
Joseph
Beach,
Director ofFinance
Jennifer Hughes, Director, Office ofManagement and Budget
Bonnie Kirkland, Assistant Chief Administrative Officer
Attachments: Expedited Legislation; Legislative Request Report; Fiscal Impact
Statement; Economic Impact Statement
@
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ROCKVILLE, MARYLAND
MEMORANDUM
November 21, 2014
TO:
FROM:
stine,
Timothy
L~Fi
ChiefAdministrative Officer
Jennifer
A.
Joseph F.
es, Director, Office ofManagement and Budget
h, Director, Department of Finance
SUBJECT:
FEIS for Bill XX-14, Commercial Property Assessed C1ean Energy
Program ­
Established
Please find attached the fiscal impact statement for the above-referenced
bill.
JAH:fz
cc: Bonnie Kirkland, Assistant Chief Administrative Officer
Lisa Austin, Offices of the County Executive
Joy Nurmi, Special Assistant
to
the County Executive
Patrick Lacefield, Directnr, Public Information Office
Joseph Beach, Director, Department of Finance
Elyse Greenwald, Office of Management and Budget
Alex Espinosa, Office of Management and Budget
Naeem Mia, Office of
Managem~nt
and Budget
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: 1
. I
Fiscal Impact Statement
Bill XX-14, Commercial Property Assessed
Clean Energy Program - Established
1. Legislative Summary.
The proposed bill establishes a Commercial Property Assessed Clean Energy (PACE)
program within the Department of Finance
to
assist qualified commercial property owners
make energy improvements. The proposed legislation allows the County
to
enter into an
agreement with a third party lender
and
collect loan repayments through the property
tax
bill.
2. An estimate of changes in County revenues and expenditures regardless of whether the
revenues or expenditures are assumed
in
the recommended or approved budget.
Includes source of information, assumptions, and methodologies used.
The legislation will not result in a net change in revenues or expenditures to the County. The
County intends to pass through
all
programmatic costs to program participants through fees
charged with the loans made by private underwriters under contract with the County.
PACE programs
in
other jurisdictions have both initial startup costs and ongoing program
operating costs. These costs are often funded by a surcharge on each loan. However, it will
be necessary to carefully monitor these costs to ensure that the lending rates are competitive
and support broad participation in the program from commercial property owners.
Montgomery County has already incurred an estimated $100,000 in existing staff and
consultant costs for the start up of this program including preparing the Program Guidelines
and related legislation.
In
addition
to
PACE program implementation costs, the Department of Environmental
Protection (DEP) estimates a public outreach and media campaign for the PACE program
would need to occur
to
both inform the public of the program and encourage participation.
DEP estimates the initial public outreach budget related to PACE at $25,000.
3. Revenue and expenditure estimates covering at least the next 6 fiscal years.
Please see number 2.
4.
An
actuarial analysis through the entire amortization period for each bill that would
affect retiree pension or group insurance costs.
Not Applicable.
S. Later actions that may affect future revenue and expenditures
if
the bill authorizes
future spending.
As stated in #2 above, the County intends to pass through the program administration costs to
program participants. However, it will be necessary to monitor and carefully manage these
costs to ensure that the lending rates are competitive and support broad participation
in
the
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program from commercial property owners. Depending onthe success of
the
PACE
program, there may be a need for more outreach, support, and program resources.
6. An estimate of the staff time needed to implement the bill.
Assuming the County is successful in outsourcing both the lending and program
administration function
to
a third·party, the Department ofFinance will absorb the new
Commercial PACE related responsibilities with existing
staff.
7. An explanation of how the addition of new staff responsibilities would affect other
duties.
There will be no significant impact to existing staff
in
the Department ofFinance or the
Department Environmental Protection
by
adding
this responsibility to existing portfolios.
8. An
~timate
of costs when an additional appropriation
is
needed.
See number 2 and 6 above.
9. A description of any
varia~le
that could affect revenue and cost estimates.
See number 2 and 6 above.
10. Ranges of revenue or expenditures that are uncertain or difficult to project.
See number 2 above. While some
data
are available on commercial PACE programs,
sufficient long-tenn trend data are currently unavailable to accurately estimate revenues and
expenditures of a fully functioning commercial PACE program. Program implementation
expenditures should be re-examined regularly to ensure the program is fiscally and
economically viable.
