Making Retrofits and Renewable Systems Affordable for
Small Businesses, Non-Profits, Industry & Homeowners

Frequently Asked Questions

Note: All references to “section” below pertain to HB 1457 or SB 260.

General Questions:

Q: What is the basic concept of this bill?
A: The major obstacle for property owners to invest in energy efficiency improvements and renewable energy systems is the lack of upfront capital. This bill addresses this problem by authorizing cities and counties to issue dedicated bonds that provide the upfront capital for property owners who willingly and voluntarily seek to make those clean energy purchases. As a result, property owners begin instantly saving money on their energy bills. Property owners pay back these assessments as line items on their property tax bills.

Q: Won’t these kinds of assessments go under the property tax caps?
A: No, because these are not property taxes, nor mandatory property assessments. They are voluntary.

Q: Why do we need this bill?
A: Hoosiers are wasting money and electricity because our buildings are not as energy efficient as they could be. This bill would make money available for energy improvements without increasing government spending. Those improvements will save money for building owners and help lower our demand for new energy sources. That’s good for public health, the environment and our state economy.

Q: Does this type of financing exist any where else in the country?
A: Yes, in 23 states including Ohio, Illinois, and Michigan.

Q. How many assessments have been issued nationally under these types of programs?
A: More than 2,000 as of June 2010.

Q: Who is eligible for such clean energy financing?
A: All property owners: residential, commercial, industrial, congregations, community centers, social service agencies, and even government agencies themselves (Section 11(a)).

Q: What kind of clean energy improvements can property owners make?
A: Systems in wind, solar, certain kinds of biomass (e.g. landfill gas to electric, manure gas to electric), and various kinds of energy efficiency retrofits (Sections 2, 3 and 4).

Questions a Locality Might Ask:

Q: What brings these clean energy financing programs into being?
A: A preliminary resolution or ordinance adopted by the local body or a combination of local bodies. At this point, one or more local bodies can begin educating and advertising such a program under the aegis of a “clean energy improvement financing district” (Section 5).

Q: Who administers the clean energy improvement financing district?
A: A city, county, or one of their units, or a combination of cities and counties and their units

Q: Who is eligible to issue these special bonds?
A: A city, county, or subdivision of either – or a third party contractor that a city or country hires (Section 7 and 8).

Q: Won’t these kinds of bonds create yet more debt for struggling municipalities as a general obligation bond?
A: No. Such bonds are not general obligation bonds – they are revenue bonds, backed by the stream of payments that property owners pay (Section 15(c)).

Q: How have other municipalities addressed marketability of such revenue bonds?
A: They have pointed out that the bonds have a dedicated revenue source. The reliability of that revenue source (to cover debt service payments) is based on the fact that default rates for property taxes tend to be very low.

Q: What has been the range of bond sales for various municipalities?
A: It varies depending on size of clean energy financing district, and the kinds of participating properties. Our understanding that it is from $3,000,000 to $10,000,000.

Q: What is the aggregate value of all of the bond sales issued, across the nation, under these types of programs?
A: $50,000,000.

Q: Can cities and counties afford this program given the financial challenges facing local government?
A: Yes, because the bond issued by the city or county would cover not only the capital for the clean energy improvements, but the administrative costs incurred by the city or county (Section 15).

Q: How can a local government entity finance the initial start up costs?
A: Through the sale of a Bond Anticipation Note.

Q: Why should a municipality adopt this program at a time of straining core municipal services?
A: If municipalities were to apply for the PACE assessment opportunities themselves, they would save on their operating costs.

Questions a Property Owner Might Ask:

Q: What does a property owner need to submit to enable them to participate in this program?
A: Their address, a legal description of their property, the proposed clean energy improvement, and documentation that shows that they’re in good financial standing and that their improvement’s predicted energy cost savings will, cumulatively, exceed the cost of the clean energy improvement (Section 11).

Q: What distinguishes these assessments from energy-efficient mortgages?
A: The former is based on underwriting criteria (e.g. no delinquency on property taxes) and the latter is based on credit worthiness. An energy-efficient mortgage is not transferrable, but rather due upon sale.

Q: What happens to the unused bond proceeds?
A: There should be little to know unused bond proceeds to begin with, since the size of the bond issuance is scaled to meet the sum of property owners enrolled in the program and some funds to cover administrative costs. In the unusual case that there are unused funds, the locality would need to immediately find new participating property owners so that the locality is able to service the entirety of the debt.

Questions a Banker Might Ask

Q: Aren’t these clean energy assessments just loans?
A: Functionally, yes. But since the borrowed money is attached to the property and not the property owner, the proper technical term is assessment.

Q: In a time of extensive mortgage defaults, isn’t this program risky?
A: No, because property owners have to demonstrate in advance their abidance to specific underwriting criteria (e.g. no property tax delinquency), and in fact the clean energy improvement would end up improving their cash flow.

Questions a Developer Might Ask

Q: How is this bill relevant to low-income properties?
A: While energy savings are, by design, supposed to exceed the sum total of the clean energy assessment, for a given year this might not be so. Accordingly, this program may not be affordable to low income households. Furthermore, Indiana has a pretty extensive weatherization program geared to low-income households that would be less expensive to pursue.

Q: How is this bill relevant to vacant properties?
A: Were a developer to buy up such properties, than they could secure clean energy assessments to enable widespread clean energy improvements for these properties.