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San Diego Energy Desk rwalsh@sdenergydesk.com
www.sdenergydesk.com
CONNECTP�6 PEOPLE,PR�PERTIES AND PERFORMANCE o.6ts.esa.77st
3245 UniversityAvenue,#1207 San Diego,Califomia 92704 m.773.633.5969
f.619283.0005
10 December 2013
City Council
City of Chula Vista
276 Fourth Avenue
Chula Vista,California
Re: The Missing Pieces of PACE Financing
The Honorable Mayor and City Council of Chula Vista:
Thank you for the opportunity to present these views,opinions and recommendations to the City of Chula
Vista City Council as you move further towards the adoption of a PACE financing program for the benefit of
the business and citizens of Chula Vista.
San Diego Energy Desk has a vested interest in promoting and encouraging any program that will fully and
rapidly implement energy conservation measures in the commercial real estate sector and has great
interest in Property Assessed Clean Energy(PACE)financing-once all the pieces are in the right place.
In the September 2008 California Long Term Energy Effitiency Strategic Plan,the California Public Utilities
Commission articulated a goal of"moving utilities,the CPUC and other stakeholders beyond a focus on
short-term energy efficiency activities into a more sustained, long-term, market transformation strategic
fotus." In parallel with statewide efforts to reduce energy use,the State of California legislature passed
AB811 to treate PACE financing programs to encourage deeper energy effitienty retrofiis in commertial
properties.
While commercial PACE financing is envisioned as a potential climate mitigation and adaption strategy, its
potential impact moves beyond operational or environmental concerns into the realm of investment
criteria. These new and innovative programs continue to come to market with very little performance
history and without any required on-going measurement and verification component. Their insertion into
the marketplace is already causing concern among and backlash from lenders as the battle for lien position
superiority continues. Mishandled, misapplied or under-performing PACE loans can easity reduce the
investment yield on a property and cause irreparable damage to the integrity of PACE programs.
This isn't sufficient justification to back away, but rather reason for moving forward—carefully, deliberately
and cautiously—as the missing pieces are pulled together.
Borrower Qualifications
The commercial real estate market continues in recovery mode and the struggling property owners most
likely to take advantage of PACE financing hold under-valued properties with few to many years of deferred
maintenance—and very little interest in energy effitiency measures.
Essentialty a sub-prime loan, leveraging the expected performance of installed energy conservation or
generation measures, PACE financing will be most attractive to those cash-strapped or high-risk property
CA Real Esta:e Broker License=01870975
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