Commercial PACE in Edina, Minnesota
Commercial PACE was new to Edina, a community of roughly 48 thousand, but just a handful of people worked creatively to put a low-cost PACE program in place. “All of it was new,” said Rick Murphy, general manager of Grandview Tire & Auto – the first business in Minnesota to take advantage of PACE financing to pay for a solar installation. The “Edina model” demonstrates how local businesses and property owners can be a driving force in developing PACE programs at very low cost.
It all started when Bradley Hanson, a local solar installer, approached Murphy with a plan to sell solar panels. Grandview had solicited several bids from other installers, but the cost of panels and installation seemed too high using conventional financing. Once Hanson explained the basics of the PACE model (a 10-year term that would be repaid as a property tax like assessment), Murphy saw that the energy savings were significant and, most importantly, that a PACE financing required no down payment and he was sold.
The next step was getting the City of Edina to put simple steps in place to implement a PACE program. As Hanson points out, it was fairly easy to convince Scott Neal, Edina’s City Manager to implement a PACE program. Creating mechanisms for imposing assessments and remitting them to PACE project funders was simplified by modifying template documents from Sonoma County’s PACE program. PACE made sense and, moreover, it is in line with the Green Step Cities program adopted statewide in Minnesota. Neal notes that setting up a PACE program was both interesting and challenging because cities in Minnesota don’t have much experience financing improvements to private property using public assessments.
Minnesota passed PACE enabling legislation in April 2010. Edina’s effort to put a program in place was also supported by the City’s Energy Commission, the Minnesota Pollution Control Agency, the Minnesota Solar Energy Industries Association, and the Minnesota Department of Commerce. The total cost of implementing the program was just $11,400. Today Edina’s Emerald Energy Program can fund any qualifying commercial or industrial property in the City. In order to participate, the project cost must exceed $2,500, the property must undergo an energy audit or an evaluation, and the property owner must be current on all property taxes. The application period takes less than 15 business days.
PACE projects are funded by private market capital investors. From a conversation with the VoteSolar Initiative, a national non-profit advocate for solar energy, Hanson learned about Clean Fund, a California based investor in PACE project assessments, which was interested in funding Grandview’s project for a number of reasons. The size of the transaction wasn’t the main draw; Clean Fund had just completed a $1.6 million PACE financing of solar panels for an office complex in Sonoma County. Clean Fund noted that it was the concept that they were interested in supporting: a low cost implementation of a PACE program driven by a business transaction. Minnesota’s PACE statute limits the term for financing to just 10 years (20 year amortization is commonly available in other states for solar panel installations). Grandview’s project was funded at 7%. With help from a skilled municipal finance lawyer, Stephanie Galey at Faegre Baker Daniels in Minneapolis, Edina’s Special Energy Finance District issued a $34,000 PACE bond secured by the property tax assessment. Grandview’s existing mortgage lender approved the project quickly, and noted that the PACE assessment saved money, reserved capital, and created good public relations as well.
Check out this video of solar panels being installed on Grandview’s roof:
The Edina model for PACE demonstrates how private demand for energy improvements, coupled with public resources, produces inspiring results.
“The launch of this commercial PACE program in America’s heartland is a big milestone for clean energy finance,” says John Kinney, CEO of Clean Fund. “The example of a small city in Minnesota creating a quality program with minimal expense should inspire other cities and counties looking to promote local clean energy job creation.”
In fact, it did. Eden Prairie, MN and Northfield, MN added PACE to their city council agendas for this summer. Moreover, Edina Emerald Energy Program received a prestigious Minnesota Environmental Initiatives Award in 2012.
“PACE preserves capital, makes good financial sense for property owners due to the fact that the assessment stays with the property. Most importantly, it is the right thing to do,” Hanson concludes.
How to get in touch
If you’d like to learn more about Edina Emerald Energy Program or participate in the program, please contact the City of Edina at www.edinacityenergy.org.
If you’d like to know more about how the program was set up, please talk to Bradley Hanson, who was instrumental in setting the program. Bradley’s email address is email@example.com.
For more information about CleanFund, visit www.cleanfund.com or contact Derek Brown, Managing Director, firstname.lastname@example.org, (415) 256-8000 x102. Clean Fund uses the PACE structure to offer financing terms that make long payback energy improvements economically compelling.
If you are interested in the legal side of the story, please get in touch with Stephanie Galey at Faegre Baker Daniels http://www.faegrebd.com/stefanie-galey.