11.
If
a bill is
likely
to have no
fIScal
impact, why that is the case.
Not Applicable.
12. Other fiscal impacts or comments.
Not Applicable.
13. The following contributed to and concurred with
.this
analysis:
Stan Edwards, Department of Environmental Protection
Michelle Vigen, Department ofEnvironmental Protection
Robert Hagedoorn, Department ofFinance
Eric Coffinan, Department of General Services
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Alex Espinosa, Office of Management and Budget
Elyse
Greenwald, Office of Management and Budget
Matt Schaeffer, Office of Management and Budget
Date"
@
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.. i
,
.'
Economjc Impact Statement
Bill xx-14, Commercial Property Assessed Clean Energy Program - Established
Background:
This legislation would establish a Commercial Property Assessed Clean Energy Program
(program) to assist qualifying commercial property owners to make energy
improvements; allow private lenders that provide capital for a commercial loan provided
under a local clean energy loan program to have annual loan payments colleCted by the
County as a surcharge on a property
tax
bill; establish that the surcharge on a property
tax
bill is treated as all other taxes and charges and that an unpaid surcharge shall
be,
until
paid,
a lien on the real property on which it is imposed; and generally amend the
environmental sustainability law.
1. The sources of information, assumptions, and methodologies used.
According to the Department of Environmental Protection, the level of
data
on the
types ofprojects and commercial property owners eligible for this Program, the cost
ofthe project,
and
the reduction in energy costs achieved by the owners are very
limited and project/site specific. While there are over 4,200 commercial buildings
th~t
encompass over 150 million square feet in the County, it
is
difficul~
without
available data on the demand for eligible projects and the amount of lending to
determine with any certainty the economic impact of Bill
xx
-14.
2. A description of
any
variable that could
affect
the economic impact estimates.
To estimate the economic impact with any degree of certainty, the analysis requires
the number ofpotential projects that will
be
constrained by the level oflending. At a
minimum, a project that
has
been approved should achieve an economic benefit such
that the cost savings from a reduction in energy consumption will exceed the cost of
the project However without specificity on the
type
ofproject
and
the cost savings,
it is premature to detennine the economic benefits of that project. Second, the total
economic benefit to the County is also dependent on the amount of available
financing by lenders.
3. The Bill's positive or negative effect,
if
any on employment, spending, saving,
investment, incomes, and property values in the County.
It
is
expected that a fully functioning Commercial PACE program will incentivize
increased construction activity and improve property values and may have additional
positive economic impacts on income, employment, and investment in the County.
However, as stated in item #2, the
total
economic effect will depend on the amount
offinancing available, the number of commercial owners and projects
that
are
eligible for the Program, the costs of renovating and retrofitting a property, the costs
of investing
in
an energy efficiency or renewable energy system and the operating
costs of such a system over the life ofthe system, the reduction of energy
I
! ,
P~e
lof2
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Economic Impact Statement
Bill xx-14, Commercial Property Assessed Clean Energy Program - Established
consumption and savings from that reduction, and the additional business
opportunities
and
increase in employment by companies that supply equipment and
material and companies that install such equipment and material The level of detail
necessary to ascertain the positive economic effect is limited, and as such, the total
economic effect cannot be detennined
with
any degree ofcertainty.
4. IT a Bill
is
likely to have no economic impact, why
is
that the case?
Please see item #3
5. The following contributed to and concurred with this analysis: David Platt and
Rob Hagedoom, Finance;
10
J(?stj>h
F
/Beach, DIrector
D¥artment
of Finance
Date
-1'1-1'1
Page 2 of2
@
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2f/
TESTIMONY ON BEHALF OF COUNTY EXECUTIVE ISIAH LEGGETT
BILL 6-15 COMMERCIAL PACE
March 3, 2015
My name is Robert Hagedoom, Chief Division of Fiscal Management, Department of
Finance, and I am here to testify on behalf of County Executive Isiah Leggett in support
of Bill 6-15.
