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An interesting, interested buzz pervaded the recent annual ACE13 conference, hosted by the American Water Works Association and held in the city of Denver. It included workshops, panel sessions, facility tours and notable speeches, including one delivered by the governor of Colorado, John Hickenlooper.
And there was a very good showing of international visitors, including a delegation of senior officials from the Mexican government led by Dr. David Korenfeld Federman, director of the national water commission, and Mr. Roberto Olivares, director general of ANEAS.
Topics that generated some of the strongest interest at ACE included the prospect of Water Infrastructure Finance and Innovation Authority (WIFIA) legislation from Congress, evolving challenges associated with rate setting, infrastructure investment needs facing municipalities, the energy-water nexus, conservation and climate change, regulatory compliance and new technologies.
States lead way
Moreover, across the country, states are distinguishing themselves as water-technology or water-knowledge hubs. This is the case in California, North Carolina and Illinois — all highly supportive of water-related companies headquartered within their borders. In fact, Illinois helped finance a small pavilion at the CY2012 Singapore International Water Week that showcased a number of Illinois-based water-technology companies.
Wisconsin has thrown its support behind establishment of the Water Council, headquartered in Milwaukee, whose aim involves working with the regional fresh-water research community and water-related industries to help establish the Milwaukee region as a World Water Hub for water research, economic development and education. This autumn, the Council will open a one-of-a-kind Global Water Center to help commercialize water technology research. The Water Council is seeking working partnerships across the country and around the world.
The Commonwealth of Massachusetts has proactively entered the water-technology world by establishing the New England Water Innovation Network to help Massachusetts-based water-technology companies become global leaders in developing innovative products and services. The network will connect companies with laboratories and operating facilities that can help quickly move proven technologies to commercial markets. It’s estimated that roughly 300 Massachusetts-based companies, organizations and institutions are already involved in the water technology sector.
As this network develops, it will be interesting to note what type partnerships it will seek to form, whether similar to Milwaukee’s Water Council, or the networks behind Singapore International Water Week, the Stockholm International Water Institute, the Grantham Institute for Climate Change (from the London School of Economics, or that behind the water-related technologies emanating out of Isreal.
It is important to take note of a newly established initiative in the State of Texas — the PACE program just signed into law by Governor Rick Perry. Utah and Arkansas also passed enabling legislation earlier this year.
By way of background, the PACE concept began in California in 2008. State-enabling legislation was passed to allow municipalities to create financing districts that could provide low-cost retrofit capital to residential, commercial and industrial building owners. PACE, which stands for Property Assessed Clean Energy, is a state/municipal-based effort that allows municipalities to issue bonds in which the proceeds are then lent out to property owners to help cover the upfront costs associated with retrofitting a building to improve energy- and water-use efficiencies.
PACE is recognized as a debt instrument. PACE loans are secured by a senior tax lien on the property. A widely accepted assumption is that the savings achieved by a well-planned and well-designed energy or water retrofit will offset the cost of the loan as well as the increased property assessment.
PACE acknowledges the multi-million dollar investment requirement needed for building retrofits, not only to establish efficiencies, but also to generate financial savings. Essentially, PACE eliminates the upfront cost linked to investing in energy and water efficiency improvements. It allows commercial, industrial or residential property owners to pay for the improvements over a 15- to 20-year time frame through an assessment levied on their annual property taxes.
PACE seeks to be recognized as a viable initiative to improve energy efficiency as well as encourage installation of renewable energy systems and efficient water use. The program is essentially positioned as a wide-scale public-purpose project initiative. The program assumes making private-property improvements helps achieve public-purpose goals set by a given municipality and improve energy efficiency, reduce greenhouse gases, expand renewable energy use or improve water efficiency.
PACE-enabling legislation has been passed in 30+ states. However, it has run into some implementation roadblocks as a result of protests and concerns voiced by the Federal Housing Finance Authority (FHFA). Some states and communities have sought to work around FHFA. For example, Texas has sought to move forward with a PACE program specifically meant for commercial and industrial buildings, as well as large residential buildings not of interest to FHFA. And in late June, as noted above, Governor Rick Perry of Texas signed into law PACE legislation focused on commercial, industrial and large multi-family residential buildings.
The Texas legislation allows local property-taxing authorities to enact ordinances enabling PACE programs across the state. Financing will allow commercial and industrial building owners to upgrade and enhance the value of existing structures and to obtain low-cost, long-term private sector financing for water conservation and energy-efficiency improvements. It’s thought the program will also create thousands of jobs statewide.
With Gov. Perry’s signature, the PACE program is effective immediately. Municipalities and counties can establish community PACE programs, working with commercial lenders and property owners. The PACE program in Texas is recognized as a voluntary, market-based economic development program that does not burden government resources, while conserving valuable resources for future generations.
A way forward
According to State Senator John Carona, who sponsored the legislation in the Texas Senate, “PACE will help Texans meet the conservation goals in our state water plan and reduce demand on our electric grid. These savings will benefit the building owners directly and help keep the Texas economic engine primed for growth and prepared for the continuing influx of people moving to Texas to share in our prosperity.”
State representative Jim Keffer, who sponsored the House companion bill, says, “The legislative priority for this session was investment in Texas’ infrastructure — roads, power and water — to support this state’s economic boom. Investing in building infrastructure to address delayed maintenance will improve our buildings’ value, create jobs and help the state meet its water and energy conservation goals.”
The next step is implementation. The first thing to watch is whether energy-related or water-related projects are first out of the box. Charlene Heydinger, executive director of Keeping Pace in Texas, notes, “Companies are going to be able to save on both their water and energy overhead. A large group of stakeholders is already working diligently to develop a PACE toolkit so that local communities can implement strong consistent PACE programs across the state of Texas.”
It will be interesting to watch PACE program evolution in those states that already have PACE-enabling legislation on the books, as well as the adoption for PACE programs in additional states. The goal should be to have PACE-enabling legislation in all 50 states.