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8.1. SR 04-07-2014 City of Elk - Request for Action River O. To Item Number Mayor and City Council 8.1 Agenda Section Meeting Date Prepared by General Business April 7, 2014 Brian Beeman,Director of Economic Development Item Description Reviewed by Property Assessed Clean Energy (PACE) Program Jeremy Barnhart,Deputy Director, CODD Reviewed by Cal Portner, City Administrator Action Requested By motion,grant City of Elk River authorization for Sherburne County to enter into a Joint Powers Agreement with the St. Paul Port Authority (SPPA) for the issuance of proposed bonds by the Port Authority for the PACE of MN Project. Background/Discussion Sherburne County and the SPPA are requesting that all cities, boards, and commissions in Sherburne County authorize the county to enter into a joint powers agreement with the Saint Paul Port Authority to administer the PACE program on their behalf. Cities are allowed to enter into the agreement directly with the Port Authority,however, SPPA is requesting to enter into one Joint Powers Agreement with the county as a partner,instead of each city, eliminating the need for redundant Joint Powers Agreements with each city. If approved, Sherburne County would be the first Minnesota county to participate in the PACE program. Both the EDA and HRA have reviewed the program and have made recommendations to the City Council to authorize Sherburne County to enter into a Joint Powers Agreement with SPPA. Peter Klein,vice president of finance from the Saint Paul Port Authority,and Dan Weber,the Sherburne County assessor/economic development specialist,will be available to explain the program and answer questions. Financial Impact N/A Attachments ■ April 7, 2014, HRA Agenda Packet PACE Program P a w E A E U s r NaA f RE] City of Ell* = Request for Action River To Item Number Housing and Redevelopment Authority 7.1 Agenda Section Meeting Date Prepared by General Business April 7,2014 Brian Beeman,Director of Economic Development Item Description Reviewed by Property Assessed Clean Energy (PACE) Jeremy Barnhart,Deputy Director, CODD Reviewed by Action Requested Recommend,by motion that the City Council grant authorization to Sherburne County to enter into a Joint Powers Agreement with the St. Paul Port Authority (SPPA) for the issuance of proposed Bonds by the Port Authority for the PACE of MN Project. Background/Discussion The Property Assessed Clean Energy (PACE) program is an innovative way to finance energy efficiency and renewable energy upgrades to buildings. Interested property owners evaluate measures that achieve energy savings and receive 100% financing,repaid as a property tax assessment, for up to 20 years. PACE overcomes financial challenges that have hindered adoption of energy efficiency and related projects in buildings. It does this by providing low-cost,long-term financing for upfront costs,and making it easy for building owners to transfer repayment obligations to a new owner upon sale. Cities or Counties establish a PACE assessment based on the project costs;the property owner evaluates projects that reduce energy costs;the local government provides financing to the property owner for eligible projects and adds an assessment to the tax rolls; and the property owner repays the financing through the assessment for up to 20 years. The State Legislature has set up the PACE program through the Saint Paul Port Authority. The Port Authority serves as the conduit by which the state funds are filtered to counties and cities. While cities can form a joint powers agreement directly with the Port Authority, for economies of scale and simplicity, the county is requesting that all cities,boards, and commissions in Sherburne County authorize the County to enter into a joint powers agreement with the Authority to administer the PACE program on behalf of the city. The PACE program saves consumers money on utility bills,it promotes local jobs,and has no exposure to the general fund. The program drives reinvestment and spending in local communities through the installation of energy efficient equipment and implementation of renewable energy measures. If the County is the partner in the Joint Powers Agreement with the SPPA, the City wouldn't be approving the application or the special assessment. The applicant applies directly to SPPA. The SPPA reviews the application and submits the request to the County to add a special assessment to the tax roll. rawEe10 0 Y NAUR If the City is the partner with SPPA then the City would be the one approving the special assessment and the County wouldn't need to approve anything. The proposed agreement with the county and sample county resolution is attached. The resolution would be for the county and not the city if the city chooses to allow the county to enter into the agreement. Peter Klein,Vice President of Finance from the Saint Paul Port Authority,and Dan Webber,the Sherburne County Assessor/Economic Development Specialist,will be available to explain the program and answer any questions. Financial Impact N/A Attachments • PACE Summary of Financing Process • PACE Draft Joint Powers Resolution N:\Departments\Community Development\Economic Development\Council HRA EDA Item s\2014\4-7-14\jb7.1 sr Property Assessed Clean Energy(PACE).docx P ° R 9 Port Authority of the City of Saint Paul Property Assessed Clean Energy Program (PACE OF MN) SUMMARY OF FINANCING PROCESS Saint Paul Port Authority 850 Lawson Commons 380 St. Peter Street Saint Paul, MN 55102 (651) 224-5686 (651) 223-5198 (fax) www.sppa.com Rev 10/21/2013 9835459v6 A. Introduction Through the Property Assessed Clean Energy Program ("PACE OF MN") the Saint Paul Port Authority (the "Port Authority"), working with Bremer Bank (the "Lender") helps to provide financing for the installation of energy efficiency improvements and renewable energy sources that are permanently fixed to eligible properties ("Improvements") located within the State of Minnesota. Property owners will repay PACE OF MN through an assessment levied against their property which is payable over years in semi-annual installments on property tax bills. The program is only