Initiatives
NJ PACE

Jonathan Cloud ... An initiative in New Jersey for Property Assessed Clean Energy (PACE) investment

Burgess COMMENTARY

Peter Burgess

Open pdf about the NJ PACE initiative

PACE Programs in General

First implemented by Berkeley, CA in 2008, PACE allows municipalities to finance energy conservation and clean energy upgrades, and recover the cost through special property-­‐tax assessments. Legislation for PACE programs has been passed in 30 states (including NJ), and numerous counties and municipalities have implemented PACE programs across the country.

• o The central benefit to the property owner is 100% financing of conservation and clean energy projects with repayments geared to savings, and attached to the property rather than being a liability of the owner or business operator.
• o The central benefit to the investor is the security associated with a municipal tax lien. This is critically important to participating banks and bond buyers.
• o The central benefits to the municipalities are the increase in jobs, the increase in ratables and the satisfaction of promoting a conservation and renewable energy initiative.

“Counties, cities and townships give up nothing, but by working together they create one statewide set of efficient and flexible PACE rules that really work for business, create the kind of common market that larger companies with multiple facilities need, save money, and avoid duplication and a blizzard of conflicting rules from place to place.” (Lean & Green Michigan)

Our legislation, “AN ACT concerning the financing of renewable energy and energy efficiency systems,” was passed as amended in January of 2012, and came into effect May 17, 2012. (See NJ 2011 Public Law 187 (S1604)). Municipalities must have their programs authorized by the Department of Community Affairs (DCA), and are then entitled to adopt by ordinance provisions creating a 'clean energy special assessment' to be attached to properties that elect to participate in the program.

The municipality may issue its own bonds (presumably “revenue bonds”) to fund its PACE program, or in the alternate, the municipality may work with a county improvement authority to issue the Authority’s bonds on the municipality’s behalf. Further, the municipality may utilize bank financing, reserves, grant funds, or a combination of these and other sources. The special assessment payments are used to repay the bond obligations and/or replenish a revolving/reserve fund.

NJ PACE will provide administration services as follows:

• • Prepare Program Guidelines and Standardized Documents
• • Determine proposed Project Eligibility and Feasibility
• • Identify BPU-­‐approved Contractors and Installers, as appropriate
• • Obtain Performance Insurance for the Installations
• • Provide Project funding via banks, bonds and private investors
• • Coordinate with Municipal Professionals, building inspectors, tax assessors, and tax collectors
• • Access Clean Energy Program funding, if any
• • Complete Interface with all State departments and agencies
• • Assist with all other Program needs

Each municipality will be reimbursed for reasonable costs it incurs in providing the Assessment registration and the Payment receipt functions for each property in the Program. Municipalities do not need to self-­‐administer or self-­‐fund NJ PACE programs.

The Program Administrator will provide the majority of the documents and forms necessary for the Program, as well as an online registration and processing site and key trade ally relationships. A municipality need only establish a PACE program pursuant to the NJ PACE Program.

By adopting an ordinance, it agrees only to provide property assessment registry and payment collection functions. As for local control, most municipalities provide building, electrical, and other inspection and approval services and will therefore approve the design and installation of projects that are built in their communities.

Other Governmental Agencies

The NJ Department of Community Affairs, acting through the Division of Local Government Services will exercise oversight and approval of each municipal program, as managed by the Program Administrator

The BPU’s Clean Energy Program must ensure that “the amount of financing made available by local programs authorized pursuant to this act is in accordance with limits set from time to time by the Board of Public Utilities in order to assure that local programs further the goals of the Office of Clean Energy in the Board of Public Utilities”. The BPU will also control the approval of projects qualifying for state incentives, if any, and the practices and procedures of certified contractors and service providers.

While not required by the Act, the Department of Environmental Protection has taken great and highly supportive interest in the Act and the PACE programs that are permitted by it.

Program Administrator

NJ Pace will be administered by NJ PACE, LLC and the Center for Regenerative Community Solutions, a NJ Nonprofit Corporation (“Program Administrator”). The Program Administrator plans to establish an office in central New Jersey and, if necessary, at locations to service the municipalities we serve.

