Source: http://brazoscountytx.gov/Index.aspx?NID=530
Timestamp: 2019-04-26 00:51:08+00:00

Document:
PACE is an innovative financing program that enables commercial, industrial, large multi-family, and agricultural property owners to obtain low-cost, long-term financing for water conservation, energy- efficiency, and renewable energy projects. Participants will then repay those loans through a property assessment imposed by the local government at the request of the property owner. To find out if PACE financing may work for you contact the Texas Pace Authority.
This report is adopted by the Brazos County Commissioners Court for the Brazos County Property Assessed Clean Energy (PACE) Program (the "program"), as set forth in Tex. Local Gov’t code Sec. 399.009.
Brazos County and its constituents benefit when older existing buildings are modified with new technology and equipment that increases energy efficiency and reduces water consumption. As described in this Report, Brazos County is establishing the commercial PACE Program to encourage private sector investment in energy efficiency and water conservation. The PACE program will be offered to property owners on a strictly voluntary basis and will not require the use of any public funds or resources.
Authorized under the PACE Act enacted in 2013, the PACE program is an innovative financing program that enables private sector owners of privately owned commercial, industrial, and multi-family residential properties with five or more dwelling units to obtain low-cost, long-term loans to pay for water conservation, energy-efficiency improvements, and renewable energy retrofits. PACE loans provide up to 100% financing of all project costs, with little or no up-front out-of-pocket cost to the owner. The 2015 legislative session streamlined the process.
Loans made under the PACE Program will be secured by assessments on the property that are voluntarily imposed by the owner. Assessments may be amortized over the projected life of the improvements. The annual utility cost savings derived from improvements financed with PACE loans are expected to exceed the amount of the annual assessment payments. In turn, these improvements are able to generate positive cash flow upon installation because the debt service will be less than the savings.
The Brazos County PACE program is a strictly voluntary program. All private sector owners of Eligible Properties located within the Brazos County PACE region may participate in PACE financing. "Eligible Properties" include commercial, industrial, and multi-family residential properties with five or more dwelling units. Government, residential , and undeveloped property and property undergoing development at the time of the assessment are not Eligible Properties.
PACE financing may be used to pay for Qualified Improvements to Eligible Properties. “Qualified Improvements” are permanent improvements intended to decrease water or energy consumption or demand, including a product, device, or interacting group of products or devices on the customer’s side of the meter that use energy technology to generate electricity, provide thermal energy, or regulate temperature. Under the PACE Act, products or devices that are not permanently fixed to real property are not considered to be Qualified Improvements.
1 This encompasses single family residential and any multi-family properties less than five unites.
unattractive returns on investment, split incentives between landlords and tenants, and uncertainty of recouping the investment upon sale of the property.
By financing Qualified Improvements through the program, property owners may achieve utility cost savings that exceed the amount of the assessment and reduce their exposure to utility price volatility. As a result, the value of the property will be enhanced, and the owner will only be obligated to pay the assessment installments that accrue during its period of ownership of the property. Additionally, by investing in energy efficiency and water conservation with PACE financing, property owners may also qualify for various rebate, tax credit, and incentive programs offered by utility providers and state or federal governmental authorities to encourage these types of investments.
Brazos County is experiencing significant growth. To meet the housing needs of the collegiate community and permanent residents of Brazos County, a large portion of the multi-family housing stock needs renovation that will result in energy and water saving measures. Revitalization of these multi-family housing properties will help preserve affordable housing. Giving Brazos County small businesses and industrial companies the financing necessary to retrofit their infrastructure with more efficient equipment that lowers operating expenses will make these businesses more competitive. A Brazos County PACE program will enable Nonprofit organizations to improve their properties without diverting core mission dollars or donations.
Finally, there are multiple regulatory schemes being promulgated by EPA that will have significant impacts on air quality in Texas. For example, adjusting the NAAQS to a lower standard will increase the difficulty for the County to maintain its attainment status. Being non-attainment for priority pollutants in the Clean Air Act endangers federal transportation funding. Through the reduction in energy consumption, as a result of the PACE program, there will be a decreased demand for power resulting in lower emissions from power plants.