This legislation amends the County Code to establish a Commercial Property Assessed
Clean Energy (PACE) program in Montgomery County. This program assists qualifying
commercial property owners with making energy improvements; allows private lenders
that provide capital for a commercial loan provided under a local clean energy loan
program to have annual loan payments collected by the County as a surcharge on a
property tax bill; and establishes that the surcharge is treated as all other taxes and
charges and that unpaid surcharge will be a lien on the real property.
PACE programs have been introduced in various jurisdictions in the country, including
Washington DC, San Francisco, Los Angeles, Connecticut and Florida. Collectively,
these jurisdictions have used PACE to unlock millions of dollars in energy efficiency and
renewable energy investments. Montgomery County would, upon program launch, be
part of this national initiative that makes energy efficiency and renewable energy
improvements more affordable and provides greater security to lenders in terms of
collection of loan payments. Such energy improvements provide environmental and
economic benefits to the borrower and the County.
Pursuant to current law, the County Executive submitted a Commercial PACE Program
Implementation Plan to the County Council on May 19,2014. The Department of
Finance worked closely with the Department of Environmental Protection, Department of
General.Services, County Attorney, and Public Financial Management (PFM), the
County's consultant, to develop this Plan. This Plan conforms to Senate Bill 186, Clean
Energy Loan Programs, adopted by the Maryland General Assembly during the 2014
legislative session. SB 186 enables counties to pass a local law to authorize Commercial
PACE for private lenders; collect a surcharge on the property tax bill; and allow certain
administrative fees to be charged to borrowers. Mortgage lender consent is required for
all Commercial PACE loans.
Bill 6-15 reflects that Implementation Plan and we look forward to implementing this
important environmental initiative. Thank you for the opportunity to testify.
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-APAl!TMENT AND OfFICE­
BUIWNi ASSOOATlON Of
MfTliOl'O!JTAN WASHINGTON
TESTIMONY ON
BILL 6-15, THE "COMMERCIAL
PROPERTY ASSESSED CLEAN ENERGY
PROGRAM"
Nicola Y. Whiteman, Esq.
Senior Vice President of Government Affairs
Apartment and Office Building Association of
Metropolitan Washington
March 3, 2015
1050 17th Street. NW Suite 300 Washington. DC 20036
p:
202.296.3390 f: 202.296.3399
www.aoba-metro.6rg
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Good afternoon Councilmembers and staff.
I am Nicola Whiteman, Senior Vice
President of Government
Affairs
for the Apartment and Office Building Association of
Metropolitan Washington (AOBA). AOBA is a non-profit trade association representing owners
and managers of more than 57,000 apartment units and over 24 million square feet of office
space in Montgomery County. I am pleased to testify today on Bill 6-15, the "Commercial
Property Assessed Clean Energy Program."
I.
BILL 6-15 PROPOSES AN INNOVATIVE SOLUTION FOR ACIllEVING
ENERGY SAVINGS
IN
BUILDINGS.
The possibility of a new financing mechanism represents an exciting opportunity to
significantly impact energy use in commercial buildings.
I
While building owners can (and many
already have) implement low-cost measures to reduce their energy costs, many energy-efficiency
projects require a significant financial investment. One must also consider that desirable energy-
efficiency upgrades for older multifamily buildings can require cost-prohibitive solutions.
2
The
financing model proposed by the legislation could allow building owners to move forward with
"shovel ready" high impact energy efficiency projects. Notably, the legislation is drafted to
finance a wide array of energy efficiency projects in commercial properties. The County's
diverse building stock have varying project needs given factors such as differences
in
age,
energy systems, and operating patterns? As drafted, any energy efficiency and/or energy
IThe definition of "commercial property" in l8A-33(a) includes both commercial office buildings and multifamily properties of a
certain size. Section 18A-33(a)("commercial property" means any real property located in the County
that
is either not designated
for or intended for human habitation. or that is intended for human habitation as a multi-family building of 4 or more rental
units.")
See Green Building Facts,
U.S. Green Buildings Council, Feb. 23,2015, http://www.usgbc.orglartic1es/green-building­
facts,
copy of which is attached to AOBA's statement ("According
to
the U.S. Green Buildings Council, buildings account fur
73% of electricity consumption and 38% of all C02 emissions in the United States.")
