On-Bill Financing
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Emmaia Gelman, Laborers International Union of North America [email protected] // (917) 517-3627 PowerPoint PPT Presentation


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

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Emmaia Gelman, Laborers International Union of North America [email protected] // (917) 517-3627

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Emmaia gelman laborers international union of north america egelman liuna 917 517 3627

On-Bill Financing

in Green Jobs-Green NY

for mass-scale retrofits, efficiency& economic recovery

Emmaia Gelman, Laborers International Union of North America

[email protected] // (917) 517-3627

KEEA ACI conference, Sept. 20, 2011

LiUNA!


Green jobs green ny

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!


Why on bill recovery

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!


Critical building blocks

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!


Play by play

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!


On bill recovery

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 amongOBR-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!


On bill recovery cont

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!


Utilities appeared

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!


Utilities appeared1

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!


And then realtors who channel the mortgage lenders too

… 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!


Solutions for mortgage lenders

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!


Key elements of the bill

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!


The sausage grinder effect

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!


Next hurdles

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!


Ny on bill recovery as a model

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!


Emmaia gelman laborers international union of north america egelman liuna 917 517 3627

Emmaia Gelman, Senior Researcher

Laborers International Union of North America

[email protected]

(917) 517-3627

LiUNA!


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