Governor’s Energy Development SummitJune 4, 2014

Salt Lake County Pilot C-PACE Program—a public/private partnership.

Kimberly Barnett, Salt Lake County Mayor’s OfficeAlan Westenskow, Zions Bank Public Finance

Why is SLCo Interested in C-PACE?• The County is interested in forging cooperative partnerships and

leveraging resources for a C-PACE pilot program. We hope to identify the benefits vs. challenges, educate other key County officials on the model, and evaluate the feasibility of future C-PACE projects.

Air Quality - Addressing energy savings, water efficiency, CO2 emissions reduction, and more in our commercial building sector is an important piece of the air quality solution.

Eliminating Financial Barriers - The County recognizes that financing can be a significant barrier for businesses to complete significant energy-efficiency and renewable projects that can ultimately lower their energy expenses.

Who Are We Looking to Partner With?

• Commercial sector with significant energy-efficiency and renewable energy projects.

• A true collaborator who will work alongside us to accomplish the first C-PACE project in SLCo.

PROJECTS MUST be located in Salt Lake County and comply with all requirements outlined in Senate Bill 221, Assessment Area Act Amendments

IDEAL PROJECTS WILL HAVE a financing partner already identified and will be larger in size and provide significant energy savings to the building.

Characteristics of Different Types of Bonds

Source: Zions Bank Public Finance

Bond Type Security/Collateral Source of Repayment

1General Obligation

(G.O.) BondsAd valorem property taxes

G.O. property tax levy, general fund of other revenues

2Revenue Bonds

(Eneterprise Fund)Revenues from water, sewer, electric or other enterprise funds

Enterprise fund revenues

3Excise Tax Revenue

BondsRevenues from sales tax and other excise taxes

Excise taxes or other available general fund revenues

4Lease Revenue

BondsLease revenues and financed improvements

Lease revenues or other revenues

5Tax Increment

BondsTax increment from tax base growth in CDA,EDA or RDA

Tax increment revenues

6Special

Assessment BondsAssessed property within Special Assessment Area

Revenues collected from special assessments against property

Traditional Special Assessment Areas (SAA)

Type Description Parcel Count % Taxable Value % Assessment* %C Commercial 250 4.37 122,251,751.00$ 15.75 1,141,270.16$ 10.15L Land 100 1.75 7,441,665.00 0.96 152,114.79 1.35M Multi-Housing 54 0.94 20,841,524.00 2.68 203,940.17 1.81O Other 24 0.42 16,522,160.00 2.13 143,196.90 1.27R Residential 4687 81.91 553,360,018.00 71.27 8,600,116.98 76.50X Condos 607 10.61 55,987,005.00 7.21 1,001,645.00 8.91

Total 5722 100.00 776,404,123.00$ 100.00 11,242,284.00$ 100.00

• Traditional SAAs are used to finance curb, gutter, water, sewer, road and other publicly owned improvements

• Counties do SAAs for unincorporated areas

• Cities do SAAs for incorporated areas

• C-PACE uses SAA tool for privately owned renewable energy and energy efficiency improvements for commercial properties

Salt Lake County Millcreek SID (SAA)

Benefits of C-PACE/QECBs1. Senior Lien - Senior lien on property pledged as

collateral, resulting in possible lower interest rate2. Increased Value - Type of improvements financed

may increase the value of building for loan purposes

3. Assessment Tied to Property - Assessment can stay with property and transfer with different owner

4. QECB subsidy - Possibly qualify for lower interest rate from Qualified Energy Conservation Bond (QECB) direct pay federal subsidy

5. Transfer Payment to Tenant - Building owner can pass payment of assessment onto tenant as a “tax” such as in a “triple net lease” arrangement

C-PACE/QECB Trade-offs1. Increased costs of issuance from issuing special

assessment bonds2. Difficult to do individual small projects and have

economics of project pencil out (i.e. projects less than $300,000 to $500,000 may be difficult to do on their own)

3. QECB projects must pay Davis-Bacon wages on entire project improvements

4. QECB subsidy may be subject to reduction from federal government sequestration

5. Note: the credit of the Issuer (i.e. Salt Lake County) is likely not pledged, just the credit of the Borrower

Qualified Energy Conservation Bonds (QECBs)