2See
Montgomery County, Maryland Commercial Building Energy Efficiency Policy Study, March 2013, (2013 Energy Report).
page 9 (" ... multifamily buildings hold
greater
technical potential
than
commercial buildings. both in total energy percent savings
terms.
They tend to be older, are more
subject
to market barriers, and are harder
to
finance for energy retrofits.
It
is apparent that
to achieve the County's 25% goal, even on a technical basis, multifamily buildings would have to be a key part of any County
rolicy and program suite.")
See also
2013 Energy Report, page 7 acknowledging differences between and among commercial and residential buildings.
/?j)')
("Commercial and multifamily market segments present different challenges. The County will need
to
carefully consider
~,/'
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improvement ''that is intended to decrease energy consumption or expand use of renewable
energy sources" could potentially qualifY for funding under the proposed PACE program. The
broad language will pennit funding of programs that meet the energy improvement needs of the
County's complex
mix
of commercial properties.
II.
LENDER
SUPPORT IS CRITICAL TO
SECURING
BUILDING OWNER
PARTICIPATION AND THE
SUCCESSFUL
IMPLEMENTATION OF
A PACE
PROGRAM.
Section 18A-36(c) proposes to make the surcharge senior to a mortgage and all other
liens on a property.
4
Most mortgages prohibit the borrower from doing any act which would
impair the security of the lender. Placing a surcharge on a property, which is senior to the
mortgage, constitutes such an act and may place a property owner in default. To remedy this
problem, the bill includes language similar to provisions applicable to District of Columbia and
Virginia PACE programs, requiring the applicant to secure the mortgagee's prior consent. s
See
Bill 6-15
§
18-35(a)(2)("The property owner must submit the following to the private lender or
the County designated lender at the time of application for funding ... (A) express written consent
of any holder of an existing mortgage or deed of trust on a qualified property." This consent
targeting its policies and programs
to
gain
the greatest energy savings, while also addressing the barriers and needs unique to
each market segment. The Study found that both commercial and multifamily markets exhibit 100"/0 characteristics that must be
accounted for in policy and program design
if
they are to
be
successful. ... Commercial buildings such as offices, retail, and
healthcare differ greatly from each other in terms of energy systems, operating patterns, ownership patterns, and financing
structures.")
4B6-15, Section ISA-36(c)("The surcharge and any accrued interest or penalty constitutes a
first
lien on the
real
property to
which the surcharge applies until paid. An unpaid surcharge will
be,
until paid, a lien on the qualified property on which it is
imposed from the date it becomes payable.")
5
See
DC Official Code 8-1778.42(a)("To qualifY for a loan from the National Capital Energy Fund, the property owner shall file
with the administrator a loan application including the following: (7) Property owner certification that the Special Assessment
will not violate any agreements with any other lender or provision
of
applicable lender consents ..."); Va.Ann. Code
§
15.2­
95S.3. Financing clean energy programs. E. ("A voluntary special assessment lien on real property other
than
a residential
dwelling with fewer than five dwelling units or a condominium project as defined in
§
55-79.2:
1.
Shall have the same priority
status as a property tax lien against
real
property, except that such voluntary special assessment lien
shall
have priority over any
previously recorded mortgage or deed of
trust
lien only if (i) a
written
subordination agreement, in a form and substance
acceptable to each prior lienholder in its sole and exclusive discretion, is executed by the holder of each mortgage or deed of
trust
lien on the property and recorded with the special assessment lien in the land records where the property is located ...")
@
~
2
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provision is necessary as many loan documents prohibit the borrower from assuming additional
loans without the lender's consent.
While this consent provision will allow commercial property owners to avoid any
potential default issues, it is unclear whether lenders are in fact granting their consent to building
owners applying for PACE loans. AOBA encourages the Council and County Executive to
solicit feedback from other jurisdictions with existing PACE programs to determine whether
lenders are granting mortgagors' requests that they consent to the PACE assessment.
In
order to
achieve meaningful participation by building owners, it is necessary that the County obtain
lender support with specifications regarding what lenders will require of property owners if a
lender is to approve modification of the loan document so that the property owner can proceed
with the loan under the PACE program. Such specifications should thereafter be included in the
legislation and any implementing regulations.
