PROPERTY  ASSESSED  CLEAN  ENERGY  PROGRAMS  

(AB  811)  
 

OPPORTUNITY OVERVIEW
June, 2010
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Contents  
 
INTRODUCTION...........................................................................................................................3  

Benefits to Municipalities and Local Governments: ..............................................................4  

Benefits to Property Owner: ....................................................................................................4  

Benefits to All Stakeholders: ....................................................................................................5  

THE PROGRAM ............................................................................................................................5  

FINANCING CONSIDERATIONS ...............................................................................................9  

PROGRAM ORGANIZATION CHART .....................................................................................10  

CONCLUSION .............................................................................................................................11  

CONTACT INFORMATION .......................................................................................................11  

PROGRAM CONCEPTS..............................................................................................................12  
 

   
   
 
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INTRODUCTION  
 
In  July  2008,  California  ushered  into  effect  a  new  era  of  opportunity  for  clean  and  renewable  
energy  financing  with  the  passage  of  Assembly  Bill  811  (“AB  811”).    This  legislation  allows  cities  
and  counties  to  create  a  taxing  authority,  within  their  boundaries,  in  order  to  provide  funding  
to  private  property  owners  for  specific  energy  efficiency  and/or  renewable  energy  
improvements  to  their  private  property.    AB  474  expanded  this  authority  in  2009  to  provide  
eligibility  for  water  efficiency  projects  as  well.    Funding  to  private  parties  is  repaid  through  a  
contractual  assessment  on  the  improved  property.  The  AB  811  bill  summary  reads  as  follows:  
 
“AB  811  would  authorize  all  cities  and  counties  in  California  to  designate  areas  within  which  
willing  property  owners  could  enter  into  contractual  assessments  to  finance  the  installation  of  
distributed  renewable  generation,  as  well  as  energy  efficiency  improvements,  that  are  
permanently  fixed  to  the  property  owner's  residential,  commercial,  industrial,  or  other  real  
property.  These  financing  arrangements  would  allow  property  owners  to  finance  renewable  
generation  and  energy  efficiency  improvements  through  low-­‐interest  loans  that  would  be  
repaid  as  an  item  on  the  property  owner's  property  tax  bill.  The  contractual  assessments  could  
not  be  used  to  finance  the  purchase  or  installation  of  appliances  that  are  not  permanently  fixed  
to  the  real  property.”  (California  Public  Utilities  Commission  Published  Reports  2008)  
 
To  date,  at  least  twenty  other  states  have  passed  similar  legislation,  with  several  more  under  
negotiation.    Nationally,  this  type  of  financing  has  commonly  become  known  as  PACE,  Property  
Assessed  Clean  Energy.  (www.pacenow.org)      
 
These  programs  allow  local  municipalities  to  encourage  property  improvements  that  provide  
energy  saving  technologies  and  features.    Funding  is  provided  to  property  owners  for  approved  
technologies  and  authorizes  contractual  assessment  lien  placement  on  the  improved  property;  
the  assessment  lien  remains  an  obligation  associated  with  the  property  upon  transfer.    This  
structure  overcomes  the  two  greatest  deterrents  to  private  property  owners’  completion  of  
energy-­‐related  improvements  by  offering:  
 
• Minimal  up-­‐front  costs  
• Repayment  obligation  stays  with  the  property  upon  sale  or  transfer  from  
current  owner  
 
Local  municipalities  are  given  the  right  to  provide  funds  directly  to  owners,  charge  interest  and  
fees,  and  collect  the  repayment  via  semi-­‐annual  property  taxes  (as  regularly  scheduled.)    
 

