HB 1090 Offers C-PACE Funding to Promote Cleaner Energy on Commercial Property

Is House Bill 1090 the closest South Dakota will get to a Green New Deal?

Representative David Johnson (R-33/Rapid City) brings HB 1090 to House Commerce and Energy Monday morning in hopes of allowing counties to fund—not just incentive, but outright finance—energy conservation and renewable energy production and use on commercial property. Here’s how HB 1090 would work:

Counties create a “commercial property assessed clean energy” (C-PACE) zone. This zone can be one neighborhood, several adjoining or separate spots, or the whole county.

Within the C-PACE zone, any commercial, industrial, agricultural, or multi-(i.e., five or more)-family residential property can apply to the county for funding for “energy improvement” projects, defined in HB 1090 as “any installation or modification of equipment, device, or materials intended to decrease energy consumption, reduce demand, promote more efficient use of water, electricity, natural gas, propane, or any other form of energy on property that is approved as a utility cost-savings measure by a county.” HB 1090 appears to include installation of on-site renewable energy systems in energy improvement projects.

The county reviews applications, approves worthwhile projects, and makes funding available, either from the county coffers or from other capital providers, as a loan. The property owners then pay back the loan via an additional assessment placed on the property by the county. Borrowers pay back their C-PACE funding right along with their regular property tax; if they don’t, the county can foreclose on the property.

First, kudos to Representative Johnson for bringing honest, serious legislation. HB 1090 is 1,516 words of new language to be written into statute. But HB 1090 didn’t spring wholly from Johnson’s head. C-PACE legislation exists in Colorado, Rhode Island, Delaware, and 33 other states and is funding actual energy projects in 20 states and the District of Columbia.

And it appears to work:

PACENation, the national organization that advocates for PACE, reports that since 2009 more than $688 million has been invested in clean energy projects nationwide. It estimates that PACE projects have created 10,300 jobs, generated more than 6.3 million MWh of energy savings, and reduced CO2 emissions by more than 3.1 million metric tons (the equivalent of taking 657,000 cars off the road for one year) [Jennifer Runyon, “Delaware Joins 34 States in Passing C-PACE Legislation; A Cleaner Energy Supply to Follow,” Renewable Energy World, 2018.09.10].

Heidi Kolbeck-Urlacher’s C-PACE Fact Sheet via the Center for Rural Affairs offers all sorts of reasons to enact HB 1090, including three success stories from Minnesota and Nebraska:

• Main Street Repeats, a thrift store located in Good Thunder, Minnesota (population 583), recently utilized C-PACE funding for an LED lighting project with a projected cost of $9,980. Owners utilized a rebate from their local utility, Xcel Energy, to save an additional $1,728, dropping the cost to $8,252. This improvement will result in $2,215 in estimated annual energy savings, and a total net savings of $19,979 over the life of the project.
• Bob and Steve’s Holiday gas station in Worthington, Minnesota (population 13,247), utilized C-PACE to install new LED lights, coolers and compressors, and HVAC. According to an energy audit, these projects have the potential to save a conservative estimate of $6,420 annually, which means a total savings of $96,316 in electricity costs over the 15-year loan.
• In December 2018, Petros PACE Finance, LLC, announced the closing of a $24.9 million transaction in Omaha, Nebraska, to redevelop a two-block site as part of an urban renewal effort for downtown Omaha. The project will fund C-PACE eligible upgrades for the $205 million mixed-use development called the Capitol District. The development includes a 333-room Marriott hotel, a 223-unit apartment building, and 90,000 square feet of retail space. The project will consist of energy efficiency measures that will generate substantial savings over the 22-year term of financing [Heidi Kolbeck-Urlacher, “Commercial Property Assessed Clean Energy (C-PACE),” Center for Rural Affairs, 2019.02.08].

C-PACE costs the state nothing. C-PACE costs the counties nothing: they arrange a loan and get paid back in full by an additional assessment. Unlike tax increment financing, C-PACE doesn’t put increased tax value on hold for other taxing entities: the C-PACE assessment appears to be separate from the normal property tax levy, so if the energy improvement raises the value of the property, the school district, the township, the water district, etc. all still get their full share of the rising value right away.

And if done right, C-PACE doesn’t cost the property owner anything. Structured properly, the C-PACE assessment should be less than the amount that will be saved in energy and/or water bills on the property.

Win, win, win, win—I’m counting four wins and zero losses. The only thing that could stop this bill is if someone suggests getting C-PACE funding to install a biofuel generator running on home-grown hemp and Governor Noem goes “Holy smokes! We’re not ready!”

House Bill 1090 goes before House Commerce and Energy Monday, February 11, 10 a.m., Capitol Room 464. Among Commerce and Energy members is Representative Steven McCleerey (D-1/Sisseton), who told Dakota Rural Action last fall that he “absolutely” supports C-PACE as a way to promote solar energy, “the next business that the State should invest in.” With Rep. McCleerey’s help, Rep. Johnson could sell the Legislature on following the majority of other states in making one more source of funding available for green energy projects.

Friendly Amendment: Section 4 Condition 3 is grammatically incomplete. It starts out seeking to set some condition for the ratio of the CPACE assessment to the total value of the property, but in its complex noun modifiers forgets to conclude with a predicate and thus fails to state what the ratio should be. Fix that!