In
the District of Columbia, which adopted legislation approving the development of a
PACE program in 2010, AOBA members are continuing to meet with representatives of the DC
PACE program administrator.
Our mutually desired goal is to allay any property owner
concerns about barriers which continue to discourage their participation in the PACE program.
Here,
in
the County, we are working collaboratively with the County Executive to ensure the
successful adoption and implementation of a program which allows for significant building
owner participation and reduction of energy consumption and demand.
In
both jurisdictions,
lender participation and consent is the focus of the stakeholder discussions.
Ill.
CONCLUSION
AOBA welcomes the opportunity to continue working with the County on this endeavor
and we will be happy to answer any questions at this time.
3
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{$iah
Leggett
CQ1Plly
Execl4ive
MatcP, Hansen
Cot(1ttyAltorney
ME.MORANDUM
TO:
J.oseph ne:ach.
Director
Department of.Finance
VIA:
FROM~
Marc
P.
Hansen.
1rJa,.t:
County Attorney.
Scott R. Foricantlon,
As~iate
County
,Attomey
February 13.2015
/~
DATE:
lffi:
Bill 6-15, Commercial
PropcrtyAssessed Clean
Energy
Progt:~
..
EslabIi~hed
l.havehadan. qpportl,lnltyto review BiIlQ;.-15.•
~omIIlercia1
Property Assessed Clean
Energy
Program -
Established. This
bill
establishes a
program that
facilities
energy'
improvements
forconunetcial
properties Witbintbe CountyaIldrequiresrepayment
onhe lOOii
thrO"g)I~ $urt.::har.8~
on the owner's property tax bill. The surchargewiU
be.
treated as a lien on
the property andoollected like all other County taxes. The County
may
select a
County
designated lender
orprivi;lte
lenders may
00.
utilized
fotthe loahsanticipated
under this program.
The
loans
must
be used
for energy efficiency or renewable energy
improvements·!.lS defined in
the
bill
and there are c.ertain
sp~ified
parameters; within
the
bill
fof.
eligibiliJYas well as the
pennjtt~damountof
the
loan~
EstabliShment of
the
Commetdid Property AsS¢Ssed
Clean
Energy
Loan
Progmin
is
,authorizedby
Subtitle 11
of
the
Local
Government
Article, Annotated Code
of
MarylanQ.
Section 1-1104, of
the
Local
G9ven;unent~elerequires
that an ordinance enactedillldcr this
law
mustprovide
that eligibility
requirements include
a requirement
that
the County
gi
Ye
due
regard
to
thepropeny
owners
ability
to
r~aya
loan
pr(fvided under
the
program
and
itt
amannet
s\lbstantiaUy
similar to that
required
fora mortgage
loan under
Sections
12-127.12;.311,
12­
409.1) 12-925,
and 12.. 129 of the
Commercial Law Article. Thisrequiremerit should be included
\vithin the bill
by
amendment orWithin the
regdlationsthat
are
adopted
toadtninister
the
program.
(240)1:71~619j'ITD
(240)
77.1~lS45
101
Mon~street;
Rockville.
MllI'yhmd
20850..2580
• PAX (24()
777~7(J.S."
scott.foncannOll@montgomcryeouritymd:gov­
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Joseph Beach
February 13, 2015
Page 2
The bill
is
otherwis~
within the authority
bfthe
Council
and
legally
sufficient
cc:
Bonnie Kirkland. Assistant Chief
Administrative
Officer
om~s
oftlie County
Executive
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o
URBAN INGENUITY
March 18
th,
2015
Dear Councilmember Berliner,
My company, Urban Ingenuity, serves as the private administrator onhe
Washington
DC PACE Commercial
program, working on behalf of the District
Department of the Environment (DDOE). In this capacity we have designed, built,
and currently administer the only fully-functional commercial PACE financing
program in the national capital region. We are greatly encouraged by your
leadership in advancing Montgomery County's well-structured PACE legislation, and
we look forward to working with you to ensure that your strong policy framework
helps advance a single, well-integrated clean energy retrofit market for the DMV.