   
   
 
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Benefits  to  Municipalities  and  Local  Governments:  

 
1. INCREASED  REVENUES  TO  MUNICIPALITY  from  application  fees,  
permit  fees,  product  sales  taxes,  business  license  fees  and  interest  
participation.  
2. Private  capital  funding  source  removes  municipal  obligation.  
3. Readymade  vehicle  to  fund  and  expedite  “shovel  ready”  projects.  
4. Provides  economic  benefit  to  everyone  in  the  chain.  
5. Low  cost  of  funding  made  available  at  a  time  of  economic  duress.  
6. Job  Creation  –  participating  regions  experience  an  increase  in  well  paying  “Green  Collar”  
jobs  that  number  in  the  thousands.  
7. Potential  to  locally  staff  administration  and  application  processing  in  each  participating  
municipality.  
8. Qualified  local  contractors  will  be  retained  to  perform  all  elements  of  labor  and  
installation  of  funded  systems.  
9. Resultant  installed  technologies  will  reduce  consumption  of  energy  resources,  relieve  
stress  and  load  on  aging  local  utilities’  infrastructure  and  forestall  diversion  of  municipal  
capital  to  fund  immediate  expansion  of  the  energy  grid.  (In  Palm  Desert  alone,  AB-­‐811  
improvements  “have  helped  the  city  reach  about  one-­‐third  of  its  five-­‐year  goal  for  
energy  reductions,  pulling  close  to  67.5  million  kilowatt  hours  of  power  off  the  grid.”  
Kauffman  2009)  
10. A  direct  and  measurable  reduction  of  the  region’s  Carbon  Footprint  is  seen  almost  
immediately  as  a  result  the  new  “green”  energy  sources  and  their  associated  savings  in  
energy  use  come  online.  
11. LEED  (Leadership  in  Energy  and  Environmental  Design)  Accredited  Professionals  will  
promote  and  conduct  “owner  focused”  education  seminars  to  detail  the  benefits  of  
energy  saving,  self  sustaining  and  renewable  projects,  and  the  financing  options  
available  to  property  owners.  Additional  education  and  training  will  also  be  offered  to  
participating  municipalities,  interested  stakeholders  and  the  labor  pool.    This  training  
will  include  classes  on  green  education,  and  a  comprehensive  “blue  to  green  collar”  
training  program  designed  to  facilitate  the  retraining  of  the  area  labor  force  from    
traditional  employment  in  non-­‐green  jobs  to  positions  in  the  sustainable  construction  
and  maintenance  field.  
 
Benefits  to  Property  Owner:  
 
1. Readily  available  source  of  capital  to  purchase  and  install  energy  
saving  technologies.  
2. Relative  ease  of  funding  approval.  

   
   
 
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3. Owner/occupant  will  enjoy  a  lower  cost  of  operating  expenses,  avoid  market  driven  
spikes  in  energy  costs  and  an  increase  in  the  quality  of  inside  air  (dependent  upon  
improvements  installed).  .  .  resulting  in  an  overall  increase  in  occupant  satisfaction  and  
property  value.  
4. As  a  major  U.S.  corporation  has  discovered  in  the  implementation  of  their  connected  
workplace  initiative,  in  addition  to  the  cost  savings  and  expense  smoothing  benefits  of  
“green”  energy,  occupants/workers  in  integrated  commercial  green  “project  buildings”  
see  a  measurable  “increase  in  productivity,  collaboration  and  employee  satisfaction  
while  reducing  real  estate  and  technology  costs”.  (Cisco  Systems,  Inc.,  “Cisco  on  Cisco  
2009  “)  
 
Benefits  to  All  Stakeholders:    
 
Triple  Bottom  Line:  
Environmental  Responsibility  
Social  Equity  
Economic  Benefit  
   
All  will  benefit  from  the  increased  quality,  reduced  consumption,  and  net  savings  enjoyed  from  
new  environmentally  friendly  sources  of  energy  and  other  installed  green  technologies.    

THE  PROGRAM  
 
Our  team  will  design,  launch,  fund,  manage,  and  administer  the  Program.    In  order  to  fund  the  
payments  to  property  owners,  we  will  utilize  funds  from  our  capital  partners,  professional  
managers,  or  capital  markets.      

Four  key  aspects  to  ensure  the  ongoing  use  and  relevance  of  the  Program  are:    Structure,  
Scheduling,  Accountability  and  Scalability.    
 
