Going retro

Sacramento's PACE program revs up—to the tune of $100 million

The city of Sacramento will spend $100 million on green retrofits of residential and commercial buidlings beginning in January 2013.

The city of Sacramento will spend $100 million on green retrofits of residential and commercial buidlings beginning in January 2013.

Who says energy efficiency isn’t sexy?

Starting in January, Sacramento will plow $100 million into retrofitting the city’s residential and commercial buildings. The Clean Energy Sacramento program will loan cash to homeowners and businesses to make green upgrades to properties while reducing greenhouse-gas emissions.

The concept isn’t new. Property owners can already take out loans from the Sacramento Municipal Utilities District to upgrade their home or business with more efficient appliances and better insulation.

But the city’s new financing program has a twist: When participants sign up, payments are added to the building’s property taxes, not the mortgage. If properties are sold, the payments transfer to the new owner.

The money is coming from the Ygrene Energy Fund, a green-investment company working on similar projects in six other states. Known as a PACE program—short for Property Assessed Clean Energy—the plan was approved by California lawmakers in 2008 to help local governments reduce greenhouse-gas emissions.

Yvette Rincon, Sacramento’s PACE program manager, said city officials have been developing the plan since early 2011. They’re estimating that $100 million will create 1,500 jobs, mostly in construction, and help jump-start the area’s green economy.

“We think the economic development potential of this program is pretty significant,” said Rincon.

So what else does $100 million buy? According to Rincon, the program could pay for green retrofits to 3 percent of Sacramento’s commercial buildings while removing 2,000 tons of CO2 emissions per year. Under the plan, property owners will get money for more efficient windows and doors; better insulation; new appliances, such as water heaters and heating, ventilation and air-conditioning systems; and green-lighting systems that use less power.

And although energy-efficiency upgrades might not grab headlines like solar farms or wind turbines, Ygrene regional director John Kaufman said Sacramento’s PACE plan will have the same impact as adding 5 megawatts of new renewable energy to the city’s power grid—not bad for upgrading a few appliances and an HVAC system, which are typical retrofits the program will finance.

“Unfortunately, energy efficiency isn’t very sexy,” Rincon said with a chuckle. “But the residents who participate will definitely feel a difference in terms of energy bills and the comfort of their homes.”

The program’s initial $100 million could be just the beginning, according to Kaufman, who says banks are lining up to invest more money in the project. Or, in banker speak: “It’s fair to say that there’s an unlimited amount of investment capital that’s interested in participating in this program,” said Kaufman.

There are two ways to sign up for the program. Starting in January, applicants can drop by Ygrene’s Midtown showroom (2600 Capitol Avenue, Suite 100) and fill out forms. The company has also trained more than 120 local contractors to promote the PACE plan, and they can also help property owners apply.

Unfortunately, the program has a catch or two.

Property owners must be current on mortgage payments and property taxes, and hold at least 15 percent equity—which means anyone who is underwater on their home or commercial building isn’t eligible. Homeowners with Federal Housing Administration loans can apply, although government-owned lenders such as Freddie Mac and Fannie Mae might force PACE participants to pay off their new Ygrene loans whenever the property is sold or refinanced, according to Rincon.

The Federal Housing Funding Agency, which oversees Fannie Mae and Freddie Mac, has held off on deep-sixing its PACE purchases and is considering new rules that could change that process.

“That’s a discussion between [property owners] and their lender to determine if there are any obstacles to prevent them from moving forward,” said Kaufman.

Despite roadblocks from the feds, Sacramento is moving ahead anyway. And Ygrene has already inked a deal with Sacramento County to expand the green finance plan.

“You’re going to see these PACE programs go full bore in 2013 in the region,” said Julia Burrows, executive director for Greenwise Joint Venture, a nonprofit firm that helps promote the city’s green programs.