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Farmington Hills sees if Property Assessed Clean Energy works

By: David Wallace | Farmington Press | Published September 5, 2012

FARMINGTON HILLS — The City Council would like to know more about the Property Assessed Clean Energy program and whether it could work in Farmington Hills, but council members have reservations about whether such a program would turn the city into a bank.

The council talked to Wendy Barrott, the Clean Energy Coalition’s PACE program administrator, at an Aug. 13 study session. Barrott works with the city of Ann Arbor, which started a PACE program last year following state legislation passed in 2010.

PACE allows commercial property owners to fund energy improvements through a property assessment. Businesses in line to make heating and cooling improvements or add geothermal systems, insulation, etc., apply for the program. The city issues bonds to raise the capital for the projects, and then the businesses pay back the city for the improvements through the assessment, which provides a fixed interest rate and a longer term than traditional lending — often 10 years, but it could be longer.

“After you’re done, your assessment payment is going to typically be less than what you would have paid for utilities before your improvement. So right away, you wind up with an area where you’re ahead. You’re already having positive cash flow,” said Barrott.

“And in most of the projects I’ve reviewed, this is true. And then after you pay the PACE assessment, then of course all that money is in your pocket,” she said.

Proposed projects’ costs must not exceed their energy savings.

The program is voluntary. Barrott said she has seen eight applications, and so far, one is approved for $86,000, while the others are in various stages of review. The applications in all total about $930,000, she said.

She said that if Farmington Hills wanted to start a PACE program, the city would need to define its goals and do a feasibility study.

The city would also look into whether it would have its own program or partner with other governments.

“This might be one other way we can help businesses and attract business investment in our community,” said Farmington Hills management assistant Nate Geinzer, who leads much of the city’s energy-efficiency and environmental efforts.

“PACE is relatively new, and in Michigan, it’s really new. I mean, we only have one municipal PACE program in the state right now,” said Geinzer, referring to the Ann Arbor program.

Council members could see some benefits to the program, but they also had financial concerns.

“I think that it can help, be an additional tool, like was mentioned, regarding revitalization or economic development, so I like the program. I’m concerned about seed money,” said Councilman Michael Bridges.

“What I don’t understand is why we would want to put the city into the position of becoming the bank, finding the notes, administering this cost, and then you’re also at the same time taking interest rates out of private industries,” said Councilman Kenneth Massey.

“I like the idea of this program, but to me, the more I hear people talk, the more I think about this myself, this almost seems like this should be a program on the state or federal level, where monies are made available from that size of government,” said Councilman Randy Bruce.

Mayor Barry Brickner wanted to find out if the city’s money would be secure in a PACE program.

“If it’s a way that we can make more money with money that we just have in reserves anyway and that we’re not planning on using, with no downside of losing that money, then that might be a reason that we do it. And then we can promote energy efficiency, lower people’s rates, and they can have more money to invest in other things,” Brickner said.

“If we have the money, it’s one thing, but if we have to go bonding, that’s another,” said Brickner.

He added a caution that PACE might not be the economic development tool in Farmington Hills that some would hope.

“Most people coming in are renters, not owners, and so the PACE grant doesn’t necessarily fit within their model, because the landlord’s going to put the money out — not necessarily the tenant,” said Brickner.

The council concluded that it would like more facts and figures, and an answer to whether the program can be conducted without bonding.