Energy Plan Still on For 13

A bill that would have paved the way for a new financing option to make homes and businesses more energy efficient narrowly missed passage by the Arkansas Legislature in 2011.

But proponents of the program that’s already been adopted by 27 states have high hopes that Arkansas will join that list in 2013.

According to the website pacenow.org, PACE, which stands for Property Assessed Clean Energy, operates at the local government level, allowing property owners to finance energy efficiency and renewable energy improvements using loans funded by the sale of low-interest bonds.

The money is paid back over time, typically 20 years, as an additional amount collected with taxes on the property, although PACE is not a tax.

Northwest Arkansas supporters of the program say it would create jobs and free up money that could be injected back into the local economy.

Orlo Stitt, owner of Stitt Energy Systems Inc. in Rogers, said PACE would help out folks who’ve put off making energy-saving upgrades because they can’t get bank financing.

“I think it’s one of those things that you just can’t find any real reason to be against it,” said Stitt, whose company designs and builds energy-efficient homes and also does retrofits and remodels.

“It doesn’t require additional government spending, it has bipartisan support, it provides [for] retrofitting of existing homes, and these homes end up to be better homes.”

The resulting savings on utility bills would offset the amount collected with the property tax, he pointed out, so there’s no added expense for property owners.

State Rep. Uvalde Lindsey, D-Fayetteville, worked in the last legislative session to garner support for the PACE-enabling bill known as SB 516, which he said could be considered an economic job creation bill.

“Putting folks back to work in this economy is something we’ve got to work on,” he said, “and especially in the construction industry, which has been so hard hit.”

Further, he said, “Once you make those kinds of changes to your property, the benefits are long term. And the more people who do it, the more impact we’ll see on our economic well-being.”

 

The Case for PACE

John Coleman served as Fayetteville’s sustainability director until he started work last month as director of the Northwest Arkansas office of Little Rock-based Viridian Sustainable Building Consulting.

“In Fayetteville, residents and businesses spend about $50 million a year on utilities,” Coleman said. “Right now, that money is going to the energy companies.”

Implementing PACE “would be shifting those expenditures to the local economy and free up that money, without relying on federal dollars,” he said.

Even at a savings of 10 percent on gas and electric bills, he said, that’s still $5 million that would stay in Northwest Arkansas’ economy.

“There’s a real opportunity there to lower utility costs and create jobs locally,” Coleman said.

PACE “really is win-win-win, because there’s no mandatory anything,” he said. “Residents can opt in. The structure is already in place, so no surprises there. Financing is set up at a low interest rate. It funds local contractors to come in and perform those jobs. And [property owners] get their energy savings on the back end.”

Mikel Lolley, as the founder of the Treadwell Institute in Fayetteville, does energy efficiency surveys on existing buildings. The institute advocates for policy change and legislation enabling “green” economic development.

“When you’re not losing money by a ‘leaky’ building in energy loss, you plug the ‘leaks’ to your wallet,” he said. “Then you get to spend that money in your local economies. That’s economic development.”

Just how much money are property owners likely to save by plugging those energy leaks?

Pacenow.org states that basic energy efficiency measures, at an average cost of $10,000, can cut annual energy spending by up to 35 percent. That would typically exceed the cost of the PACE assessments, resulting in improved cash flow for owners.

And Lolley points out that in addition to the direct construction-related jobs that would be created, about three times as many will be created indirectly.

These indirect jobs would likely include retail, restaurant and other service-sector positions.

Coleman, who testified on behalf of PACE in the last legislative session, said he’s been involved in discussions with the Task Force on Sustainable Building Design and Practices of the Arkansas General Assembly about how the program might be structured in Arkansas.

Possibilities include creating a statewide district or more local districts that involve one or more counties, he said.

SB 516 stated that the districts would give private lending institutions a chance to participate in local loan programs that would put money for the retrofits into the hands of property owners.

Some matters, such as interest rates and whether or not loan applicants could choose their own contractor, aren’t addressed in the bill.

“The issue for us is really to get the enabling legislation in place,” he said. “Once that’s done, you get into the technicalities of how it will be set up.”

 

Legislative Efforts

SB 516, also known as the Property Assessed Clean Energy Act, was introduced in 2011 by state Sen. David Johnson, D-Little Rock.

The actual title of the bill is: “An act to grant the authority for the establishment of energy improvement districts to fund loans for energy efficiency improvements and clean renewable energy projects on residential, commercial, industrial and other properties at the request of the owner and to be repaid through inclusion with the real property tax assessment; and for other purposes.”

The bill “sailed through the Senate, and had bipartisan support,” Lolley said.

State Rep. Greg Leding, a Fayetteville Democrat who represents District 92, sponsored the bill in the House. But after passing the Insurance and Commerce Committee, it failed in the House by only a few votes.

That was largely because it was introduced late in the session, Lolley said, and it’s a complex issue that lawmakers needed time to read and understand. Many of them were learning about it for the first time, he said.

An objection that proponents ran into last year when talking with legislators, Lolley said, was “a perception that PACE is an unfunded mandate, and that’s absolutely false.”

Participation in the program is purely voluntary at every level, he stressed, from state and local government down to the individual property owner.

The biggest opposition to PACE has come from the federal agency created to regulate mortgage lenders Fannie Mae and Freddie Mac. The Federal Housing Financing Agency issued a statement in July 2010 that prohibits those entities from buying home mortgages with PACE assessments.

While federal legislation like the PACE Protection Act is in the works to overcome this barrier, Lolley said there are still plenty of qualified borrowers who wouldn’t be affected by the FHFA’s stance.

And Coleman points out that the Fannie/Freddie issue wouldn’t be a problem for commercial properties.

Lolley said he’ll be traveling the state this year to speak to various groups about PACE and clear up any misconceptions they may have about it.

Lindsey thinks a PACE-enabling bill will have a better chance of getting passed in 2013, especially with backing from Gov. Beebe.

“I know the governor is very supportive of an innovative new energy plan,” he said. “I’m confident that he will support PACE and will include it in his energy plan.”

Plus, Lindsey added, “Anything we can do to wean ourselves from fossil fuels is a good thing.

“It’s better for the environment, and it reduces our dependency on buying oil from folks who may not like us a whole lot.”