Structure of  the  Program  ensures  that  projects,  procedures,  standards  and  guidelines  are  
documented  and  consistent  for  all  participants.    A  well-­‐structured  Program  also  enjoys  greater  
market  acceptance  and  will  result  in  attractive  financing  options.      
 
Scheduling provides  financing  team  members  and  participating  stakeholders  with  timelines  for  
key  tasks  related  to  program  development,  implementation,  funding,  and  ongoing  
administration.    
 

   
   
 
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Accountability  holds  financing  team  members,  property  owners,  contractors,  vendors,  and  city  
staff  responsible  for  completion  of  specific  items  on  the  schedule.  Similarly,  tracking  of  
appropriate  property  improvements  provides  ongoing  information  to  investors  that  require  
security  assurance  related  to  providing  capital.  
 
Scalability  provides  for  the  ability  to  duplicate  processes  and  procedures  across  increasing  
numbers  of  participants  over  time.    A  properly  designed  program  can  be  replicated  in  other  
jurisdictions  and  provides  flexibility  to  incorporate  additional  financing  sources,  technologies,  
and  projects  as  the  Program  evolves.  
 
As  Program  Manager,  we  will  become  both  the  administrator  and  a  wholesale  supplier  of  
capital  to  California  municipalities.    Through  our  funding  sources  and  team  of  LEED  AP’s  
(Leadership  in  Energy  and  Environmental  Design  Accredited  Professionals),  we  will  be  the  first  
competitor  in  this  market  to  provide  turnkey  solutions  to  municipalities  that  includes  all  aspects  
of  design,  education  and  immediate  access  to  capital.    Others  programs  have  been  launched  
with  the  promise  of  raising  money  through  municipal  bond  placements  or  securing  a  line  of  
credit.    With  the  exception  of  the  locally  funded  Programs  (Sonoma  County,  Palm  Desert,  
Yucaipa)  these  Programs,  to  date,  have  resulted  largely  in  a  feast  or  famine  situations  –  that  is,  
when  there  are  funds  available  there  is  a  rush  of  projects  seeking  funding  and  then  when  those  
funds  are  all  committed,  there  is  a  famine  again  with  projects  waiting  for  the  next  capital  
infusion.  
 
Our  solution  will  provide  ongoing  funding  to  assure  qualified  projects  continue  to  receive  
funding  regardless  of  timing  of  submission.  Similarly,  additional  municipalities  will  be  able  to  
join  existing  Programs  or  start  new  ones  based  on  the  same  availability  of  funding  and  
management.    
 
Please  see  the  following  diagram  for  an  illustration  of  the  interaction  between  participants  
related  to  funding  property  improvements  through  our  Program.  

   
   
 
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As  Program  Manager,  PACE  America  is  responsible  for  all  interaction  with  the  municipality  for  
implementation,  administration  and  funding  of  the  Program.    These  Program  functions  include:  
• Program  design  and  launch  
-­‐  documentation  of  eligible  projects  and  allowable  financing  terms  
-­‐  minimum  and  maximum  funding  amounts  
-­‐  application  processing  procedures  
-­‐  Program  Handbook  
-­‐  County/City  responsibilities  defined  
• Legal  documentation  assistance  to  assure  prompt  validation  action  for  funding  
• County  /City  staff  and  supervisors  /  council  liaison  
• Support  for  any  required  election  proceedings  
• Marketing  program  design  &  support  

   
   
 
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• Education  program  design  &  support  

