TO: Mayor and City Council
THROUGH: Krishna Namburi, Interim City Manager
FROM: Kristin Retherford, CPD Director
SUBJECT:
title
Should the Council direct Staff to investigate the possible authorization of the CPACE Program within the City of Salem.
Ward(s): All Wards
Councilor(s): All Councilors
Neighborhood(s): All Neighborhoods
Result Area(s): Strong and Diverse Economy; Welcoming and Livable Community.
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SUMMARY:
summary
To present the CPACE (Commercial Property Assessed Clean Energy) Program to the Council and gauge interest in creating an ordinance to implement the program in the City of Salem, Oregon.
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ISSUE:
Shall City Council authorize staff to explore and make a recommendation on implementing a CPACE program in the City of Salem.
RECOMMENDATION:
recommendation
Authorize staff to explore and make a recommendation on implementing a CPACE program in the City of Salem.
body
FACTS AND FINDINGS:
Commercial Property Assessed Clean Energy (CPACE) is an innovative financing structure that enables owners of commercial, industrial and multifamily residential properties (with five or more units) to obtain long-term financing for energy-efficiency improvements and renewable energy retrofits. The Oregon Statutes (ORS 223.680 and ORS 223.685) authorize local governments to establish property assessed financing programs that help property owners finance energy, water, renewable, and seismic improvements to qualifying real property. The financing is secured with a lien on the benefitted property in the manner and with the same priority as a lien for the assessment of local improvements (LI) authorized by ORS 223.393. The LI lien is an established mechanism that has been used by municipalities for decades to finance projects such as street improvements, water, sewer and street lighting.
In Oregon, CPACE financing is available in four categories: energy efficiency, renewable energy, water conservation, and seismic rehabilitation improvements. Improvements that reduce greenhouse gas emissions would qualify, provided that the improvements also conserve energy or result in renewable energy improvements. A voluntary CPACE loan is secured by a senior lien on the property and paid back over time; tax liens and other government assessments remain superior to the CPACE lien. Like other assessments, CPACE financing is non-accelerating, which means only current or past due payments can be collected, while future payments are the responsibility of whomever owns the property at the time. The CPACE repayment obligation transfers automatically to the next owner if the property is sold. In the event
of default, only the payments in arrears are due. This arrangement spreads the cost of qualifying improvements - such as energy-efficient HVAC equipment, upgraded insulation, new windows, solar installations, or seismic upgrades - over the useful life of the measures.
Individual cities and counties may now take action to create their own CPACE programs and help buildings become more efficient and resilient. Creating a CPACE program is simple: first, a city or county adopts a resolution and guidelines that govern how its CPACE program works. Second, since the repayment of the CPACE financing is between a private lender and a property owner, when the lender’s lien against the property is filed, a county only has to review the lien application for compliance with the CPACE state law and then record a unique agreement that includes the acknowledgment of a special property “benefit assessment” by the city/county. Cities and counties can charge fees for this program to cover administrative costs.
State enabling statutes require a county or city ordinance for the program to be implemented. City staff would be responsible for recording the CPACE property lien and setting up a default mechanism for a private lender to recoup losses in case of a default. To be clear, the City would not be party to the transaction and City finances would be separate from the program’s finance.
BACKGROUND:
The CPACE program has been in existence for several years. Recently, the program has become more popular, especially for the development of new commercial buildings. This popularity is tied to both an interest in new resilience-centered construction methods and systems and because the program has become financially advantageous for developers. There are several developers who have shown interest in utilizing CPACE for development projects. To date, City staff has not conducted extensive outreach efforts with developers or property owners.
The City’s primary role is to enable the program through adoption of an ordinance which allows for an assessment to be placed on the property (hence the title “property assessed” clean energy), voluntarily consented to by the property owner in order to secure the CPACE financing; and then to set up a mechanism for a private lender to recover delinquency payments in case of a default. The City does not have a fiduciary role in the program and City funds are not at risk.
Multnomah County established the first CPACE program in Orgon, which has been branded ‘Property Fit’ and is administered by Prosper Portland, the economic development agency for the City of Portland. Deschutes, Washington and Hood River Counties have also adopted ordinances and developed programs.
CPACE Assessment
Benefits to the City
If implemented, the CPACE program would stand to benefit the City in several ways. Foremost, the program would encourage the use of more resilient and energy efficient building systems within the City. These systems and building methods would increase local resilience to the effects of climate change through improvements to air quality, reduced energy costs, conservation of energy and water, and reduced greenhouse gas production and, in the case of seismic upgrades, help to mitigate life and safety risks caused by earthquakes.
The CPACE program would also provide positive economic benefits. Because CPACE can lower the financing costs of building construction (and lower ongoing operational costs), it can act as a financial incentive for development
CPACE: Examples of Eligible
Building Improvements
▪ EV Charging
▪ Solar and wind energy
▪ Boilers, chillers, and furnaces
▪ HVAC upgrades and controls
▪ Seismic retrofits
▪ Energy storage
▪ Combined heat and power
▪ Water conservation
▪ Building envelopes
Next Steps
If City Council adopts the staff report recommendation, staff will:
• Conduct in-depth research about possible CPACE program implementation in the City of Salem, including a full legal, financial, and capacity/resource review.
• Confirm the entire process necessary, under Oregon State Statutes, to establish a CPACE program, including consultation with affected taxing jurisdictions (if any) and public engagement aligned with City best practices.
• Identify CPACE program and policy choices and package those into implementation options for the Council’s consideration.
• Based on Council feedback, draft a Program Implementation Plan and draft ordinance for the Council’s consideration
Dana DeKlyen
Assistant Director, Urban Development
Attachments:
1. Information Report