The PACE program requires minimal support from the County. It is designed to be self-sustaining. Furthermore, because the PACE program is tax neutral, it achieves all of the benefits listed in this Report without imposing a burden on the County’s general fund.
PACE loans are attractive to lenders because they are very secure investments. Like a property tax lien, the assessment lien securing the PACE loan has priority over other liens on the property. Therefore, the risk of loss from non-payment of a PACE loan is low compared to most other types of loans. PACE assessments provide lenders with an attractive new product to assist existing and new customers in addressing an almost universal pent-up demand for needed commercial and industrial property equipment modernization. In order to protect the interests of holders of existing mortgage loans on the property, the PACE Act requires their written consent to the PACE assessment as a condition to obtaining a PACE loan.
PACE loans provide attractive sources of financing for water and energy saving retrofits and upgrades, thereby encouraging property owners to make substantial investments in existing commercial and industrial buildings. As a result, PACE will unlock business opportunities for contractors, engineers, and manufacturers throughout the commercial and industrial sectors.
Under the PACE Act, the establishment and operation of the program are considered to be governmental functions. The PACE Act further authorizes the County to enter into a contract with a third party to provide administrative services for the PACE program (the “Authorized Representative”). Brazos County may delegate administration of the PACE program to a qualified, non-profit organization that can administer the program at no cost to the County. The Authorized Representative will be funded by transaction fees paid by the parties, charitable grants or other sources of revenue. The Authorized Representative will not receive compensation or reimbursement from the County.
2 TX. Local Gov’t Code §399.019.
All lenders must have the ability to carry out, either directly or through a servicer, the bookkeeping and customer service work necessary to manage the assessment accounts.
Any lender can participate in the PACE program as long as it is a financially stable entity with the ability to carry out, either directly or through a servicer, the bookkeeping and customer service work necessary to manage the assessment accounts. The property owner, not the County or the Authorized Representative, selects the lender.
The PACE administrator will not guarantee or imply that funding will automatically be provided from a third-party lender, imply or create any approval, endorsement or certification of, or responsibility for, any lender; or create any type of express or implied favoritism for any eligible lender.
Map of Region. A map of the boundaries of the proposed region to be included in the Program is attached to this report as Exhibit 1. The region encompasses the County limits.
Form Contract with Owner. A form contract between Brazos County and the record owner of the Eligible Property is attached as Exhibit 2. It specifies the terms of the assessment under the PACE program and the financing to be provided by an Eligible Lender of the property owner's choosing.
Form Contract with Lender. A form contract between Brazos County and the Eligible Lender chosen by a property owner is attached to this report as Exhibit 3. It specifies the financing and servicing of the debt through assessments.
Authorized Representative. HB 3187 was signed into law on June 16, 2015. It authorizes Brazos County to delegate administration of the PACE program to a third-party "representative." Brazos County may delegate all official administrative responsibilities, such as the execution of individual contracts with property owners and lenders, to an Authorized Representative. This relationship will be monitored and maintained by the County Judge or his designee.
Plans for Insuring Sufficient Capital. Lenders will extend loans to finance Qualified Improvements. Financing documents executed between owners and lenders will impose a contractual assessment on Eligible Property to repay the owner's financing of the Qualified Improvements. The lenders will ensure that property owners demonstrate the financial ability to fulfill the financial obligations to be repaid through contractual assessments.
No Use of Bonds or Public Funds. Brazos County does not intend to issue bonds or use any other public monies to fund PACE projects. Property owners will obtain all financing from the Eligible Lenders they choose.
Limit on Length of Loan. One of the statutory criteria of a PACE loan is that the assessment payment period cannot exceed the useful life of the Qualified Improvement that is the basis for the loan and assessment. As part of the application process, the property owners will submit a third-party review showing the water or energy baseline conditions and the projected water or energy savings. This review will aid the Authorized Representative in making a determination that the period of the requested assessment does not exceed the useful life of the Qualified Improvement.
A description of the specific Qualified Improvements to be installed or modified on the property.
3 TX. Local Gov't Code §399.002(5).
4 TX. Local Gov't Code §399.002(3).
5 TX. Local Gov't Code §399.004.
The total amount of financing, including any transaction costs, to be repaid through assessments.
