February 17, 2011
First ever mobile post, so excuse the brevity.
Mayor Lee will sign the proposed ordinance into law tomorrow.
WHERE: Adobe headquarters, 601 Townsend
WHEN: 10 A.M., Friday, February 18, 2011
I wish I could be there, but I’m out of town.
Congrats, San Francisco!
For our comprehensive analysis, please click here
December 14, 2010
Last week Mayor Gavin Newsom and Recurrent Energy announced the completion of the Sunset Reservoir Solar Project. We mentioned the story back when it started, and we’re glad to see it finished quickly! A year and a half is pretty good to install 24,000 solar panels (imagine 12 football fields) generating 5 megawatts of power (with some sources stating as high as 7 megawatts). The energy generated can power 1,500 homes, but will be used instead by the city to power public transportation and city buildings.
The project is the result of a public-private partnership (P3) with Recurrent. As a result, San Francisco owns the property, but leases the rights to operate the plant and sell the energy. Under the current contract, Recurrent will sell energy to the city at $0.235 /kWh. That price will allegedly save roughly $1 million per year in energy costs. Through the P3 procurement method, San Francisco saves the up-front costs of implementing the system, and reaps the rewards of low cost sustainable energy.
And, let’s not forget. The money paid to Recurrent stays right here in California. The corporation was founded in California, pays taxes in California, and employs people in California. 71 general labor jobs – in a decimated construction industry – were created from this project. 30 percent of those jobs were for individuals from disadvantaged communities (Though they had to fight to keep those jobs).
This project looks like a win for proponents of sustainable energy, public-private partnerships, and green job promotion (The CGBB fits into that category). It also looks to be a win for San Franciscans who will instantly see savings in energy costs to public services.
In the meantime, congratulations to Recurrent Energy and San Francisco. The Sunset Reservoir Solar Project is currently the largest municipal solar installation in the state. We hope more of these projects are built immediately all around California and the nation!
San Francisco Press Release Here
(For those of you wondering, “FTW” stands for “For The Win”)
October 20, 2010
The feud between Fannie Mae, Freddie Mac, and the PACE program is heating up. I’m going to play devil’s advocate (for a moment), so let me quickly set the stage. As you will recall, Fannie Mae, Freddie Mac, and their parent entity (following the financial crisis of 2008) the Federal Housing Finance Agency (for convenience, collectively “FHFA”) single-handedly torpedoed the Property Assessed Clean Energy program (PACE), one of the best publicly and privately-funded tools for gaining energy independence. California immediately sued to stop FHFA from interfering with the programs. (United States District Court For The Northern District Of California, Case 4:10-cv-03270-CW) According to pacedata.org, five other parties have separately sued the FHFA. Just last week, the FHFA filed a motion to dismiss the California lawsuit. I am not willing to join FHFA’s motion, but I am also willing to say we can’t just scapegoat FHFA. They are just doing their job. Perhaps a compromise is in order?
For a copy of California’s lawsuit against the FHFA, click here.
For a copy of FHFA’s recently filed Motion To Dismiss, click here.
FHFA is in charge of protecting the integrity of the housing finance industry, and they have taken on PACE financing because it undermines the integrity of primary mortgages. They have a point, and they can’t just look the other way (as much as it appears they are looking straight into the pockets of big banks).
PACE debt is classified by municipalities as an assessment, and in case of non-payment the PACE debt becomes a tax lien against a home. The issue FHFA have is that in case of foreclosure, tax liens are paid first. That puts the PACE payout in front of a primary mortgage, and that undermines the integrity of the primary mortgage market. If PACE programs explode in popularity across the nation (as they were prior to the FHFA advisory letter), that’s a big problem for FHFA. The PACE debt is likely small, but if it is nationwide it is definitely an issue. If FHFA are going to be true to their mission they have to stand up to this (especially since Fannie Mae and Freddie Mac didn’t show sound judgment leading up to the mortgage-backed securities financial crisis).
The sticking point is proponents of PACE financing aren’t interested in making the PACE debt secondary to a primary mortgage. Recently, California Representative Mike Thompson (and many others) proposed a bill that’s a pretty good compromise, but still asks the FHFA to look the other way on PACE financing. The devil’s advocate is not sure this is appropriate in situations where private entities finance PACE debt.
HR 5766 requires that:
“the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation [Fannie Mae and Freddie Mac] shall adopt underwriting standards that are consistent with the Guidelines for Pilot PACE Financing Programs issued on May 7, 2010, by the Department of Energy.”
