Clean Energy Assessment Districts: A Tool to Develop More Local Renewable, Energy Efficiency Projects

June 2009

This year, with the help of VNRC and a broad network of organizations, businesses and concerned citizens, the Legislature passed a far-reaching energy bill. One of the most exciting provisions of the bill enables Vermont municipalities to create 'clean energy assessment districts' to help interested property owners more affordably finance renewable energy and efficiency projects.

Modeled after a very successful program in Berkley, California, which raised over $1 million to spur local renewable energy investments,the bill had broad support from VNRC, the Vermont Energy Investment Corporation, the Vermont League of Cities and Towns, Burlington Electric Department and many others. Find out much more about CEADs, also know as 'property assessed clean energy.' Check out PACEnow.org or the Renewable and Appropriate Energy Laboratory, including their 'how-to guide.'

Clean Energy Assessment Districts - A New Tool to Help Vermonters Invest in Clean Energy*

Vermonters are more interested than ever before in investing in energy efficiency and renewable energy improvements for their homes and businesses. They know that these investments are good for the environment and financially beneficial over time. Vermont policymakers have an interest in encouraging these investments, because they help meet not only greenhouse gas emissions reduction targets, but also the aggressive building energy efficiency goals established in Vermont statutes.

One major barrier to making these investments is a lack of sufficient upfront capital. For property owners who don’t have the cash to make these investments in major energy improvements, there are few options available that have the necessary combination of easy qualification, attractive interest rate, and a relatively long repayment term. A statute that enables cities or towns to establish a Clean Energy Assessment District (CEAD) would provide an innovative tool to overcome this barrier. CEAD offers property owners a new way to install renewable energy and energy efficiency upgrades with little or no upfront costs.

CEAD is a voluntary mechanism allowing individuals wishing to make major energy improvements to opt in to a special assessment “district”.  Energy efficiency and / or renewable energy improvements are funded by taxable municipal bonds or other municipal debt, repaid over a 20-year period as an additional line item on the participating property owners’ tax bills. The longer payback period makes it more likely that these projects can produce a positive cash flow on a monthly basis, in comparison to the 5-year loan products that are typically available in the commercial market.

Participation in CEAD would be voluntary for municipalities as well. The enabling legislation would allow interested municipalities to offer the program if they chose to do so. Just as the program is optional for property owners, it would be optional for municipalities, based on the interests and priorities of individual communities.

Summary of CEAD Legislation

•    Enables municipalities to create and secure debt for a CEAD – 100% voluntary
•    Allows participating municipalities to secure funding or work with the Vermont Municipal Bond Bank to issue taxable bonds to pay for energy efficiency and renewable energy projects
•    Allows property owners who elect to participate to pay for the benefit over a period of up to 20 years through a special assessment charged as a new line on their property tax bills and paid to the municipality
 
Benefits for Vermont Property Owners
•    Overcomes a key financial hurdle for making investments in energy efficiency and renewable energy
•    Incremental special assessment payments are low and fixed for up to 20 years, with no upfront cost
•    Special assessment fees transfer to the new owner when the property and improvements are sold or assessment obligation can be paid in full at transfer.
•    Electricity and fuel bills are lower than they would be without the improvements, and the property owner is helping to reduce greenhouse gas emissions
•    Property taxes remain unaffected for those who choose not to participate

Benefits to Vermont Cities and Towns
•    Cities and towns can use CEAD to become more self-reliant and energy efficient and contribute to meeting community sustainability, climate, and energy goals
•    Cities and towns can provide a valuable public service to the members of their community
•    All CEAD program costs can be paid out of bond proceeds

Benefits to Vermont’s Economy
•    The creation of CEADs could inject millions of dollars directly into the Vermont economy to make lasting energy and building infrastructure improvements
•    The creation of CEADs would provide a steady and growing demand for energy efficiency installers, as well as installers of small scale renewable energy systems
•    The creation of CEADs helps to establish a steady and predictable demand for energy efficiency and renewable energy products, helping suppliers and retailers expand their businesses
•    Participating property owners will be able to make significant reductions in their heating and electricity costs
Programs similar to CEAD are already in place in other communities and are proving to be very popular. California has enacted statewide enabling legislation similar to what is proposed for Vermont. In Berkeley, California, the BerkeleyFIRST program was launched in the fall of 2008 and the $1.5 million pilot was fully subscribed almost immediately after it was open for applications.  Other communities in other parts of the country are considering similar programs.

* This summary is courtesy of the Vermont Energy Investment Corp.