Based on this information, the Authorized Representative may issue a preliminary letter indicating that, subject to verification of all requirements at closing, the proposed project appears to meet program requirements. Based on this preliminary letter, the property owner may initiate an independent third-party review of the project and submit the project to Eligible Lenders for approval of financing.
All other information required by the Authorized Representative.
there is an appropriate ratio of the amount of the assessment to the assessed value of the property.
7 TX. Local Gov’t Code §399.009(b).
the contract is executed, and the owner must obtain the written consent of all mortgage holders.
The Eligible Lender notifies the Authorized Representatives that the owner has demonstrated the financial ability to fulfill the financial obligations to be repaid through contractual assessments.
The contract will impose a contractual assessment on the owner's Eligible Property to repay the lender's financing of the Qualified Improvements. The Eligible Lender will file "A Notice of Contractual Assessment Lien," in substantially the form in Exhibit 5 in the Official Public Records of [name] County, depending on where the Eligible Property is located, as notice to the public of the public of the assessment, from the date of filing. The contract and the notice must contain the amount of the assessment, from the date of filing. The contract and the notice must contain the amount of the assessment, the legal description of the property, the name of the property owner, and a reference to the statutory assessment lien provided under the PACE Act.
8 TX. Local Gov’t Code §399.010.
9 The servicer will be responsible for maintaining payment records, account balances, and reporting to the PACE administrator as required.).
the Qualified Improvements. Alternatively, the lender may make progress payments to the property owner as the Qualified Improvement is installed.
The assignee or transferee of the right to receive the payments executes an explicit written assumption of all of lender's obligations under the lender contract.
Verification Review. After a Qualified Improvement is completed, the Authorized Representative will require the property owner to provide verification by a qualified independent third-party reviewer that the Qualified Improvement was properly completed and is operating as intended. The verification report conclusively establishes that the improvement is a Qualified Improvement and the project is qualified under the PACE program.
Marketing and Education Services. Brazos County may subsequently enter into agreements with one or more other local governments or non-profit organizations that promote energy and water conservation and/or economic development to provide marketing and education services for the PACE program.
Quality Assurance and Antifraud Measures. The Authorized Representative will institute quality assurance and antifraud measures for the Program. The Authorized Representative will review each PACE application for completeness and supporting documents through independent review and verification procedures. The application and required attachments will identify and supply the information necessary to ensure that the property owner, the property itself, and the proposed project all satisfy PACE program underwriting and technical standard requirements. Measures will be put in place to provide safeguards, including a review of the energy and water savings baseline and certification of compliance with the technical standards manual from an independent third-party reviewer (ITPR), who must be a registered professional engineer, before the project can proceed. This review will include a site visit, report, and a letter from the ITPR certifying that he or she has no financial interest in the project and is an independent reviewer. After the construction of the project is complete, an ITPR will conduct a final site inspection and determine whether the project was completed and is operating properly. The reviewer's certification will also include a statement that the reviewer is qualified and has no financial interest in the project.
10 TX. Local Gov’t Code §399.011.
Mail to the owner a second notice of delinquency and demand for payment by both certified mail (return receipt requested) and first class mail, at least 30 days after the date of the first delinquency is continuing.
If the owner fails to cure the delinquency within 30 days after mailing the second notice of delinquency, the lender may notify the Authorized Representative of the owner's default. Pursuant to Texas Local Government Code Section 399.014(c), the Authorized Representative will initiate steps for the County to enforce the assessment lien in the same manner as a property tax lien against real property may be enforced, to the extent the enforcement is consistent with Section 50, Article XVI, of the Texas Constitution. Delinquent instalments will incur penalties and interest in the same manner and at the same rate as delinquent property taxes, according to Texas Local Government Code Section 399.014(d), and such statutory penalties and interest will be due to the County to offset the cost of collection.
If the County files suit to enforce collection, the County may also recover costs and expenses, including attorney's fees, in a suit to collect a delinquent installment of an assessment in the same manner and at the same rate as in suit to collect a property tax. If a delinquent installment of an assessment is collected after the filing of a suit, the County will remit to the lender the net amount of delinquent instalments and contractual interest collected and remit to the Authorized Representative the amount of any administrative fees collected but will retain any statutory penalties, interest, and attorney's fees collected.

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