In this note,
1
offer three suggestions for your consideration at this time. These
proposals are based on the experience of the
DC PACE Commercial
program, and are
intended to improve the effectiveness of your already strong legislative framework
as it operates within the market These potential modifications include:
L
Recording the PACE special assessment surcharge as an agreement in the
land record, which only converts to a formal tax lien upon delinquency;
2. Allowing for the assignment of any tax certificate established in delinquency,
at the discretion of the County, instead of requiring a formal tax auction; and
3. Allowing a higher total Loan to Value (LTV) threshold, only for those
properties that carry little or no existing senior debt.
I offer further personal reflections on each of these points, here, as a citizen of
Montgomery County and a stakeholder to this legislation. My Bethesda-based
company, Urban Ingenuity, stands ready to provide any additional assistance that
may be useful to support your important work in building an effective Montgomery
County PACE program and a strong regional PACE market.
1.
Establishing an "agreement" instead ofa "lien" in the land record:
In Washington DC, the current statute establishes PACE financing as a special
assessment through the Office of Tax and Revenue, recording an "agreement" on the
property's note within the land record, but only registering a "lien" when payment
becomes delinquent. In this way, DC PACE is similar to other tax-based assessments
and surcharges, including Tax Increment Financing (TIF), Payment In Lieu Of Taxes
(PILOT), or "Front Foot Benefits" charges for water and sewer upgrades. These
assessments are routinely collected on tax bills, with the full enforcement remedies
7735 Old Georgetown Rd. Suite 600, Bethesda, MD 20814
www.urbaningenuity.com •
0:
301-576-1107 • F: 301-280-6639
@
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of tax obligations, without immediately recording a formal lien. This becomes
relevant when a mortgage lender or seNker agrees that the PACE surcharge can
enhance property value and improve maintenance, but is prohibited from allowing
the establishment of a senior lien. The proposed modification in language, while
potentially allowing for a future lien, does not in-itself establish a lien, and can
facilitate lender consent for the PACE special assessment
Z.
Allowing assignment a/tax certificates Instead a/requiring auction:
Under normal tax sale proceedings, a tax certificate is created by the government
representing the delinquent debt obligation, and sold in a tax auction to the highest
bidder. Investors can buy delinquent debt to collect penalty interest on unpaid
taxes (Under DC law this accrues at 18% annually). In Washington DC, however, the
PACE statute was amended to allow the Chief Financial Officer to assign this
certificate to the mortgage lender, servicer, PACE bond holder, or another
appropriate party, at the discretion of the government, instead of requiring a public
auction. By assigning the tax certificate to someone who is a party to the PACE
transaction, it allows greater opportunity to bring the delinquent PACE payments
up-to-date, while allowing for a timely resolution of any outstanding concerns of
other lien-holders on the property, induding primary mortgage lenders. The
DC
PACE Commercial
program supported this amendment because it provides greater
certainty and control within the foreclosure process for consenting mortgage
lenders that the management of any delinquent PACE notes would not add
additional risk to their outstanding mortgage claims. We believe that this feature
will increase comfort with the DC PACE structure over time and facilitate lender
consent Establishing a common best practice on this point among regional
programs would further help to establish certainty, consistency, and confidence In
the PACE security for investors within the regional PACE market This amendment
to the DC Energy Efficiency Finance Act was included in the Sustainable DC Act of
2012 (See:
§
47-1336 on Energy efficiency loan foreclosure).
3.