The DOE guidelines referred to in HR 5766 state:
“In states where non-acceleration of the lien is standard for other special assessments, it should also be standard for PACE assessments. After a foreclosure, the successor owners are responsible for future assessment payments. Non-acceleration is an important mortgage holder protection because liability for the assessment in foreclosure is limited to any amount in arrears at the time; the total outstanding assessed amount is not due in full.” (Full Guidelines Here)
The DOE guideline quoted above states that under a PACE program in a state where under foreclosure proceedings a primary mortgage holder can demand payment for the full amount of the debt, PACE assessments can only ask for the debt that was owed up to the time of the foreclosure. This is an important distinction. The problem is that the PACE lien still supersedes the primary mortgage to some degree.
I doubt this would be such a problem if municipalities provided all of the financing for PACE programs. Municipalities will always have the power to impose assessments. The problem is that often PACE financing is provided by private enterprise. Further, with the municipal budgets in pieces, the likelihood of private finance for PACE programs only increases. I am all for PACE programs, but allowing a private entity to supersede a primary mortgage without asking the primary lender seems a little, shall we say, inconsistent (even if the motives are pure).
For my return from the devil’s side of the argument, and some suggestions for solutions, click the “more” link here: (more…)
July 19, 2010
The local California programs that allow homeowners to pay for green renovations through an added assessment on their property taxes is in jeopardy. The BerkeleyFirst program – the first Property Assessed Clean Energy (PACE) program in the nation, is still up and running, but San Francisco suspended the GreenFinanceSF program, and Sonoma County now sends warning letters out with every application. Mind you, 22 states now have PACE programs (enabled in California by AB 811), and President Obama wants to allocate $150 million in federal funds for these programs. Someone in his office better call the Federal Housing Finance Agency (FHFA), because they don’t like the programs one bit.
The issues started when Fannie Mae and Freddie Mac sent out a letter in the beginning of May that scared some investors and homeowners because it stated, “an energy-related lien [i.e. PACE loan] may not be senior to any mortgage delivered to Freddie Mac.” Then, at the beginning of this month, the FHFA (who oversee Fannie and Freddy) stated that the PACE loans pose a risk to lenders, and called for the programs to be stopped. Last week, California shot back and sued the Federal Government to have the FHFA back PACE programs.
FHFA’s concern is that if a property goes into foreclosure, property taxes are the first debts paid off. Since the PACE loans are an assessment included in property taxes, the PACE loans would be paid off first in a foreclosure. Almost universally, a primary mortgage is paid off before any subsequent loans taken on a property. The PACE loans throw that fundamental rule out the window. This allegedly adds risk to the primary mortgage, and since Fannie and Freddie are the largest purchasers of mortgages in the nation, they object.
To make matters worse, a New York Times article reports that Fannie and Freddy might not accept mortgages with PACE loans. Fannie and Freddy turning down mortgages is huge. The two entities own nearly 50% of the mortgages in the nation, and banks rely on the ability to sell mortgages in bulk to Fannie and Freddie. If PACE loans make mortgages less valuable in the mortgage market (the banking market that bundles groups of mortgages and sells them wholesale between banks and investors . . .e.g. “mortgage-backed securities”), that will essentially end the programs.
I understand the FHFA point of view, but I think their concerns are overblown. The improvements to the property add value, and the PACE payments are generally very small. A $25,000 loan at 6.5% over 20 years comes to about $185 / month. If you consider the savings to the owner’s energy bill, are we really talking about a debt obligation that will jeopardize someone’s mortgage payment? Indeed, what if the local government just increased taxes outright?
The PACE programs are gaining tremendous momentum, creating jobs, and leading us toward energy independence. Throwing a wrench in the system over something quite small is not only counter-productive, its subversion. We’ll track this issue closely, and let you know of further developments.
More on the lawsuit from Sustainable Business here
More on the lawsuit from the San Francisco Chronicle here
The CGBB first post on BerkeleyFirst is here
March 30, 2010
As discussed in Part I of this post, LEED version 3.0, first implemented in June 2009 includes enhancements that place greater emphasis on closing the gap between performance expectations and actual performance. These measures were likely included partially in response to studies focusing on performance of LEED buildings that illustrated a potential for large fluctuations in meeting projected performance levels. Performance is primarily based on energy and systems modeling, and one study of existing LEED buildings found that although LEED buildings are higher performing than regular buildings, the actual performance measurements deviate as much as 25% from projected levels.
