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PACE loans could be key to infrastructure reinvestment in Cottage Grove

In an effort to reduce its carbon footprint and reinvest in existing infrastructure, the city of Cottage Grove has partnered with the St. Paul Port Authority to secure Property Assessed Clean Energy (PACE) loans.

A program that is gaining traction throughout the country, the PACE program funds retrofits of large scale commercial properties with energy efficient HVAC systems, windows, lighting and other installations to help buildings go green. Last month, the Port Authority was approved to issue funding to Minnesota cities through $10 million revenue bonds.

Jeremy Kalin, president of Eutectics, LLC, a premier Upper Midwest clean energy financing and consulting firm, briefed the Cottage Grove Economic Development Authority last week about the PACE program and said the city’s recent partnership with the Port Authority is the “perfect” collaboration.

“One retrofitting of a business can save more energy than an entire housing development,” Kalin told EDA members. “Across the United States, the market analysis estimates that in the next 10 years retrofitting existing buildings can save $1 trillion and create 3.3 million energy-efficient jobs. That is a 358 percent return investment over a decade.”

Minnesota enacted PACE enabling legislation in 2010, joining the ranks of now 31 states, including the District of Columbia, that are taking steps to become more energy efficient.

To date, Edina is the only city to utilize the PACE program after it retrofitted Salut Bar Americain with an energy efficient lighting system and new range hoods in the kitchen last year.

Businesses who participate in the program borrow the money to finance program-approved energy retrofits and repay the loan through an annual special assessment on their yearly property tax bill.

With a significant amount of money needed up front for energy-saving improvements, Kalin said he often is asked how businesses pay for retrofitting. This is where the PACE program takes over.

Once a project is proposed, an energy audit is conducted to identify how a building could be more energy friendly. The results are analyzed and an initial plan is put into place before the commercial property owner applies for a PACE loan. If the Port Authority finds that the project is a true energy improvement, the loan is approved and processed.

The city of Cottage Grove would then issue a special assessment, which is placed into the property’s yearly property tax bill, and the business is then able to implement the energy efficient upgrades.

”It’s safe for the bank and it’s safe for the city because you have this committed pot of money and the Port Authority has done all the legal work,” he explained. “The money flows from the bank to the Port Authority to the project. The city doesn’t not have to touch it.”

According to the 2010 legislation, the program applies to residential, multi-family residential, commercial or industrial properties that would benefit from renewable energy. Kalin said because wind farms are already self-sufficient and standalone units, they are not included.

Commercial property owners repay the loan with savings acquired from the upgrades, Kalin said.

Participation in the PACE program is voluntary.

While Cottage Grove has joined forces with the St. Paul Port Authority, there is no immediate plan to begin retrofitting buildings.

However, the EDA did mention the vacant Home Depot and Hollywood Video buildings being viable candidates in the future.

“I think for your redeveloping and existing businesses, with the Port Authority partnership, there is 99.99 percent no risk,” Kalin said. “I would say let’s jump in with both feet, find some projects and get them done.”