Setting a higher LTV threshold/or properties with little
or no
debt:
The current Montgomery County PACE statute requires that the PACE assessment
not exceed 20% of the property value, and that the total debt on the property
(including the PACE assessment and any mortgage debt) not exceed 90% of the
property value. Together these provisions ensure that PACE finanCing will not over­
leverage properties. This is responsible undelWriting guidance. We strongly
support the inclusion of Loan to Value standards within the Montgomery County
PACE statute. Such traditional underwriting criteria are critical to ensuring that
PACE financing enhances property values and reduces risk for both owners and
investors within the county. Within the statute as currently written, however, I wish
URBAN INGENUITY
7735 Old Georgetown Rd. Suite 600, Bethesda, MD 20814
www.uItJaningenuity.com •
0;
301-576·1107 • F: 301-2.80-5639
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to flag one feature that could narrow the utility of the PACE product for certain
borrowers. In Washington DC, we have found that there is a class of property
owners who have little or no pre-existing debt on their property, and who do not
wish to take on new mortgage debt, but for whom PACE provides a valuable
alternative. In such a circumstance, where the PACE note represents virtually the
entire leverage on the property, the current Montgomery County Statute would have
the effect oflimiting the total
LTV
to 20%, rather than the intended cap of90%. For
such properties, an exception might be made, for example, specifying that
if
the total
debt prior to establishing a PACE assessment falls below say 45% of property value
(or a similar low benchmark number), then the cap on the total PACE assessment
could rise to represent up to 45% of the total property value (or a similar low
assessment value that is higher than 20%). Such an .accommodation would allow
larger PACE financed projects to proceed
only
in circumstances where little
Of
no
debt exists on the property, and in all cases, would ensure that total debt on the
property remained well within the intended 90% LTV cap. Our experience suggests
that this policy adjustment would be especially beneficial for non-profits and other
community-based institutions who may have more limited access to traditional
capital markets, and for whom PACE can represent a particularly attractive
financing mechanism.
Thank you for your leadership and vision in advancing this important bUL Thank
you also for your interest in the experiences of the Washington
DC PACE Commercial
financing program, and the opportunity to offer thoughts on the Montgomery
County PACE legislation. My company, Urban Ingenuity, stands ready to facilitate
your work however we can, and to promote the growth of a strong regional PACE
market in the metropolitan Washington area.
Best regards,
Bracken Hendricks
President and CEO, Urban Ingenuity
Program Administrator, DC PACE Commercial
URBAN INGENUITY
7735 Old Georgetown Rd. Suite 500, Bethesda, MD 20814
www.urbanlngenuity.com •
0:
301-576·1107 • F: 301-280-6639
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Mihill. Amanda
From:
Sent:
To:
Cc:
Subject:
Attachments:
Beach,Joseph
Monday, March
23,20159:39
AM
Berliner's Office, Council member; Gibson, Cindy; Berliner, Roger; Hagedoorn, Robert; Crow,
David; Foncannon, Scott; Mihill, Amanda
FRANKEL@pfm.com
T&E hearing on C-PACE legislation
Letter from Urban Ingenuity to Council Member Berliner.pdf; PACE lien estimate.xlsx
Dear Councilmember Berliner;
This email is in response to a question you had on one of the items in the proposed legislation for Commercial PACE (Bill
6-15), specifically whether the C-PACE loan limit of 20% ofthe assessed value of the commercial property can be set at a
higher rate (Bill 6-15 line 154). I have attached the letter from Mr. Hendricks of Urban Ingenuity who recommended in
his letter a much higher rate of 45% to allow large C-PACE initiatives to be funded through this mechanism if the existing
debt on the property is small. You asked us to revisit this issue and discuss it with our consultant to determine if the
recommended limit in the Bill should be modified.
As we noted during the hearing, we relied on the knowledge and experience of our PACE consultant who had
recommended an upper limit of20% for a C-PACE loan. Yesterday, we had an opportunity to discuss this issue again
with the consultant who reiterated that 20% is generally the upper limit of PACE programs around the country with most
of them falling somewhere between 10% and 20%. The consultant also noted that pushing the limit too high raises the
possibility of default - the same as we noted during the T&E hearing this past Wednesday.
Finance also conducted its own analysis of the impact that a PACE surcharge has on a property
tax
bill and the effect on
the tax lien sale in case of delinquency (see second attachment). As you know, one of the strengths of a PACE program is
the collection ofthe annual payment through a surcharge on a property tax bill which provides a high degree of certainty
for a lender that they will collect the annual loan payment in full. In case of a delinquency, the surcharge (together with
property taxes and related charges) will be collected through a tax lien sale that is held annually. However, while the tax
lien sale has a high degree of collection, it cannot guarantee that all tax liens will be sold. Generally, ifthe tax
de linquency as a share of assessment exceeds a certain percentage, investors are less willing to bid on that property. In
such cases, investors would have to invest considerably more money while risking that they won't recoup that
investment. For example, on average, the tax sale amount that represents a delinquent property tax bill in Montgomery
County as a share of the property assessment is only 0.9%.
