Emmaia Gelman, Laborers International Union of North America egelman@liuna // (917) 517-3627

1. On-Bill Financing in Green Jobs-Green NY for mass-scale retrofits, efficiency& economic recovery Emmaia Gelman, Laborers International Union of North America egelman@liuna.org // (917) 517-3627 KEEA ACI conference, Sept. 20, 2011 LiUNA!

2. Green Jobs/Green NY: Signed in October ‘09, now under RFP for work to begin 2011 Mass-scale retrofits + good local jobs • 1,000,000 homes in 5 years • 14,250 permanent jobs • ~$1000/year home energy savings • $5b in new capital invested in New York …to build a sustainable retrofit economy in 5 years. LiUNA!

3. Why On-Bill Recovery? • Overcome barriers: up-front cost, lack of trusted messenger, lack of clarity about return on investment, etc. - GET TO MASS SCALE • Open up closed customer sectors – about half of NYS homes? • Give lenders enough security to raise $billions in market-rate funds (without high interest rate, huge loan loss reserve or defaults) • Create consumer-safe loans to avoid creating debt spirals... (Utility bill is the safest available debt vehicle for vulnerable pops.) • Tie savings directly to repayments (use energy savings as revenue) • Create a vehicle that community groups willingly market to customers • Create sustainable, scalable, replicable retrofit fund. • Leverage state's role to ensure good jobs, good impacts LiUNA!

4. Critical building blocks • Universal standards for worker/contractor certification already in place • State agency with programming standards, including some M&V • Bulk data from prior years’ energy efficiency retrofits • Utility rates high enough to provide good returns on retrofits (although lower-cost states are also making it work!) • Utility bill protections for consumers (NYS HEFPA) • Loan Loss Reserve funding (RRGI in NY) • Legislation setting terms of retrofits, standards & customer recruitment • On-Bill Recovery legislation LiUNA!

5. Play-by-Play • Convened 150+ stakeholder groups to devise program to be funded w/ OBR • Consulted with lenders from the very start – maybe even fatigued them! • Held utilities separate, so they didn't overrun process, but consulted from start • Convened political actors/political will: primarily around jobs message • Provided competent technical drafts of legislation to bill champions • Continued intensive education, problem-solving & drafting for legislature • (Negotiated job standards between business, communities & labor after trust had been well-established.) • Introduced legislation in 2010, passed in 2011. LiUNA!

6. On-Bill Recovery • State action • State creates Retrofit Fund & Loan Loss Reserve legislates utility role, basic loan terms & economic impact standards • Utility bill provides security for lenders • Low rate of default and write-offs among OBR-eligible customers • Possibility of power shut-off backs payment • Revenue from retrofit is sent directly back to Retrofit Fund • Utility bill provides safer borrowing for vulnerable households • No one puts their home up as collateral • Missed/late payments aren't catastrophic • Penalty for default (shut-off of service) is reversible • Homeowners don't have to budget in order to repay LiUNA!

7. On-Bill Recovery (cont.) • Obligation to repay stays with the meter (and the retrofit) • “Enforcement Mortgage” (or maybe UCC1 filing) is assumable by a new owner, so even homeowners who may move can do retrofits • Projects can be scoped for cost-effectiveness within longer time period (15 years in NY legislation) • Utility focus supports community organizing around retrofits • On-Bill Recovery allows massive engagement by community groups • On-line tools like “EarthAid” can support post-retrofit engagement • Etc... LiUNA!

8. Utilities appeared... Issues mostly based on misinterpretation of the bill/program. • We don't want to be a bank. • Utilities are only collecters – no other obligation. Retrofit charge is just a line item on the overall bill; no separate collection. • We don't want to collect the debts of some state agency. • Utilities are part of the energy infrastructure. Providing access to energy efficiency is an appropriate role. • We don't want to shut off customers' power for a debt that's not ours. • Customers would be paying the same or more for without the retrofit, so shut-offs will not increase. • You can't accurately predict savings from retrofits. • Inaccuracies are minimized by using home-specific data on utility bills and usage, and periodically recalibrating projections using real program data. The program can also build in a cushion (don't use all of your monthly savings to pay the bill) LiUNA!

9. Utilities appeared... • This will increase our uncollectible bills (and therefore raise rates.) • OBR rules require that project savings match the repayment amount. Bills will not go up because of a retrofit loan. OBR will not increase shut-offs nor uncollectibles. • When there's a new buyer of a retrofitted home, we'll have to sue/deny service/do expensive collections to get them to start paying. • OBR builds in strong provisions of notice and transfer of obligation, at the demand of mortgage lenders and utilities. • This will cost a lot in collections. • Administrative costs are coverable by NYSERDA. • This will require millions of dollars in software upgrades. • Flipping on a new monthly charge can be manual till customer numbers grow. When upgrades are needed they can be rate-based. And yes, utilities need to upgrade outdated systems. LiUNA!

10. … and then Realtors(who channel the mortgage lenders, too) • OBR financing may be an impediment to sale of a home • Is the benefit obvious? • Will the benefit “stick” when there's a new occupant? • Will the On-Bill Loan impinge on repair/renovation loans later? • Prospective buyers may find the OBR obligation onerous • How clear is notice? • How hard will the obligation be to assume? • Can the obligation be satisfied at sale? • At foreclosure, OBR may become a burden on the lender • Will the bank be on the hook for benefits it's not using? • Does the repayment obligation survive? • What happens when a home is “dormant?” LiUNA!

11. Solutions for Mortgage Lenders • Notice of Lien? • Appears in Title Search • Transferable at sale • A bit unknown to lenders & realtors • Survives foreclosure (good for the Loan Loss Reserve.) • Enforcement Mortgage? • Appears in Title Search • Transferable or satisfiable at sale • Well known & used in NYC for subsidized properties • Doesn't survive foreclosure • UCC1 Filing? • Appears in Title Search • Transferable at sale • Probably survives foreclosure LiUNA!

12. Key elements of the bill • Sets standards for contracting and cost-effectiveness • Requires that payback be achieved on the bill used to collect • Sets standards for data collection & use of data to recalibrate • Permits savings across fuels • Lays out some parameters for alternative creditworthiness tests • Provides for seamless collection as part of utility bill (including consumer protections) • Provides for complaint remediation • Allows cost recovery for utilities, while mandating “prudence” • Creates Enforcement Mortgage & Note LiUNA!

13. The sausage-grinder effect: • On-billing only mandated for combined gas/electric utilities • Requires participants to pay a utility fee of $100 + 1% of loan value • Defers OBF roll-out for 10 months (while outreach begins now) • Doesn't establish key elements like scale, customer demographics or job standards. • Doesn't provide benchmarks for success & continuation of program LiUNA!

14. Next hurdles • Scaling up investment capital, possibly through CDFIs/regional banks • Setting terms for “pilot” loans that work for communities, lenders • Establishing CRA eligibility for early loans • Aligning customers, contractors and financing on the messy timeline LiUNA!

15. NY On-Bill Recovery as a model? • What's the alternative? • NYSERDA “Tier 2 loans” use OBR's alternative credit tests, but may not be safe for vulnerable borrowers... • Small credit unions issuing subordinate mortgages on a local scale,but use homes as collateral • PACE! But not for a while, and not for folks with lower incomes or lower home values • On-Bill solution documents at www.cwfny.org • Critical elements of On-Bill Recovery policy and legislation • Green Jobs-Green NY “Enforcement Mortgage” language • Talking points & solutions on utility objections • Model legislation (near future!) LiUNA!

16. Emmaia Gelman, Senior Researcher Laborers International Union of North America egelman@liuna.org (917) 517-3627 LiUNA!