Currently, there are two professionals working on the NJ PACE program: Jonathan Cloud, Executive Director and Gustav E. Escher III, Director of Finance. Mr. Cloud has an extensive background in renewable and alternative energy, and is affiliated with the Institute for Sustainable Enterprise at Farleigh Dickinson University. Mr. Escher is a licensed Investment Banker with over 25 years of project finance experience at major bond underwriting firms.

Mr. Cloud has worked for the Federal Government of Canada, and is the founder of several energy-­‐ and sustainability-­‐ related enterprises and nonprofits. He has served as a member of the Local Economies Task Force of Sustainable Jersey, is a member of the Board of Directors of Cooling America thru Local Leadership, and of the Board of Trustees of the Liberty Ridge Neighborhood Association. He has written numerous articles, organized two green ventures conferences in New Jersey, and has spoken at several seminars in New Jersey during the past five years.

Mr. Escher has been a Councilman of Princeton Borough and has served on numerous community boards and at governmental agencies, such as Vice Chairman of the NJ Health Care Financing Facilities Authority.

Both have lived in New Jersey for several decades and have raised families here.

Costs and Expenses

The Program is structured to be cost-­‐effective and riskless for the property owner, for the municipality, for the lender, and for the investor. Being an “opt-­‐in” program, it will not succeed unless it offers real value to the property owner: the cost to the property owner must be meaningfully less than the energy savings. Our intention is to offer the program to property owners without an application fee; the application requirements, including approved contracts with certified installers, are sufficiently onerous to discourage frivolous applications. Trade allies may be asked to pay a participation fee on a project by project basis.

The processing costs and expenses of the Program will be pro-­‐rated on a project by project basis and paid as follows:

• • Principal, Loan Interest, and Processing Fees – paid by property owner as special assessment charges to the municipality, then remitted to the Bank or the Bond Trustee, and disbursed to the Program and to investors
• • Participation Fees – paid by Program participants (other than the municipality and the property owner) directly to the Program Except for Participation Fees, all funds and monies required by the Program will be handled by participating Banks and/or independent trustees, acting on behalf of the Property Owner and the Bond Issuers.

• • No cost to municipalities
• • Nominal Upfront Fee for Property Owner
• • Not Exclusive -­‐ is open to all Program entities (engineers, BPU service providers, funders, etc.)
• • Shared Services Model, with local customization
• • An open, free and efficient marketplace for conservation and clean energy projects
• • Specialized Key Expertise (energy, program management, and financial administration)
• • Online Transactions Management
• • Standard, Uniform Documentation
• • Coordination with State and Municipal Officials
• • Ease of State Agency Oversight
• • Documentation of Economic Impact
• • Provision of Public Education Events and Materials
• • Private Capital to Bridge to Subsequent Bond Issues
• • Assistance in Placing Special Revenue Bonds
• • Investor Relations and Management
• • Avoidance of the problem of local governments picking “winners and losers”

• NJ PACE www.njpace.net
• Sustainable Jersey www.sustainablejersey.com
• NJ DCA www.state.nj.us/dca
• NJ DEP www.nj.gov/dep/sage/index.html (Sage Program & SBI)
• NJ BPU www.njcleanenergy.com (Office of Clean Energy)
• PACENow www.pacenow.org (national nonprofit advocacy organization)
• California www.californiafirst.org/overview (15-­‐county footprint)
• Florida www.floridagreenenergyworks.com/home
• Michigan www.leanandgreenmi.com
• Connecticut www.ctcleanenergy.com
• IBE: www.institutebe.com/clean-­‐energy-­‐finance.aspx
• Vote Solar www.votesolar.org/city-­‐initiatives/municipal-­‐finance-­‐programs-­‐pace/

For Further Information, Please Contact:

Jonathan Cloud
Managing Director
Basking Ridge, NJ
Office: (908)
Cell: (973)

Gustav E. Escher III
Director of Finance
Princeton, NJ
Office: (609) 683-­‐1666
Cell: (609) 413 1749

This Executive Summary is a presentation of information regarding NJ PACE. It does not constitute a commitment by nor an obligation of any of the parties mentioned herein. This Executive Summary and the information contained therein is subject to copyright ©2013 by the Center for Regenerative Community Solutions. Page 3 NJ PACE Design The goal of NJ PACE is to work with municipalities to establish municipal Property-­‐Assessed Clean Energy Programs (“Programs”) throughout New Jersey, in as many municipalities as desire them.