for eligible properties. B. Project Scoping Eligible property owners can obtain an onsite survey by hiring a Home Energy Rating System ("HERS") rater, or equivalent. By participating in PACE OF MN, property owners are making a financial investment; this decision should be made based on both the efficiency and the cost effectiveness of the improvements. Conducting an energy audit will help property owners assess water conservation, energy efficiency, and renewable energy opportunities for their property. An onsite energy audit is required to participate in PACE OF MN. For more information, go to www.sppa.com. Conducting an energy audit will help property owners assess energy efficiency and renewable energy opportunities for their property. Costs incurred to conduct onsite audits or surveys may be included in your application for PACE OF MN Financing. Property owners will work directly with contractors to determine the scope of their project. As the project is defined, the property owner obtains a contractor's bid or determines the cost of the equipment if self-installing. C. Program Application Interested property owners can visit the PACE OF MN website (www.sppa.com)1 to complete a PACE OF MN application form (the "Application"). The Port Authority can also provide an Application by mail, e-mail or fax upon request. D. Title Check The Port Authority will verify property ownership by performing a title check. Applicants are responsible for the costs of the title check as follows: 1) Financing requests less than $5000: $100 2) Financing requests $5000 to $49,999: $150 3) Financing requests $50,000 to $199,999: $200 4) Financing requests greater than $200,000: $250 1 Can we be more specific with this link? 1 9835459v6 Title costs may be included in the PACE OF MN Financing request. E. Application Review During the Application Review process, the Port Authority verifies that: • The Application is complete and accurate; • The property owner(s) owns the Property without federal or state income tax liens, judgment liens or similar involuntary liens on the Property; • The Property is developed and within a City, County or Town (the "Host Jurisdiction") that has agreed to participate in PACE OF MN; • The Property is not exempt from secured property taxes; • The Property owner is current on property taxes; • Property owner is current on mortgage(s) and all lender have given consent to PACE OF MN Financing; • The Property owner has provided all financial information requested by the Port Authority or the Lender; • The property owner has declared that the property owner(s) and the Property is/are not currently involved in a bankruptcy proceeding. If property owner has been in bankruptcy in the past three years, the bankruptcy must have been concluded at least one year before application was filed. In addition, all mortgage payments due on the property must have been timely paid during the six months preceding the application; • The property owner has executed all declarations required in the Application; • The proposed Improvements and costs are eligible to be financed under the Program. If the proposed Improvements are part of a project that includes new construction (e.g., a room addition), the costs of the work have been properly allocated between adding PACE OF MN Improvements and new construction; • The cost estimate(s)/bid(s) is/are reasonable for the Improvements; • Improvement costs are reasonable to property value. As a guideline, proposed Improvements should not exceed ten percent of assessed value. If more costly Improvements are proposed, the Port Authority and the Lender may require additional information supporting both the reasonable relationship of the Improvements to the property, and information related to the ability of the property owner to repay the assessment; 2 9835459v6 • All required documents have been submitted; • The requested assessment amount (including contingency) is equal to or greater than $2,500; and • PACE OF MN funding for the Improvements has been approved by the Lender and is available. Within 15 business days of receipt of an application, the Port Authority notifies the Property owner if the application is incomplete, approved, denied or requires additional approval. • Incomplete. An application shall be deemed incomplete if it is missing any information or attachments the property owner is required to provide. All requested documentation must be submitted within 30-days. • Approved. An application shall be approved if the Port Authority has verified all of the items in Section E. • Denied. An application shall be deemed denied if the Port Authority cannot verify any of the items in Section E. PACE OF MN will send a written denial notice. Property owners are free to submit a new application, which will be processed on a first-come, first-served basis based upon the new receipt date, under the following circumstances: 0 If an application is denied on the sole basis that PACE OF MN funding is not available, the application does not need to be resubmitted; applicants will be placed on a waiting list based on the date of application receipt. 0 If an application is denied because the cost estimate(s) is/are not deemed reasonable by the Port Authority, a resubmitted application must be accompanied by additional documentation of cost estimates as determined in the Port Authority's discretion, including, but not limited to, cost estimates provided by one or more additional contractors. The property owner will not be required to select the low bid; however, the Port Authority may limit the maximum assessment amount to an amount deemed reasonable by the Port Authority. Applications for PACE OF MN Financing require approval of both the President of the Port Authority and the Lender. The Property owner will be notified that the application is complete and has been forwarded to the Lender for approval. With respect to an application to finance a renewable energy system(s) other than solar (such as wind or geothermal) or a custom energy efficiency measure(s) (such as a combined heat and power system cogeneration system), or to finance an emerging technology ("Custom Measures"), the Port