By Chris Hagan
Review Staff Writer
Orion Township hopes to keep PACE, help the environment and save money for local businesses and organizations in the process.
PACE is the Property Assessed Clean Energy Act. It is Michigan Public Act 270 of 2010 and it authorizes local units of government to adopt property assessed clean energy programs and to create districts to promote the use of renewable energy systems and energy efficiency improvements by owners of certain properties.
At Monday night’s Orion Township board meeting a new way to finance energy-efficient upgrades was introduced.
One local business, Powers Distributing, has already been taking advantage of the savings seen with PACE.
LED lighting and solar panels are just two of the most popular upgrades businesses can make to decrease their energy bills. Those lights require a fraction of the power, those panels help offset electricity costs and those businesses end up saving while being part of the green movement.
So why aren’t more businesses doing these conversions and more? The answer is cost.
Many of these conversions come with a hefty upfront price tag and businesses don’t typically see a return on that money until 15 to 20 years later. So typically, businesses would rather use that funding for repairs, upgraded machinery, and personnel. Furthermore, obtaining a bank loan helps offset this cost but according Levin Energy Partners, a Detroit based energy efficiency consulting firm, an average bank loan is three to five years; making the monthly debt in the time it would need to be paid off greater than the savings.
This is where the township and the Property Assessed Clean Energy (PACE) Act comes in.
A bank would give a long-term loan to a property owner to pay for new heating and cooling equipment, lighting upgrades, solar panels, and low-flow plumbing, and other improvements.
Then, municipalities such as Orion Township, would place the monthly repayment amount from that property owner on their property tax bill through special assessment. The property owner would pay their taxes and the added amount from the loan.
The township would then pass that payment back to the bank after it is collected alongside the normal property taxes.
So after the money has been loaned to the property owner, that lien stays on the property, not the owner, until it is paid off. PACE allows that property owner receive a long term loan for energy upgrades at a fixed percentage rate.
‘If a company installs millions of dollars worth of energy upgrades, but sells in five years, the subsequent owner picks up the payments while reaping the benefits,? Supervisor Chris Barnett said. ‘The best thing from the local government’s perspective is that this is a free economic development tool and the government is never on the hook for the debt involved; the lender bears all risk.?
According Barnett and Levin, there is no cost to the township or tax payers and the township isn’t funding any business improvements. The township is promising to act as a collecting authority through its normal tax collection process which makes the bank feel more comfortable approving energy upgrade loans over such a long duration.
Who qualifies for these upgrades?
The PACE Act allows commercial, industrial, multi-family and non-profit building to improve energy efficiency, water efficiency and renewable energy measures and related costs. More examples of those upgrades include insulation, windows, doors, HVAC improvements, wind, solar and geothermal installations.
Single family residences and government buildings are not eligible nor can a business install incinerators or digesters.
The reason PACE is now making an appearance in Orion Township is because Powers Distributing, who just recently sunk $450,000 into energy upgrades, is looking to refinance through PACE and reinvest that money back into the business.
Chief Operating Officer Gary Thompson said last year Powers installed 16,000 square-feet of solar panels on their recycling center saving them $2,000 a month in energy costs. He also mentioned they upgraded their lighting to all LED and are working towards becoming a ‘zero landfill? business with all their waste being recycled.
‘It’s a great tool for businesses in Michigan, especially in older buildings to start looking into this,? Thompson said. ‘We’re taking looking at whether or not we invest these proceeds into expanding a second solar field on the ground level.?
Powers has already been approved for a PACE loan but they cannot receive until Orion Township establishes a PACE financial district.
In the event of a default, Oakland County could foreclose on the company’s property, and the PACE debt would transfer to the subsequent owner. According to Levin, defaults on PACE loans are 30 times lower than standard loans.
According to Levin, the township has the power to approve or disapprove of each individual project because part of establishing a program means the township chooses and authorizes an official to oversee the paperwork and have it placed on the tax roll.
The township will draft a resolution of intent and will also hold a public hearing on PACE before any actions are taken to adopt PACE. If the township partnered with Levin to handle the coordination between PACE and the loan dispersal, then the property owner would pay Levin two percent of the loan amount.
Despite the coordination with Levin, there is no contractual agreement between the township and Levin and the cost to the township is still zero.
If approved, Orion would be the second township in the state to utilize PACE by establishing a district, the other being Bloomfield Township. Rochester Hills, Ferndale, Royal Oak, and Southfield also have PACE loans in their communities.