Version 3.0 introduces several new elements which will work to close the gap between expected and actual performance. Buildings can now gain more points under both the LEED energy efficiency credits and measurement and verification credits, which include greater emphasis on commissioning, post occupancy monitoring and validation of energy use.
One key component to performance monitoring is that the USGBC now mandates that buildings provide post occupancy data on all LEED-certified structures. Buildings must provide the USGBC with post-occupancy water and energy bills, even if the building changes owners. The USGBC plans to collect and analyze this data to determine areas which need the most improvement and in turn to address these areas in subsequent LEED versions. Data collection is taken seriously, the USGBC has posted the following statement on its website:
“CERTIFICATION MAY BE REVOKED FROM ANY LEED PROJECT UPON GAINING KNOWLEDGE OF NON-COMPLIANCE WITH ANY APPLICABLE MPR. IF SUCH A CIRCUMSTANCE OCCURS, REGISTRATION AND/OR CERTIFICATION FEES WILL NOT BE REFUNDED.”
MPRs, minimum project requirements, were newly introduced with version 3.0 and require each project to meet certain specified criteria including compliance with environmental laws and providing the energy and water use data referenced above. If a building’s owner fails to provide this data to the USGBC, the building’s LEED certification MAY be revoked.
The USGBC has not stated that once the building’s data is received and analyzed, if it is not meeting performance criteria, its certification will be revoked. As written, it seems that certification can only be revoked by failing to provide the data itself. We will need to wait to see how this new element plays out upon completion of more 3.0 projects. Maybe in the future the USGBC will take the more drastic step of de-certification for failure to meet projected performance if confirmed by data collection.
Obviously, green building will never be as prolific as it seems destined to be if buildings fail to perform. The USGBC’s recent changes, along with the actions taken by the BSC and ASHRAE (discussed in Part I of this article) are huge steps in the right direction. This nascent emphasis on actual building performance is a trend that will increase significantly as green building continues to gain traction and a larger percentage of LEED buildings’ post-occupancy performance can be tracked and analyzed.
Stay tuned to the California Green Building Blog for new information on this topic.
November 23, 2009
There were many compelling sessions at the USGBC Greenbuild conference, but I focused on sessions that discussed policy, local government, and risk transfer. I would like to start with the session on risk transfer. But rather than go into what the speakers presented (which only scratched the surface), I thought it would be a good to dig deeper and review and summarize what we have stated previously on the CGBB.
When going for LEED, Greenpoint Rated, or any other certification, make sure to pay close attention to the following areas:
- Scope of work. Make sure the scope of work is clearly defined. If you’re going for a specific certification, LEED, GreenPoint Rated, or other, cut and paste the requirements right into the specifications in the contract. Also, you’re going to need to specify who is responsible for review and inspection of each item, and who is responsible for documentation and preservation. High-performance buildings require a new level of inspection, and the heightened level of liability for these tasks must be detailed in the contract. Failure to properly document materials for construction is one of the top reasons buildings fail to get proper certification.
- Incentives and rebates. Make sure it is clear who is responsible for applying for and securing incentives and rebates for products and efficiencies.
- Standard of care. The AIA recently issued form contract B214–2007 for architects working on LEED buildings. That form specifies the standard of care architects should observe when designing a LEED building. After the AIA contract, there’s not a lot of guidance, so make sure your contract is specific regarding ALL parties on the project.
- Review specifics with your surety. Make sure your surety is committed to building a green building…not many are convinced of the added value in green buildings. Sureties will not help you build an independently certified building unless you clearly specify such in the contract.
- Value engineering. Don’t go through the process of value engineering without reviewing how this might effect your LEED or GreenPoint Rated application. Know your materials, and make sure there are no substitutions without a clear understanding of the implications. This goes for projects that use BIM software too. If the project uses BIM, make sure liability is clearly assigned for any changes that may result in issues, and make sure the liable party is aware of the implications changes may have of third party certifications.
Arguably, the greatest risk to constructing a high-performance building is in the contract documents themselves. Make sure the documents are precise and reflect exactly what needs to happen. All parties need to be informed of their responsibilities, AND liabilities.
Stay tuned for more from Greenbuild – future posts will reflect more of actual session content…I promise.
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Steve Sacks