Authority reserves the right to require the 3 9835459v6 appropriate engineering documentation and energy studies showing the energy savings and/or energy generation capabilities of the proposed project. The Port Authority may also charge an additional administrative fee for this technical review to be discussed with the property owner before proceeding. F. Permit After receiving notice of Application approval, property owner (or contractor) must obtain a permit from the local building official. All Improvements, including those normally exempt from permit requirements, will require a permit from the Building Department. Final inspection will be required to ensure that the Improvements were completed. A valid permit is required before the Port Authority can execute an Assessment Contract and reserve PACE OF MN Financing for a project. G. Assessment Contract and Reservation All property owners of record must sign the Assessment Contract and Implementation Agreement ("Assessment Contract") and have their signature(s) notarized. The Port Authority, a representative of the Host Jurisdiction, and the Lender, will execute the Assessment Contract. This will assure the property owner that the PACE OF MN Financing has been approved and that funds are reserved for the property owner's approved project. H. Assessment Lien Upon execution of the Assessment Contract, PACE OF MN records an assessment lien against the Property in the offices of the Port Authority and the Clerk of the Host Jurisdiction. The lien will be for the full amount of the assessment on the property that secures the assessment, including capitalized interest. If funds are disbursed to property owners by the first business day in September, the assessment will appear on the next tax bill. For disbursements after that date, the assessment will not appear on the tax bill until the following tax year, but interest will accrue on the outstanding amount. I. Installation of Improvements Property owner enters into a contractual arrangement directly with a contractor for Improvements unless the property owner is self-installing the Improvements. All work is subject to the appropriate permitting and inspections and all other applicable federal, state, and local laws and regulations. All work must be completed, including the final inspection, within 90 days of execution of the Assessment Contract. The property owner and the Port Authority may agree to an extension of this completion date for good cause. 4 9835459v6 J. Progress Payments/Multiple Disbursements If the maximum assessment amount is $20,000 or greater, the property owner may request in writing that PACE OF MN make a progress payment prior to the completion of the work. Progress payments will be subject to a $150 onsite inspection fee per disbursement and interest will accrue on the entire assessment amount at the time of the first disbursement. Progress payment requests must be filed with PACE OF MN at least five business days before the end of the month for payment to be made on the first business day of the next month. The following conditions must also have been met before disbursement is made: 1) At least 75 percent of the required materials have been delivered to the property and have been reasonably secured as confirmed by an onsite inspection. PACE OF MN has the discretion to make its own determination with respect to whether this condition has been satisfied; and 2) The requested progress payment does not exceed 50 percent of the maximum assessment amount. K. Final Inspections & Disbursement of PACE OF MN Financing After Improvements are completed, the Property owner must contact the local permitting agency for a final inspection and final permit. The Property owner notifies PACE OF MN that all work has been completed and submits final documentation: final permit; invoices showing all costs, less rebate amounts and Request for Disbursement. Checks will be mailed at the beginning of each month, provided that final documentation has been filed with PACE OF MN five business days before the end of the month for processing. The amount disbursed will be the lesser of (i) the maximum assessment amount provided in the Assessment Contract or (ii) the actual costs, net of County costs listed on Request for Disbursement. Interest accrues as of the date of disbursement. 5 9835459v6 Proposed City Council/County Resolution [PACE OF MN] WHEREAS: 1. The Port Authority of the City of Saint Paul (the "Port Authority") has given its approval to the issuance of its taxable special assessment revenue bonds (PACE OF MN Project) (the "Bonds") in the aggregate principal amount of up to $10,000,000. The proceeds of the Bonds will be used to finance the acquisition and construction or installation of energy efficiency and conservation improvements, together with other related costs of the financing (collectively the "Project"). 2. Laws of Minnesota 1976, Chapter 234, provides that any issue of revenue bonds authorized by the Port Authority shall be issued only with the consent of the City Council of the City of Saint Paul,by resolution adopted in accordance with law. 3. To meet the requirements of state law, the Port Authority has requested that the City Council give its approval to the issuance of the proposed Bonds by the Port Authority, subject to final approval of the details of said Bonds by the Port Authority. NOW, THEREFORE, BE IT RESOLVED by the Council of the City of Saint Paul that in accordance with the Laws of Minnesota 1976, Chapter 234, the City Council hereby approves the issuance of the aforesaid Bonds by the Port Authority for the purposes described in the Port Authority resolution adopted July 23, 2013, the exact details of which, including but not limited to, provisions relating to principal amount, maturities, interest rates, discount, redemption, and the issuance of additional bonds are to be determined by the Port Authority, and the City Council hereby authorizes the issuance of any additional bonds (including refunding bonds) by the Port Authority found by the Port Authority to be necessary for carrying out the purposes for which the aforedescribed Bonds are issued. Adopted: , 2013 9953061x2