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St. Louis Post-Dispatch
By Jeffrey Tomich
October 13, 2013

Post Dispatch Business 10/13/13

St. Louis Energy Savings Program Gets Rolling

Four Muddy Paws co-owners Jeff Jensen and Matt Brazelton have a mission to make their Lafayette Square pet boutique as eco-friendly as possible.

Their efforts include installing an energy-efficient air conditioning system, using recycled materials and upgrading to LED lighting. But when they looked to add a rooftop solar array, the $33,000 price tag (before incentives) had them in search of financing options.

In the end, they chose a new city-sponsored program, Set the PACE St. Louis, which launched in July to help property owners finance energy-efficiency projects and renewable energy systems.

For Four Muddy Paws, it was a perfect fit.

"We were looking at all different types of financing options and when this came up it made the most sense for us," Jensen said.

Set the Pace St. Louis is intended to help property owners overcome high upfront costs that can take years to recoup. Those costs often serve as a barrier to energy-savings projects that can help shrink energy bills and cut carbon dioxide emissions.

In the first three months, applications totaling more than $7 million worth of work have been received, said Byron DeLear, the head of Energy Equity Funding, the company contracted by the city to run the program.

"We've seen great interest," he said.

Set the Pace St. Louis can help finance a range of projects, from air sealing and weatherization to installation of high-efficiency furnaces and heat pumps to solar energy systems. Payback terms extend up to 20 years depending on the work performed.

Financing amounts range from a minimum of $2,500 to a maximum equal to 10 percent of a property's value. Program administrators say interest rates offered are "competitive" for land-secured loans.

The St. Louis program was enabled by state law passed in 2010 that allows local governments to issue bonds to finance efficiency projects or solar panel installations. Proceeds from the bond sales are borrowed by property owners who make repayments over a period of up to 20 years through property tax assessments.

Missouri is one of 30 states that have approved Property Assessed Clean Energy, or PACE, laws.

But the St. Louis program works differently than most others across the country.

Instead of relying on the sale of bonds and repayment of loans through tax assessments, the St. Louis program uses a single lender, PNC Bank, and most borrowers pay the bank directly.

DeLear and Tom Applebaum, Energy Equity Funding's president, said the relationship with PNC allows for more flexibility and less red tape and achieves the same objectives.

So far, more than a dozen contractors have been qualified to work on Set the Pace St. Louis projects. And, as was the case with Four Muddy Paws, the program is looking to the network of solar installers, energy auditors and other businesses to help with marketing.

While one of the obvious benefits of energy-savings projects is reduced utility bills, city officials see a public benefit, too.

The city used $95,000 of a stimulus grant to develop the outline for Set the Pace St. Louis, said Catherine Werner, St. Louis' sustainability director. The program is overseen by a seven-member board.

The program is one part of the city's broader sustainability plan that includes a goal of slashing greenhouse gas emissions by 25 percent by 2020 and 80 percent by 2080. Because buildings are the source of almost 80 percent of St. Louis' greenhouse gas emissions, retrofitting older homes and offices to use less energy can play a big part in helping the city achieve its goal, Werner said.

For now, the focus of Set the Pace St. Louis is commercial building owners.

While some more traditional financing options are available for homeowners, such as energy-efficiency mortgages, PACE options are limited because of concerns among federal regulators.

Not long after Missouri's PACE legislation was signed into law, similar programs across the nation were halted because the Federal Housing Finance Agency raised red flags.

Specifically, the FHFA, which regulates Fannie Mae and Freddie Mac, grew concerned that PACE liens were senior to mortgages, meaning they would be repaid first in the event of default.

Concerns about how the PACE loans are structured haven't gone away.

Still, DeLear said Set the Pace St. Louis is looking at ways to open up additional financing options for homeowners.

"We are vigorously exploring different options on the residential side," he said.


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