• Funding  application  documentation    
• Underwriting  standards  and  procedure  establishment  
• Online  processing  and  tracking  
• Assist  underwriter  and  counsel  in  preparation  of  preliminary  official  statement  /  
placement  memorandum  
• Prepare  presentations  to  rating  agencies  and/or  credit  enhancement  providers  
• Provide  ongoing  administrative  support  to  initiate  subsequent  rounds  of  financing    
• Ensure  proper  reporting  of  tax  liens  
• Identification  and  definition  of  eligible  projects  
• Establishment  of  procedures  to  ensure  best  practices  
• Establishment  of  contractor  verification  procedures  
• Preliminary  auditing  and  post  installation  commissioning  for  projects  
• Education  and  outreach  to  contractor  and  vendor  constituents  in  Program  area  
• Secure  funding  for  immediate  disbursement  upon  project  verification  
• Privately  place  or  publicly  offer  aggregated  assessments  to  long-­‐term  investors  
 
In  the  event  a  public  bond  sale  in  the  capital  markets  is  desired,  we  will  work  with  a  recognized  
municipal  bond  firm,  as  underwriter.      The  underwriter  would  be  responsible  for  bond  
underwriting  services  related  to  financing.      If  needed,  these  services  may  include:  
 
• Evaluate  most  cost-­‐effective  debt  model  
• Works  with  financing  team  to  evaluate  credit  enhancement  and  ratings  strategy  
• Prepare  presentations  to  rating  agencies  and/or  credit  enhancement  providers  
• Assist  counsel  in  preparation  of  preliminary  official  statement  /  placement  
memorandum  
• Pre-­‐market  the  bonds  to  potential  investors  
• Sell  bonds  to  fund  property-­‐owner  assessments  
• Provide  post  sale  analysis  and  support  
• Make  a  market  in  the  bonds  
• Issue  refunding  debt  when  appropriate  to  maintain  balance  of  investor  capacity  

In   order   to   effectively   structure   and   document   the   program,   additional   financing   team  
members   would   be   selected.   We   will   work   with   the   individual   municipalities   to   make   certain  
that  our  selections  are  aligned  with  preferences  of  the  municipalities.  We  would  anticipate,  at  a  
minimum,  engagement  of  the  following  professionals  (along  with  their  respective  roles):  

   
   
 
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• Program  Counsel1     Prepare  Program  implementation  documents,  funding  

applications,  project  description  standards,  guidelines  and  
performance  measures  
• Bond  Counsel1     Prepare  bond  documents  and  file  validation  documents  
• Disclosure  Counsel1   Prepare  preliminary  official  statement  and  provide  financing  
team  with  legal  advice  regarding  disclosure  and  compliance  
issues    
• JPA  Counsel1     Prepare  Joint  Powers  Authority  documents  and  define  process  
for  inclusion  of  multiple  participating  cities    
• Trustee     Disburse  payments  for  funding  and  debt  service  
1
Legal counsel duties will be critical to the overall success of the Program. It is conceivable that these
duties could be performed by one or more firms acting in different capacities.

FINANCING  CONSIDERATIONS  
 
Our  team  is  prepared  to  implement  a  completely  turnkey  program  for  cities  and  counties.    The  
Program,  as  we  envision  it,  will  consist  of  one  or  more  contractual  assessment  program  
jurisdictions.    Property  owners  within  the  jurisdictions  will  be  able  to  finance  energy  and  water  
efficiency  improvements,  based  upon  completed  energy  audits,  with  funding  that  will  be  repaid  
over  the  course  of  up  to  twenty  (20)  years  through  contractual  assessments  on  their  property  
tax  bills.    In  order  to  qualify  for  funding  the  property-­‐owner  will  have  a  preliminary  energy  audit  
to  identify  appropriate  improvements  and  their  relative  benefits;  thus,  providing  opportunities  
to  encourage  deeper  whole-­‐house  energy  projects.    These  audits  will  be  provided  at  a  nominal  
fee  to  assure  property  owner  commitment.    Audit  fees  will  be  reimbursable  through  project  
financing  if  desired  by  the  property  owner.  
 
