While economically distressed local governments are mostly enmeshed in the grim task of cutting budgets these days, at least one innovative idea is under serious consideration locally. Next week both the Sacramento City Council and the county Board of Supervisors are expected to give conceptual approval to an exciting new program designed to help residents finance energy efficiency upgrades to their homes and businesses.
Known as the AB 811 program, after the bill signed into law last year that made it possible, the program gives cities and counties the authority to create special financing districts. Using startup funds generated initially by federal stimulus money and California Energy Commission grants and possibly the Sacramento Municipal Utility District, residents will be able to tap into the fund to finance energy efficiency improvements to their properties – new, more efficient heating and air conditioning systems, for example, or better insulation, weatherization, whole-house fans or even rooftop solar panels. If the financing scheme works, private investors may be approached in the future.
The loan payment is attached to the borrower's property tax bill. That is what makes the program truly innovative. Unlike a conventional loan, AB 811 debt stays with the property, not the borrower. So when borrowers sell their homes or businesses, the benefit of the energy efficiency improvement stays with the property and passes to the new property owner, and so does the debt.
The Sacramento AB 811 program, dubbed SAVES for Sacramento Area Voluntary Energy Savings, gives residents one more option for financing energy-efficient upgrades. It lowers demand for energy, helps reduce pollution and greenhouse gases, increases property values and saves money on utility bills, among other things. It also boosts investment in energy-saving industries and green jobs.
Sacramento County officials estimate the program here would generate 725 new jobs and $170 million in new spending locally.
But it's not risk-free. It increases debt at a time when many homeowners and businesses are struggling. Property owners who buy in to the program have to be creditworthy and able to pay the new, higher costs. Depending on the cost of the improvement financed, even with the anticipated utility bill savings, in some cases, it could take years before the borrower recoups the cost of the initial investment.
Next week's votes at the Sacramento City Council and the Board of Supervisors would approve merely a notice of intent. The hard work of designing a specific ordinance that would detail the kinds of energy improvements eligible and the terms of the loans and identify a third-party administrator to manage the program will take more time.
Eventually, Sacramento officials hope to expand their program across the region, into Placer County and beyond. A regional approach will help make the program both more cost-effective and more competitive when local officials apply for state and federal grants.
Other jurisdictions have already moved forward with AB 811 programs. Sacramento is right to consider it. If it works for energy efficiency, similar financing schemes might make sense for water conservation as well.
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