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Fayetteville to Become State's First Energy Improvement District

City Council votes unanimously to establish local Property Assessed Clean Energy (PACE) program.
FAYETTEVILLE, AR (News release) - The Fayetteville City Council unanimously enacted an ordinance Tuesday that will make the city  the first community in Arkansas to take advantage of the Property Assessed Clean Energy (PACE) financing program (Act 1074), which was enacted by the Arkansas legislature earlier this year, according to the Arkansas Advanced Energy Association (AAEA).

With strong support from Mayor Lioneld Jordan, the Council voted 7-0 to enact an ordinance creating Energy Improvement District No. 1 effective on November 15, 2013.    

The Mayor and council will now appoint seven members of a PACE Board of Directors and plan to formally launch the program after the first of the year, 2014. One member will be appointed by the Mayor and six will be selected by the City Council to serve a term of two years. 

"I am proud that the City of Fayetteville is creating the first PACE district in Arkansas," Mayor Jordan said. "PACE will provide green jobs that will help build the future of Fayetteville."

"The security of tying the repayment of loans to property tax assessments combined with low default rates allow PACE to offer very low and extremely attractive interest rates for these improvement loans," said Peter Nierengarten, City Sustainability and Strategic Planning Director. "PACE is a completely voluntary program that enables private investment for the purpose of energy savings."

Signed into law by Governor Beebe in April 2013, the Arkansas local-option PACE program authorizes the voluntary creation of energy improvement districts to fund loans for 100 percent of the cost of energy savings projects by interested property owners. The loans are repaid via a special assessment on the owner's property. Loan payments are generally less than the amount of energy savings achieved, so most business owners experience an increase in cash flow. Without access to low-cost financing opportunities, Arkansas property owners must typically bear the upfront costs of energy savings projects, an obstacle that has stymied many energy savings projects in Arkansas.  

The Fayetteville PACE Board will assume responsibility for overseeing design and administration of the PACE program, and the ordinance stipulates that the City of Fayetteville will incur no debts or obligations as a result of agreements entered into by the PACE Board.

The City Council received a letter of support for the program from AAEA Executive Director Steve Patterson. In the letter, Patterson noted that since the first PACE financing mechanism was enacted by the State of California in 2008, 30 states have adopted PACE-enabling legislation with 24 having actually launched programs. AAEA continues to monitor and analyze these programs to create a catalogue of best practices and case studies from participating regions that demonstrate clear advantages for communities, commercial property owners and the energy savings industry. Here are just some of the conclusions we can draw:
  • Interest rates on PACE loans that account for 100 percent of the project cost are averaging between 4.75 percent and 7 percent across the country;
  • Size of projects range from around $20,000 for a small business to millions of dollars for large properties like shopping centers or office complexes;
  • Business owners are increasing their company's cash flow enabling them to retain jobs and become more competitive in the marketplace;
  • Existing mortgage lenders support projects that meet their clients' objectives and increase value of their collateral;
  • Energy service contractors are generating new sales as a result of PACE programs;
  • Local governments like PACE because it creates jobs, generates economic activity with no added credit risk;
  • Private market investors like PACE because assessment liens are a proven, strong credit.
"AAEA applauds the efforts of Mayor Jordan and the City of Fayetteville for pioneering this important program in Arkansas," said Patterson. "We look forward to working with Fayetteville and future PACE improvement districts that will empower Arkansas property owners who want to invest in energy efficiency improvements, water conservation improvements and renewable energy projects, and in turn create jobs, expand local economies, and reduce energy usage."

PACE addresses one of the largest barriers to energy savings retrofits - up front financing and short-term loans. In testimony before legislative committees during General Assembly consideration of PACE earlier this year, AAEA energy savings company CEOs estimated potential job growth for their companies at 30 percent once PACE is deployed in their respective regions.

Click here to read a summary of the Property Assessed Clean Energy (PACE) legislation.
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