Funding  will  be  provided  through  the  most  cost  effective  of  the  following:    (i)  funded  directly  at  
the  time  of  project  completion  through  issuance  of  mini  bonds  by  the  City  (or  other  municipal  
entity)  that  will  receive  funding  from  a  direct  lending  facility  or  private  fund,  or,  (ii)  public  bond  
sale  to  fund  the  purchase  of  aggregated  mini-­‐bonds  based  upon  approved  assessment  projects.    
The  contractual  assessments  paid  by  the  property  owners  will  service  the  debt  on  the  bonds,  
fund  a  reserve  account,  and  cover  annual  administration  costs  of  the  Program.  No  municipal  
credit  support  or  debt  service  obligation  will  be  required.  
 
While  the  actual  financing  could  take  different  forms,  we  envision  utilizing  the  following  
methods  for  pooling  the  assessments.    At  the  Program  level,  likely  through  a  Joint  Powers  
Authority,  a  “warehousing”  bank,  revolving  fund,  or  private  equity  fund  would  provide  funding  
immediately  upon  approved  project  completion  to  contractors.      Upon  reaching  targeted  
aggregate  amounts,  the  entire  pool  of  assessments  will  be  sold  either  through  public  sale  or  
private  placement  as  taxable  bonds  secured  by  the  contractual  assessment  obligations.  

   
   
 
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As  a  result  of  the  continued  economic  downturn,  most  of  the  cities  and  counties  are  without  
excess  capital  for  such  programs.  These  municipalities  should  welcome  a  ready  source  of  capital  
that  promotes  economic  prosperity  and  energy  efficiency  within  their  political  borders.    
 
Because  the  funding  is  secured  by  assessment  lien,  underwriting  standards  are  expected  to  be  
held  to  a  minimum,  but  will  likely  include  the  following:  
 
• Property  owners  must  be  listed  on  the  tax  roll  
• Property  must  be  located  in  the  program  boundaries  
• Property  tax  payments  must  be  current    
• Mortgage  payments  must  be  current  
• Existing  property  liens  must  not  exceed  value  (property  is  not  upside-­‐down)  
• Consent  of  existing  mortgage  holder  for  commercial  properties  
• Assessment  amount  to  value  is  acceptable    
• Improvements  must  be  appropriate  and  approved  by  Program  prior  to  funding  

PROGRAM  ORGANIZATION  CHART  

   
   
 
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CONCLUSION  

PACE  America’s  team  has  built  out  a  comprehensive  slate  of  services  and  
funding,  including  private  capital,  which  is  looking  forward  to  having  an  
opportunity  to  invest  in  these  Programs.  
 
We  believe  the  Program  model  and  funding  solution  identified  will  provide  significant  value  to  
participating  jurisdictions.    Our  approach  works  equally  well  for  existing  Programs  and  
jurisdictions  that  have  not  yet  begun.    By  layering  our  financing  capacity  over  an  already  
established  Program  model,  we  will  be  able  to  provide  consistent  funding  and  management  
relief  to  the  jurisdiction  and  its  constituents.    For  new  Programs,  we  are  able  to  employ  our  
team  of  professionals  to  provide  a  turnkey  solution.  
 

CONTACT  INFORMATION  

Laura  Franke  
Principal  
Clean  Energy  Advocates,  Inc.  
1223  Wilshire  Boulevard  #310  
Santa  Monica,  CA    90403  
310.560.1548  Office  
310.892.0177  Cell  
lfranke@ceadvocates.com  

   
   
 
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PROGRAM  CONCEPTS  
Approved  Improvement   Property  improvements  that  are  approved  for  funding  through  the  
Program.    The  approval  will  be  given  by  program  management  to  the  
property  owner  upon  preliminary  approval  of  the  amount  requested  
and  verification  of  the  improvements’  eligibility  and  appropriateness  for  
the  property.  
 
Mini-­‐Bonds   Each  property  owner  lien,  at  the  time  of  funding,  is  evidenced  by  the  
sale  of  a  mini-­‐bond  by  the  municipality  (or  JPA)  to  the  warehouse  
lender.    The  warehouse  lender  holds  the  mini-­‐bonds  until  they  are  
securitized  to  and  taken  out  by  another  investor.  
 