• QECBs can be used for renewable energy, energy efficiency, “green community programs” and other qualified uses for both public and private projects

• Total Utah QECB Volume Cap Received - $28,389,000• Salt Lake County allocated $6,392,683

▫ Already used $1,917,804 allocation for Salt Palace solar▫ Remaining allocation of $4,474,879

• Approximately $21,470,230 of Utah allocation remaining

• Allocation currently does not expire, however there has been recent discussion in Congress of imposing an expiration date

• http://business.utah.gov/programs/pab/energy-conservation-bonds/

Treasury Direct Tax Credit Rate• QECB subsidy is calculated by taking 70% of the “Tax

Credit Rate”• Example: 4.39% X 70% = 3.07% subsidy• For a $100 loan, borrower receives a “direct pay”

subsidy of $3.07 from federal government to offset interest paid to lender

https://www.treasurydirect.gov/GA-SL/SLGS/selectQTCDate.htm

• True Interest Cost goes from 5.38% to 2.21% (5.38% -3.17%=2.21%)Date Principal Coupon Interest Subsidy Total P+I

06/01/2015 7,291.00 5.380% 17,131.53 (10,094.16) 14,328.3706/01/2016 7,496.00 5.380% 19,145.87 (11,281.03) 15,360.8406/01/2017 7,912.00 5.380% 18,732.37 (11,037.42) 15,606.9506/01/2018 8,348.00 5.380% 18,296.05 (10,780.33) 15,863.7206/01/2019 8,806.00 5.380% 17,835.76 (10,509.12) 16,132.6406/01/2020 9,292.00 5.380% 17,350.15 (10,222.99) 16,419.1606/01/2021 9,804.00 5.380% 16,837.73 (9,921.06) 16,720.6706/01/2022 10,346.00 5.380% 16,297.06 (9,602.47) 17,040.5906/01/2023 10,915.00 5.380% 15,726.56 (9,266.33) 17,375.2306/01/2024 11,518.00 5.380% 15,124.57 (8,911.65) 17,730.9206/01/2025 12,152.00 5.380% 14,489.44 (8,537.40) 18,104.0406/01/2026 12,822.00 5.380% 13,819.29 (8,142.55) 18,498.7406/01/2027 13,530.00 5.380% 13,112.13 (7,725.87) 18,916.2606/01/2028 14,277.00 5.380% 12,366.00 (7,286.25) 19,356.7506/01/2029 15,064.00 5.380% 11,578.68 (6,822.34) 19,820.3406/01/2030 15,893.00 5.380% 10,748.01 (6,332.87) 20,308.1406/01/2031 16,771.00 5.380% 9,871.54 (5,816.44) 20,826.1006/01/2032 17,696.00 5.380% 8,946.65 (5,271.46) 21,371.1906/01/2033 18,670.00 5.380% 7,970.84 (4,696.50) 21,944.3406/01/2034 19,701.00 5.380% 6,941.20 (4,089.82) 22,552.3806/01/2035 20,788.00 5.380% 5,854.75 (3,449.66) 23,193.0906/01/2036 21,933.00 5.380% 4,708.42 (2,774.21) 23,867.2106/01/2037 23,144.00 5.380% 3,498.84 (2,061.52) 24,581.3206/01/2038 24,418.00 5.380% 2,222.57 (1,309.53) 25,331.0406/01/2039 25,767.00 5.380% 875.93 (516.05) 26,126.8806/01/2040 2,210.00 5.380% 9.91 (5.83) 2,214.08

Total $366,564.00 - $299,491.85 (176,464.86) $489,590.99

QECB Direct Pay Subsidy Example

Next Steps• Solicit Request for Information (RFI) • Review RFIs with County C-PACE team and

make preliminary determinations on projects they may be a good fit.

• Solicit additional detailed information from a handful of projects and make a decision on which projects to include in the pilot program.

• Complete other necessary internal steps such as presentations and formal approval from the County's Debt Review Committee and the County Council.

Thank You!Kimberly BarnettSalt Lake County Mayor’s Officekbarnett@slco.org

Alan WestenskowZions Bank Public Finance Alan.Westenskow@zionsbank.com