Utah, Arkansas Pass Commercial PACE Laws

By Kevin Emerson, MSc
Sr. Policy Associate, Utah Clean Energy

Walking the halls of the Utah State Capitol during the Legislative Session, it is clear that Utah policymakers have embraced modern technologies. From smart phones and tablets, to tweets and blogs, Utah policymakers understand the importance of staying up-to-date in the 21st century.  In the case of clean energy policies considered during Utah’s 2013 Legislative Session, their votes are starting to reflect that same understanding. This year, Utah joined nearly 30 states in adopting a policy that enables Commercial PACE financing in the Beehive State.

Utah’s commercial buildings currently consume one-fifth of Utah’s total energy and close to 40% of Utah’s electricity, the majority of which is generated by burning coal. Enabling Commercial Property Assessed Clean Energy (C-PACE) financing provides Utah businesses with a needed financing mechanism to cut energy costs through energy efficiency retrofits and on-site renewable energy. Despite the interest in renewable energy and energy efficiency projects among Utah businesses, a major barrier for many commercial property owners is the upfront costs and difficulty accessing low-cost, long-term financing for such projects. C-PACE overcomes this obstacle and makes it easy for building owners to transfer repayment obligations to a new owner upon sale.

PACE HISTORY IN UTAH
In 2010, Utah Clean Energy worked with interested parties to develop legislation (Senate Bill 194) that would have enabled PACE financing for both residential and commercial properties. While the bill received strong support from local government and industry, concern from the Utah Bankers Association about subordination of residential mortgages and opposition to PACE on the national level from Federal Housing Financing Agency prevented SB194 from moving forward.

Beginning mid-year 2012, Utah Clean Energy began working closely with interested local governments, property owners, to bring the commercial component of the bill back to life. In mid-February 2013, Senate Bill (SB) 221, Assessment Area Act Amendments, sponsored by Senator Kevin Van Tassel, was introduced to the Utah Legislature. This enabling legislation allows municipalities in Utah to offer C-PACE financing to commercial building owners in Utah.

HOW’D WE GET HERE?
Utah Clean Energy played a major role in developing and securing passage of SB 221. Central to our success in 2013 was the fact that SB 221 is limited to non-residential properties and language was added that requires lenders to provide consent before an existing mortgage can be subordinated by the C-PACE assessment. In addition to these critical changes addressing concerns from the 2010 legislation, we worked strategically to involve key stakeholders and built support among industry and decision-makers. Our success can be attributed to the following strategic efforts leading up to the bill’s passage:

• Hosting a webinar (in partnership with PACENow) to educate parties interested in C-PACE in Utah. The webinar introduced participants to C-PACE concept, along with proposed legislative language that addressed previous concerns.
• Meeting regularly with the Utah Bankers Association, Zions Bank Public Finance, and individual lenders to understand and address their previous concerns. We kept bankers and lenders involved throughout the process to make sure their interests were represented.
• Coordinating with PACENow throughout the process, tapping into their PACE expertise and available resources. PACENow generously hosted an on-line petition, which we circulated during the session to demonstrate the broad support for the legislation.
• Meeting with Utah utilities to make them aware of the legislation and ensure they were comfortable with the language; ultimately, none of Utah’s utilities had issue with the bill, and some of the municipal utilities expressed support for the concept.
• Requesting industry feedback on draft legislation ahead of the legislative session and incorporating necessary changes into the draft bill language. We requested feedback from local governments, local businesses and business associations, and commercial real estate groups; this process was critical to garner broad support.
• Recruiting a coalition of supporters, including members of Utah Clean Energy’sClean Energy Business Coalition, Salt Lake County, Salt Lake City, BOMA Utah, Utah League of Cities and Towns, Utah Association of Counties, Utah Association of Energy Users, and the Vest Pocket Business Coalition, a coalition of small businesses in Utah.
• In partnership with our allies, reaching out to respected legislative sponsors knowledgeable about financing and commercial real estate.Developing simplified factsheets and letters of support to share with lawmakers to help them understand the benefits of this legislation.

SUCCESS AND NEXT STEPS
Senate Bill 221 passed with near unanimity and was signed by Governor Gary Herbert. In the coming months, Utah Clean Energy will continue working with the coalition of supporters, local municipalities, local businesses, lenders, and commercial real estate groups to help interested jurisdictions develop C-PACE program guidelines and launch C-PACE programs in Utah.

By enacting this modern energy policy and enabling the clean energy market, Utah policymakers have given Utah’s cities and counties, lenders, and commercial property owners a state-of-the-art financing tool to reduce energy waste and drive renewable energy, thereby addressing the energy challenges of today and tomorrow.

Extra!

The Arkansas legislature passed its own PACE act on April 8.