Published in Economic Development

PACE slowly builds momentum in Kent County; Financing tool helps fund cost of renewables, energy efficiency projects

BY Sunday, February 21, 2016 09:04pm

GRAND RAPIDS — Advocates in West Michigan have spent nearly two years pitching Property Assessed Clean Energy financing to Kent County officials as one more tool in the Grand Rapids region’s economic development toolbox.

However, county officials say they are still gauging whether there is enough interest among property owners to use the financing mechanism that helps pay for clean energy or energy efficiency projects. 

As Kent County continues to study whether PACE financing works for the region, others in the state have adopted the policy, allowing property owners to make sometimes costly energy efficiency improvements while still generating positive cash flow.

The West Michigan Environmental Action Council is leading the effort to convince Kent County to adopt PACE financing. Nicholas Occhipinti, WMEAC’s director of policy and community activism, said the program was first introduced to county officials in June 2014. 

“We are still demonstrating the need and demand for the tool and finding what impact there would be on county resources, administration and any additional burdens on the county treasurer,” Occhipinti said. “I have the impression that it’s something that could be worked through. I haven’t sensed any strong opposition in town.”

The Kent County Board of Commissioners would ultimately need to vote to establish a PACE district. Supporters say PACE financing can be an alternative to traditional bank loans. PACE districts allow property owners to eliminate the need for upfront capital, spreading the costs across upwards of 20 years. 

The savings generated from the projects are used to pay down the loan payment over time and projects are cash-flow positive from the start, Occhipinti said. Property owners take on special assessments, which are paid off as part of the annual property tax bill and are transferred if the property changes ownership.

Occhipinti says his organization has been working with Kent County and economic developers at The Right Place Inc. to promote the program’s benefits, as well as bringing it to the attention of contractors and developers.

Twenty six units of government in Michigan — including townships and counties — have voted to establish PACE districts, according to Lean & Green Michigan, an organization that helps facilitate clean energy and efficiency projects.

“This is one of those classic win-wins if done right,” Occhipinti said. “It allows for cleaner, more efficient energy use and creates an economic development tool that will decrease utility costs for new and retrofit projects. While it’s not a solve-all, it’s absolutely a powerful niche tool that can help deals get done that may not have gotten done. It’s one more economic development tool to attract companies.”

More due diligence

Still, Kent County officials say they continue taking time to do “due diligence” on whether it would be a good fit for local units of government or the county and what resources it would take to administer the program.

“I had some questions about what the economic benefit is,” said Mary Swanson, Kent County’s  assistant administrator. She said the county also has concerns about whether it’s working in other regions, what kind of resources would be needed to oversee the program and where there is demand to do such projects in Kent County.

“We continue to look at it,” Swanson said. “Right now, we haven’t had a lot of business owners coming forward saying, ‘I want to use this.’ Until we start to see demand for it, we’re hesitant to just recommend it at this point.”

However, advocates say this approach creates a chicken-or-the-egg scenario: There may be a lack of demand coming forward because units of government haven’t promoted the benefits.

Swanson countered: “There’s a lot of people advocating for it statewide, working with companies who are expanding and doing energy improvements. They certainly know it’s there.”

Swanson said there are no current plans to put a proposal before county commissioners. 

“But I have an open mind,” she said.

Interest growing

A first-of-its-kind project in Montcalm County calls for hundreds of thousands of dollars in upgrades to the boiler system, LED lighting, water fixtures, Energy Star appliances and a small solar generating system at an apartment complex in Greenville. It is the first project to have PACE financing approved under a U.S. Department of Agriculture loan program for affordable housing.

Such efficiency improvements can be particularly difficult for rental properties, as there is little incentive for property owners to make the upgrades because they don’t pay bills and tenants have little incentive to make improvements on property they don’t own.

In January, an Oakland County-based beer distribution company refinanced an earlier solar energy project under the county’s PACE program. It was the county’s first PACE program and the first in the state to refinance an earlier project.

The Michigan Public Service Commission has also “led by example,” agency officials have said, by using PACE financing to make efficiency retrofits at the building the agency rents in Lansing.

The city of Grand Rapids recently announced a “2030 district” that commits downtown property owners to reduce buildings’ energy and water use, although it’s a voluntary program.

“It’s spreading — there is a lot of interest,” said Occhipinti, noting WMEAC’s role begins with an “education process” for public officials. “We have a long list of businesses, NGOs and an assortment of groups interested in moving forward, but we’re more interested in actual project concepts.” 

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