Using a conservative 7% interest rate (including administrative charge backs), adding a 20% of assessment C-PACE loan
to a property
tax
bill with a 20-year loan term, jumps a property
tax
bill from an estimated 1.5% of assessment to 4%
while a 10 year loan jumps it to nearly 5% and well above the average tax lien ratio of 0.9%. While there may be reasons
for an investor to purchase a tax lien with a higher percentage anYway, raising the 20% limit to an even higher level will
further reduce the appeal of purchasing such a tax lien. For example, raising the 20% limit to the 45% recommended by
Mr. Hendricks would jump the total property
tax
bill as a share of assessment from 1.5% to almost 7% with a 20 year loan
term and over 9% with a 1O-year term. At these elevated levels (9% versus a total tax lien average of 0.9%), it is very
likely that an investor would not purchase the tax lien which means the C-PACE lender will not receive their loan
payment but it also impacts the County since we will not receive our property taxes and related charges like water quality
or solid waste to fund those operations.
For these reasons, I strongly recommend that the 20% limit in Bill 6-15 is not raised to a higher level to ensure that the C­
PACE program operates effectively and does not negatively impact the County's revenue stream. Please let me know if
you have any questions.
1
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Joseph F. Beach, Director
Department of Finance
Montgomery County Government
101 Monroe Street
Rockville, Maryland 20850
(240)777-8870 (Office)
2
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C·PACE LOAN ANALYSIS FOR TAX LIEN SALE EVENTS
Assessment
Taxes
Liability
PACE
Term
(years)
Interest
+
Charges
7%
Surcharge
(P&
I)
Tax Bill
Ratio (BIII/Value)
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
1.50%
1.50%
1.50%
1.50%
1.50%
1.50%
1.50%
1.50%
1.50%
1.50%
1.50%
1.50%
1.50%
1.50%
1.50"Ai
1.50%
1.50%
1.50%
1.50%
1.50%
1.50%
1.50%
1.50%
1.50%
1.50%
1.50%
1.50%
1.50%
1.50%
1.50%
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
10%
10%
10%
20%
20"Ai
20%
30%
30%
30%
40%
40%
40%
45%
45%
45%
50%
50%
50%
60%
60%
60%
70%
70%
70%
80%
80%
80%
90%
90%
90%
20
15
10
20
15
10
20
15
10
20
15
10
20
15
10
20
15
10
20
15
10
20
15
10
20
15
10
20
15
10
$7,000
$7,000
$7,000
$14,000
$14,000
$14,000
$21,000
$21,000
$21,000
$28,000
$28,000
$28,000
$31,500
$31,500
$31,500
$35,000
$35,000
$35,000
$42,000
$42,000
$42,000
$49,000
$49,000
$49,000
$56,000
$56,000
$56,000
$63,000
$63,000
$63,000
$12,000
$13,667
$17,000
$24,000
$27,333
$34,000
$36,000
$41,000
$51,000
$48,000
$54,667
$68,000
$54,000
$61,500
$76,500
$60,000
$68,333
$85,000
$72,000
$82,000
$102,000
$84,000
$95,667
$119,000
$96,000
$109,333
$136,000
$108,000
$123,000
$153,000
$27,000
$28,667
$32,000
$39,000
$42,333
$49,000
$51,000
$56,000
$66,000
$63,000
$69,667
$83,000
$69,000
$76,500
$91,500
$75,000
$83,333
$100,000
$87,000
$97,000
$117,000
$99,000
$110,667
$134,000
$111,000
$124,333
$151,000
$123,000
$138,000
$168,000
2.70%
2.87%
3.20%
3.90%
4.23%
4.90%
5.10%
5.60%
6.60%
6.30%
6.97%
8.30%
6.90%
7.65%
9.15%
7.50%
8.33%
10.00%
8.70%
9.70%
11.70%
9.90%
11.07%
13.40%
11.10%
12.43%
15.10%
12.30%
13.80%
16.80%
®