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PROGRAM OVERVIEW PROPERTY ASSESSED CLEAN ENERGY PACE Commercial Energy Improvement Funding Perspective: Property owner Slide 2 PACE Defined PACE, or Property Assessed Clean Energy, is financing vehicle for private property owners to access the municipal bond market to finance the following: Clean energy improvements Energy efficiency improvements Energy related measures Slide 3 Why PACE Works: An Essential Element PACE provides investors with an incentive to provide capital for energy projects. The PACE Act provides that a EE or RE project financing is secured by a special property tax assessment which is collected in the same manner as ad valorem taxes. This gives investors a superior security interest. Addresses key barriers to EE / RE project financing: Long term fixed rate financing Up-front capital Balance Sheet Debt Slide 4 Bank vs. Bond Market Bank Market: Regulatory Restrictions Capital Ratio Re-pricing requirement Traditional underwriting Limited Market Vs. Muni Market Coordinating terms Virtually unlimited market PACE addresses a mismatch between the appropriate investor market and the energy borrower. Slide 5 Why PACE: Structural STRUCTURAL REASONS TO USE PACE Make necessary building improvements Save money on operating costs Improve tenant satisfaction and retention Spread the costs over the life of the improvements, not the implementation time Compete with new construction and other building owners Improve the environment Slide 6 Why PACE: Financial FINANCIAL REASONS TO USE PACE Zero up-front investment No impact on capital budget Off-balance sheet only current year expense Long term Fixed Cost Assessment transfers to new property owner No acceleration of obligation Split Incentives - pass costs to tenants Slide 7 Eligible Property Types & Projects Property Types The District will accept applications for project funding related to the following property types: Commercial Industrial Agricultural Multi-family Not-for-profit Public facilities Energy Efficiency and Renewable Energy funding applications proposing any acquisition, installation, or modification on public or private property designed to reduce the energy consumption of the property, includes a wide variety of property types. Even local governments may apply for funding of energy projects which may receive the additional benefit of tax- exempt rates. While the District currently funds commercial property improvements it is expected that residential funding will be available in the future. Eligible Measures Energy efficiency improvements include any acquisition, installation, or modification of publicly or privately owned property designed to reduce the energy consumption including but not limited to: Insulation, heating and cooling distribution systems, storm windows and doors, multi-glazed windows and doors, heat-absorbing or heat-reflective windows and doors, and other window and door improvements designed to reduce energy consumption, automatic energy control systems, heating, ventilating, or air conditioning distribution system modifications and replacements, weatherizing, replacement or modification of lighting fixtures, energy recovery systems, daylighting systems. Renewable energy improvement includes any acquisition and installation of a fixture, product, system, device, or combination thereof on publicly or privately owned property that produces energy from renewable resources, including, but not limited to: photovoltaic systems, solar thermal systems, wind systems, biomass systems, or geothermal systems. Slide 8 Property Type Categories Agricultural buildings Commercial buildings Residential buildings Educational buildings Government buildings Industrial buildings Military buildings Parking and storage Religious buildings Transport buildings Infrastructure Power Stations Other Current MCED Project Types in Process: Slide 9 PACE Case Study: Simon Property Group Source: PACENow Simon Property Group immediately recognized the benefits of long-term, property tax like structure. The company was motivated by economic savings and a desire to support sustainability in general. Through the PACE program Simon has financed over $64 million in commercial and residential projects to date. Project Financing PACE Assessment: $463,411 Term: 10 years Rate: 7% fixed Building Details Size: 699,000 sq. ft. Year Built: 1971 Building Value: $240 million Improvement: Reflective Cool Roof Increase tenants comfort and satisfaction Improve overall building performance Reduce energy costs Zero up-front cash investment Ability to pass payments through to tenants PACE assessment stays with the property upon sale Long-term financing Worlds largest REIT PACE adopter Slide 10 INVESTOR AND PROPERTY MANAGER CONSIDERATIONS Zero up-front investment Without using valuable equity or owner capital, PACE allows you to do the following: Make property repairs Implement sustainable improvements Avoid additional property balance sheet debt Preserve property capital improvements budget Reduce variable operating costs Increase NOI and building value Improve return on equity Transfer PACE payments to tenant via tax pass through clause in lease agreement Slide 11 PACE Project Example Source: PACENow 1,290,000 Slide 12 MISSOURI CLEAN ENERGY DISTRICT Our Purpose: Bringing Life Back to Communities The Missouri Clean Energy District is a political subdivision established to provide unlimited funding for energy efficiency and renewable energy projects. Funding available now can finance private non-residential property for all types of business owners as well as for local government projects. Local GovernmentsProperty OwnersEnergy Contractors Local governments can provide access to funding by adopting a membership ordinance or resolution to join the District. There is no cost, liability or administrative burden involved. The District does all the work for its members. Projects are funded 100% and repaid through property taxes. The obligation attaches to the property, not the individual borrower, creating a way to pay for the improvements if the property is sold. Add value for your clients by introducing PACE as an option to fund upgrades, and projects that may have stalled due to lack of available funding. The District can connect you and your clients with capital. Slide 13 WORKING TOGETHER, AND MAKING IT WORK It must work for everyone if it is to work for anyone! No single municipality alone can establish a truly sustainable PACE program. Even the largest of municipalities havent the capacity for such a program. Therefore, the District has followed the best practice for implementation by providing access to capital through municipal membership in the District. The PACE financing mechanism provides relatively small funding amounts to individual property owners and then bundles multiple contracts together for the purpose of accessing the municipal bond market. Certain efficiencies of scale are necessary to spread financing costs. It is for that reason that pooling of projects from many communities is needed for sustainability. STRENGTH IN NUMBERS By taking the simple steps required for improving energy security, local communities throughout our state can reduce reliance on ever increasing energy costs and improve energy security for us all. Slide 14 Missouri Member Communities Current Membership: Belton Branson Cassville Charlack Cole County Cooper County Doniphan Ferguson Galina Hartville Hazelwood Hollister Independence Jefferson City Jackson County Kansas City Kirksville Lamar Mercer County Mississippi County Nixa North Kansas City OFallon Olivette Otterville Ozark Ozark County Peculiar Pilot Grove Reeds Spring Sullivan County Taney County Town & Country Warrensburg West Plains A Developing Landscape Approx. 25% Mo. Pop. Slide 15 REVIEW: How PACE Works Local government joins PACE benefit district Building owners choose cost saving projects District arranges financing add PACE assessment to property tax roll Building owner pays PACE assessment with other property taxes Slide 16 Tip the Scales to Your Advantage Commitment of capital REBATE + PACE ROI Slide 17 THANK YOU Our website contains PACE webinars, newsletters, latest reports on energy efficiency, PACE program materials, videos on PACE, and other relevant information. There are endless ideas for EE/RE projects. Please check out our site for summary information of other sources and offerings related to the goal of EE/RE implementation. Additionally, the U.S. Department of Energy released the following documents on commercial PACE: Commercial PACE Primer.Commercial PACE Primer. The U.S. Department of Energy. Power Point. 2010. MCED Resources Page. MCED Resources Page. Includes a voluminous documents and resources related to how PACE works. Further Resources Please visit MCED.mo.gov for Program Details & Contact Information.MCED.mo.gov Representatives of the Missouri Clean Energy District or the Missouri Small Business & Technology Development Centers are available as a resource to community councils, boards and commissions.