404 Aviation Boulevard, Suite 200 Santa Rosa, California P: F: E:

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1 404 Aviation Boulevard, Suite 200 Santa Rosa, California P: F: E:

2 Sonoma County Energy Independence Program 2011 Annual Report Table of Contents I. Overview... 1 History of SCEIP... 1 SCEIP Mission, Values and Purpose Mission Core Values Purpose... 3 Services Education and Outreach Municipalities, Replication Whole building approach Financing Contractor Services... 5 II. Program Performance... 6 III. Special Projects - CEC Grant... 7 IV. Challenges / Strategies... 8 Federal Housing Finance Agency (FHFA)... 8 Program Activity... 9 V. Looking Forward Immediate Future Long Term Plans New Initiatives VI. Financial Statements Statement of Net Assets Statement of Cash Flows Statement of Revenues, Expenses and Change in Fund Net Assets VII. Appendix Organization Chart SCEIP Program Activity PACE Financing What is PACE? How Does PACE Work? Why is PACE so Important? Frequently Asked Questions General Information Program Finance Information Eligible Improvements Information... 23

3 History of SCEIP I. Overview In July 2008, the California Legislature approved Assembly Bill 811, authorizing local municipalities to establish voluntary contractual assessment programs to fund an array of conservation and renewable energy projects proposed by property owners through a financing mechanism now known as Property Assessed Clean Energy or PACE financing. On March 25, 2009, the Sonoma County Board of Supervisors authorized the existence of the Sonoma County Energy Independence Program (SCEIP), and the program was launched with a grand opening celebration. SCEIP began accepting applications immediately and began funding projects shortly thereafter. Since then, SCEIP has been a leader in the PACE financing arena nationwide. Sonoma County and each of its incorporated cities and towns (collectively the Cities ) have established a goal to reduce their greenhouse gas emissions 25 percent below 1990 levels by The County, the Cities, the Sonoma County Water Agency, the Sonoma County Transportation Authority and the Sonoma County Agricultural Preservation and Open Space District are members of the Regional Climate Protection Coordination Plan ( RCPCP ) with the goal of coordinating efforts to reduce countywide GHG emissions. In 2008, these collaborating agencies viewed the opportunity provided by California state-enabling legislation to form a PACE assessment program as a significant tool in helping Sonoma County and its cities reach their aggressive GHG emissions reduction targets. Joined by every incorporated city, SCEIP covers all geographic areas in Sonoma County. Since program launch, SCEIP has financed over $50 million in projects, representing 1600 residential properties, 45 non-residential properties, 2500 individual improvements and approximately 67 job-years. Because a majority of the improvements have been performed by local contractors, most of the $50 million in funding provided by the County has remained within the local community. SCEIP finances more than 90 eligible measures for energy efficiency, water conservation and renewable generation. Since program launch, SCEIP has resulted in over 5.6 MW of photovoltaic solar generation installed, equating to a GHG reduction of 4,500 tons annually. An effort to quantify the energy savings and GHG reduction for financed energy efficiency and water conservation projects is currently underway. 1 Sonoma County Energy Independence Program

4 SCEIP Mission, Values and Purpose 1. Mission Leading the way to energy independence in Sonoma County through dynamic and collaborative partnerships and the public financing of energy improvements on private property. 2. Core Values Community we respect and value all the people we serve, support local business, and encourage local jobs creation Collaboration we will engage in public and private partnerships to address the emerging and evolving needs for sustainability and energy independence in Sonoma County Customer Service our business exists to provide outstanding service and to support our customers and partners in the development and execution of their energy conservation, energy creation, and sustainability plans 2 Sonoma County Energy Independence Program

5 Energy Independence we are committed to the goal of energy independence for Sonoma County in the form of deep energy retrofitting of homes and businesses, the installation of distributed clean generation systems, and a robust water conservation element as key components of our SCEIP efforts. 3. Purpose SCEIP provides the public access one stop shop, single hub to the programs and services required to achieve local energy independence through conservation, efficiency and generation projects. We play a key role in Sonoma County reaching our community climate protection goal of decreasing green house gas emissions by 25 percent below 1990 levels by the year Services 1. Education and Outreach SCEIP has grown to be the hub of information, resources and services related to energy efficiency, water conservation, and renewable energy options in Sonoma County. Through this, 2011 was a very busy year for SCEIP in terms of public events. With the availability of CEC funds, SCEIP either hosted or participated in numerous events to broaden consumer knowledge in conservation, efficiency and generation. These events included everything from consumer education and outreach to contractor trainings. Highlights include: March 2011 PACE Conference; Palm Desert, California March 2011 Home and Garden Show; Santa Rosa, California May 2011 Sustainable Enterprise Conference; Rohnert Park, California June 2011 Sonoma County Climate Protection Conference; Healdsburg, California July / August 2011 Sonoma County Fair; Santa Rosa, California September 2011 Harvest Fair; Santa Rosa, California October 2011 Hispanic Chamber of Commerce Business Expo; Santa Rosa, California 3 Sonoma County Energy Independence Program

