BRADENTON, Fla. — Florida is on the cusp of joining a nationwide trend by giving local governments the authority to use municipal bonds to help homeowners finance energy-conservation improvements.
But the proposed law has a unique feature that might interest other hurricane-prone states: it also authorizes bond financing for improvements that help property owners strengthen their homes against storms.
HB 7179 is similar to a program getting increased attention across the country: property-assessed clean energy, or PACE.
Gov. Charlie Crist received the bill on Monday, and although he is a proponent of renewable energy efforts he has not said if he supports the legislation. He has until June 1 — the start of the annual hurricane season — to act on the bill.
Eighteen states have implemented legislation based on the PACE model, according to the Database of State Incentives for Renewables and Efficiency program at North Carolina State University.
PACE financing allows property owners to borrow money to pay for renewable energy and energy-efficiency improvements that is typically repaid through a special assessment on the property.
“No other PACE-type state laws authorizing local entities to offer PACE programs include improvements that would help people protect their property from hurricanes,” said Amanda Vanega, a policy analyst at DSIRE.
Other PACE-type authorization bills focus on energy-related improvements, though a recent amendment in Wisconsin expands the eligible technologies to include water efficiency measures, Vanega said.
Under the PACE structure, a local government issues bonds or enters into a financing program with a private lender.
Florida’s law authorizes local governments to partner with each other to finance energy conservation and renewable-energy improvements as well as to make wind-resistance improvements such as reinforcing roofs, putting on wind-resistant shingles, and installing storm shutters.
Although the PACE organization was not directly involved in Florida’s legislative efforts, a number of local governments wanted the state’s authorization to do PACE-type financing and supported the recently passed bill, according to Bob Reid, an attorney at Bryant Miller Olive, which helped craft the legislation.
Sen. Mike Bennett, R-Bradenton, sponsored the companion bill to HB 7179 and pushed to incorporate wind-resistance measures, Reid said. Bennett could not be reached for comment.
“You do not get energy savings, per se, that you do with energy projects but in some cases you will get a discount on homeowner’s insurance,” Reid said. “Because of Florida’s unique situation and its exposure on all sides to hurricanes, it makes sense here where it might not in a lot of other places.”
The energy conservation measures in Florida’s bill are similar to those adopted by other states.
But the pitfalls experienced by other states implementing PACE programs were used to improve the structure of Florida’s program, Reid said.
For example, it avoids the time-consuming property-by-property assessment procedure required by some states to qualify properties for loans.
Florida’s measure would allow local governments to establish an energy conservation district so that any property owner can participate.
In addition, some PACE programs have experienced difficulty accessing the bond market and achieving low interest rates, partly because the program is new and usually begins with small, less cost-effective financings.
Florida’s financings are expected to be structured similar to a line of credit by using a drawn-down bond facility.
Once there are enough loans they can be sold to long-term investors at fixed rates. The ability of local governments to enter partnerships and aggregate the loans into larger financings also should make the program more attractive to the capital markets, Reid said.
HB 7179 also has the potential to help encourage new business and job growth, Cutler Bay Mayor Paul Vrooman told a state House Energy and Policy Committee reviewing the bill on March 17.
“I have personally been to California to see where this has been put into place and what they have done is something incredible,” he said. “It fostered a new industry that did not exist.”
Vrooman said businesses in his South Florida town are anxious to get involved with the projects authorized by HB 7179. “I think it will help me protect my economy,” he added.
On the east coast of Florida, St. Lucie County is taking yet another approach to financing energy conservation improvements.
County Commissioner Doug Coward is spearheading the creation of a nonprofit, U.S. Treasury-certified community development financial institution, or CDFI, that will be called the Solar and Energy Loan Fund of St. Lucie County.
Coward said he found the PACE model cumbersome and it resulted in unattractive interest costs as high as 8% to 10%. He expects the CDFI to provide a less costly way of financing improvements offering loans with interest rates “in the 4% range” without relying on the capital markets.
The CDFI has already secured $20 million in pledges from four banks and it expects to receive a $5 million block grant from the U.S. Department of Energy as well as an $800,000 grant from Florida for a solar demonstration project.
The program will offer low-interest loans that will be paid back by assessments collected on tax bills, which is the only similarity to the PACE program, Coward said.
More than half of the loans will go to low- and middle-income homeowners.
“We’re leveraging public dollars with an infusion of private capital, instead of local government securing bonds,” Coward said. “Our interest rates should be significantly lower, which makes this business model more likely to succeed. We hope we can grow this into a regional solar and energy loan fund.”
With 14% unemployment in St. Lucie County, Coward said he also expects the program to have a bigger impact on the local economy than just offering revolving loans.
It has already sparked entrepreneurial activity as well as businesses interested in relocating to the county and building trades that want to open a green jobs training center, he said.
“I think we’re literally months away from launching this program as we create our own economic recovery from the bottom up,” Coward said. “And we didn’t need permission from the state or some energy monopoly — we empowered ourselves through strong partnerships.”
