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Local Option - Special Energy Improvement Districts

Last Review: 2012-08-10
Incentive Type: PACE Financing
Eligible Efficiency Technologies: Yes; specific technologies not identified, Solar Water Heat, Solar Thermal Electric, Solar Thermal Process Heat, Photovoltaics, Wind, Biomass, Geothermal Heat Pumps, Anaerobic Digestion
Applicable Sectors: Commercial
Terms: Low-interest, 30-year loan
Website:

Summary:

Note: The Federal Housing Financing Agency (FHFA) issued a statement in July 2010 concerning the senior lien status associated with most PACE programs. In response to the FHFA statement, most local PACE programs have been suspended until further clarification is provided.

Property-Assessed Clean Energy (PACE) financing effectively allows property owners to borrow money to pay for energy improvements. The amount borrowed is typically repaid via a special assessment on the property over a period of years. Ohio has authorized certain local governments to establish such programs, as described below. (Not all local governments in Ohio offer PACE financing; contact your local government to find out if it has established a PACE financing program.)

Legislation enacted in Ohio in July 2009 (HB 1) expanded the state's existing special improvement district law by authorizing local municipalities and townships to create special energy improvement districts that offer property owners financing to install photovoltaic (PV) or solar-thermal systems on real property. In June 2010, legislation (S.B. 232*) provided additional authorization to municipalities to allow for financing of geothermal, customer-generated systems (including wind, biomass, and gasification systems 250 kW and below; or 250 kW and above as long as they serve all or part of the owner's on-site load) and energy efficiency improvements that are permanently fixed to the property within a special energy improvement district.

Any municipality choosing to establish a Special Energy Improvement District (SID) is authorized by law to issue bonds (either special or general obligation funds) and/or apply for state or federal money in order to fund such programs. Any property owner who opts in to such a program and installs solar, geothermal, wind, biomass, gasification, or energy efficiency improvements permanently affixed to his/her real property using municipal financing must agree to a special assessment on the property tax bill for up to 30 years in order to pay for the financing secured through this mechanism.

Municipalities and townships interested in creating such districts and providing financing for property owners must circulate a petition for eligible property owners to opt in to the program and the municipality must approve a special energy improvement district via ordinance or resolution. A special improvement district board of directors must be created (if one did not already exist) to implement the program. Each local municipality must determine specific eligibility criteria, the maximum financing amount and interest rates, and other terms. Unlike regular special improvement districts in Ohio, a special energy improvement district does not have to be comprised of contiguous properties.

The City of Cleveland in partnership with the First Suburbs Development Council has announced the creation of the Advanced Energy Special Improvement District and commercial loans for energy improvements. For additional information, see the Northeast Ohio Advanced Energy District web site. The City of Toledo has also created a SID in collaboration with the Northwest Ohio Bond Fund in order to finance energy efficiency improvements.

*In addition, S.B. 232 includes a provision for aggregating renewable energy certificates created by projects within a district. The bill also allows any electricity savings and/or demand reduction resulting from projects within a district to count towards the electric distribution utility's compliance under the Energy Efficiency Resource Standard (22% reduction in electricity use by 2025 and peak demand reduction requirements under Ohio's Revised Code (ORC 4928.66). This would not include any industrial customers who choose to commit its savings to the utility in exchange for an exemption from the utility's energy efficiency cost recovery mechanism, as provided by law. The district would have to report to the utility regarding energy projects implemented in the special energy improvement district on a quarterly basis.

 


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