DATE: February 23, 2017
TO: Members of the Economic Development Authority
FROM: Chris Heineman, Community Planning & Development Director
Nate Carlson, Economic Development Coordinator
Title
Consideration of Property Assessed Clean Energy (PACE) Program
Body
SUMMARY AND ACTION REQUESTED:
Staff recommends EDA adoption of a motion to recommend City Council approval of a Joint Powers Agreement with the St. Paul Port Authority implementing the Property Assessed Clean Energy (PACE) Program in the City of Northfield.
BACKGROUND:
The PACE program implementation of this type of program would not be in lieu of any other type of financing a business could use, but would be an additional tool available.
In 2010, the Minnesota Legislature authorized cities to establish voluntary contractual assessment programs to fund energy and water conservation and renewable energy projects that improve local energy efficiency, lower business costs, and promote installation of such systems. The legislation authorized voluntary assessments to local businesses to finance the costs of these energy improvements.
As communities began to implement this program, it became known as the Property Assessed Clean Energy (PACE) program. The purpose of the PACE program is to provide financing for energy-saving improvement projects to commercial properties. When it was initially established, financing for this program had to be arranged through a third party with all costs borne by the business. This proved to be very costly and very few businesses were able to take advantage of this program.
In 2014, the St. Paul Port Authority issued bonds to provide a third party funding source for communities throughout Minnesota. MinnPACE was established as a division of the Saint Paul Port Authority and is now the largest provider of PACE financing in the State of Minnesota. Minnesota PACE financing is available statewide to commercial building owners interested in renewable energy and energy efficiency upgrades.
Minnesota PACE financing is structured so payments are rolled into a special tax assessment through either a Minnesota city or county. As of February 2017, MinnPACE has agreements in place with 31 counties and 20 cities from all corners of the state. These numbers continue to grow with an additional 20 agreements in pending status. Additional locations will be added as local projects are identified.
A link to the MinnPACE website can be found in the attachments.
How Does Minnesota PACE Financing Work?
1. The local government establishes a Joint Powers Agreement with MinnPACE.
2. Commercial building owners select projects that reduce energy costs.
3. MinnPACE provides financing directly to the building owner.
4. The local government adds the assessment to the tax rolls.
5. The building owner pays the assessment for up to 20 years.
What are the Benefits of Minnesota PACE Financing?
• Property owners are able to invest in energy efficiency and/or renewable energy upgrades with no upfront costs.
• Utility savings exceed payment obligations, making investments cash positive for property owners and tenants.
• Payments are rolled into a special tax assessment made payable twice per year as part of the building owner's property taxes; the first payment is due in May of the following year.
• The program is tax neutral with no financial exposure to cities or counties.
• The energy saving investments promote local jobs.
Rice County approved a joint powers agreement with the St. Paul Port Authority in 2016 which provides a point of access to the PACE program for all Rice County businesses. Dakota County has not approved a joint powers agreement, which excludes a portion of the City of Northfield from access to this program. By entering into an agreement with the St. Paul Port Authority, all businesses within the City of Northfield would be eligible to participate in the PACE program. This would also allow the Northfield EDA to include the PACE program as a local resource and be the primary contact for potential projects. A fact sheet is attached for further illustration of the program.
RECOMMENDATION:
Direct staff to develop a Joint Powers Agreement with the St. Paul Port Authority for City Council approval and develop marketing materials for the PACE program.