Program  Manager/    
Funding   PACE  America  has  built  a  team  of  professionals  to  provide  the  
comprehensive  services  needed  by  a  municipality  to  initiate  and  
operate  a  successful  Program.    Municipality  involvement  will  be  
minimally  required  at  the  discretion  of  staff  and  elected  officials.  
 
Program  Requirements   Each  Program  has  the  ability  to  define  the  improvements  eligible  for  
funding,  prioritization  of  projects,  and  identification  of  appropriate  
loading  order  to  incentivize  appropriate  improvements.    Some  
improvements  may  be  eligible  for  funding  contingent  upon  other  
improvements  being  completed  as  well;  i.e.  leaky  roof  must  be  fixed  
prior  to  installation  of  solar  panels.  
 
Energy  Audit    
-­‐ Pre  Improvement   A  pre-­‐improvement  property  evaluation  will  be  prepared  prior  to  
funding  approval  in  order  to  verify  the  appropriateness  and  eligibility  of  
projects  requested  for  funding.    This  evaluation  will  determine  the  
“approved  improvements.”  
-­‐ Post  Improvement   A  post-­‐improvement  property  evaluation  will  be  prepared  prior  to  the  
release  of  funds  to  assure  that  the  approved  improvements  have  been  
made  and  appropriately  installed.  
 
Revolving  Fund   A  revolving  fund  exists  as  the  aggregation  point  for  all  funding  
originated  by  the  Program.    The  revolving  fund  can  receive  funding  from  
the  warehouse  line  to  provide  fund  as  provided  to  the  property  owner.    
The  revolving  fund  may  receive  funding  from  different  sources  over  
time  in  order  to  maintain  consistent  capacity  to  lend.    Similarly,  
assessment  repayments  go  back  to  the  revolving  fund  to  provide  a  
sustainable  source  of  funds  from  internal  (repayments)  as  well  as  
external  (warehouse)  sources.  
 

   
   
 
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Take-­‐Out   At  such  time  as  the  warehouse  line  holds  a  significant  amount  of  mini-­‐
bonds  that  have  funded  individual  property  owner  assessments,  the  
mini-­‐bonds  will  be  securitized,  or  bundled,  into  a  larger  bond  ($10-­‐50  
million)  that  will  then  be  sold  to  an  investor.    This  take  out  is  handled  by  
the  PACE  America  team  and  will  not  impact  the  underlying  assessments  
or  their  repayment  terms.  
 
Underwriting  Requirements   In  order  to  approve  the  individual  property  owner  funding  applications,  
certain  requirements  will  need  to  be  met  in  order  to  meet  credit  
security  standards,  these  are  called  underwriting  requirements.    These  
are  likely  to  include  the  following:  
• Validation  action  completed    
• Program  Managed  by  PACE  America  
• Property  owner  verified  on  tax  roll  
• Property  located  in  Program  eligible  boundaries  
• Property  taxes  are  current  
• Mortgage  is  current  
• Existing  property  liens  do  not  exceed  current  assessed  value  
• Consent  of  existing  mortgage  holder  for  commercial  properties  
• Assessment  to  value  is  acceptable    
• Improvements  are  appropriate  and  approved  by  Program  
• Notice  of  lien  required  upon  transfer  of  Property  
 
Warehouse  Line   Warehouse  line  or  refers  to  the  initial  funding  provided  to  purchase  the  
mini-­‐bonds,  as  issued  in  amounts  to  fund  individual  property  owner  
improvements.    This  warehouse  lender  is  investing  short  term,  relatively  
small  amounts,  and  will  expect  to  have  the  assessments  packaged  and  
resold  in  a  “take  out”  at  some  point  in  the  future.    Having  a  warehouse  
line  is  vital  to  being  able  to  fund  assessments  on  an  ongoing  basis  
instead  of  having  to  wait  for  the  issuance  of  a  larger  bond  by  the  
municipality.  The  warehouse  provider  can  be  a  bank,  private  equity,  
mutual  fund,  other  institutional  lender,  or  the  underlying  municipality.