6 November 2011 ACI Conference; North Carolina In addition to the above, SCEIP hosted bi-monthly Contractor Forums and participated in regular monthly trade meetings with the Builders Exchange, PG&E, Clean Energy Series, and more. SCEIP also hosted many training events for contractors to broaden their skills and become certificated as energy analysis raters. In addition, SCEIP provides the necessary resources and tools to assist a property owner in making the decision to make energy efficiency and water conservation improvements through contractor training, consulting, and other means. SCEIP accomplishes this service through many program partners, including but not limited to local and state agencies, local contractors and trade organizations, and more. 2. Municipalities, Replication With SCEIP s success, questions have followed from numerous other municipalities regarding program formation. As such, SCEIP has taken the lead on program replication and consults closely with neighboring counties, as well as other municipalities across the nation regarding program replication. In addition, SCEIP now hosts a monthly municipal webinar in partnership with PACENow to facilitate the dissemination of we looked at the whole resources and information. (building) concept when making upgrades. Even in a down 3. Whole building approach economy, we must make business decisions that make sense and Increasing your property s efficiency is more than cents. Right now I have a large switching out light bulbs or buying new appliances. enough (solar energy) credit to pay It is approaching your home as a complete system November and December s heating bill. - Rod Stevenson, Stevenson Supply, Business and Homeowner with heating, air conditioning, insulation, water and other systems working together more effectively to reduce energy use and help lower your utility bills. The first step toward making your home more energy efficient and comfortable is finding out how well your house is performing - the good and the 4 Sonoma County Energy Independence Program

7 bad. An Energy Analysis is a science-based approach to finding where your home may be leaking energy and money. The Analysis will assess all the major energy efficiency features of your home; air leaks, cooling and heating systems, water heating system, insulation, windows, attached lighting fixtures, major appliances, solar systems (if any) and other energy uses. Through the CEC Grant, SCEIP has funds available to subsidize up to $1400 of a Home Energy Analysis the report card for your home. The results of your Energy Analysis will show you specific ways to improve your home s energy efficiency and comfort. Working with an Energy Upgrade Expert, you can plan and complete a project that will benefit your family now...and for generations. 4. Financing The program works by placing an assessment on the property through a PACE financing system, which is paid back through property taxes over 10 or 20 years with a simple interest rate of 7 percent. Financing is available to both residential and commercial applicants with a minimum assessment amount of $2500. The amount available for financing is based on the value of the property, and the assessment stays with the property 1. We saved 70% the first month on our winter heating bill and are enjoying comfortable temperatures and reduced energy bills year-round -Amy Rider, SCEIP is a thriving hub of sustainability activity and is seen Petaluma Homeowner as a valued resource by the diverse communities in Sonoma County. We are leading edge in the processes used to enable energy independence. Partnerships crossing boundaries of the past are now the norm and collaboration has become the new standard. All local communities value and appreciate the outstanding customer service of SCEIP and see us as the place to go for an excellent sustainability plan. We are a unique business unit operating inside the government infrastructure, combining the best of government services dedicated to the public good with modern business and private sector operational thinking and planning. 5. Contractor Services One key item to SCEIP s success is its partnership with the Contractor community. Because SCEIP acknowledges this and understands that for a contractor to effectively perform in the 1 This is a subject of litigation with the Fair Housing Finance Agency (FHFA). 5 Sonoma County Energy Independence Program

8 industry, continued education and tools are needed. To assist in this endeavor, SCEIP has partnered with several agencies including the Building Performance Institute (BPI), the Workforce Investment Board, North Coast Builders Exchange and more. Through these partnerships, SCEIP hosts an expansive Tool Lending Library as well as numerous contractor trainings, forums, and more. II. Program Performance 6 Sonoma County Energy Independence Program

9 Two significant events which resulted in changes to program volume include the Industry Bulletin issued by Fannie Mae and Freddie Mac in July 2010 (See IV. Challenges and Strategies), and the adoption of the Department of Energy guidelines for PACE financing in July 2011 (See III. Special Projects CEC Grant). A full report of SCEIP activity is provided in the Appendix and can also be viewed online at III. Special Projects - CEC Grant In March 2011, SCEIP was awarded a $3 million grant from the California Energy Commission (CEC) to accomplish five major deliverables: CONTRACT PROJECT AREAS DESCRIPTION FUNDING AMOUNT Grant Administration 1. Pool Bonding and Financing 2. Hub Tool Consultation a) Program management and oversight of the $3M Energy Commission funding in the 5 project areas, task tracking, fund management, reporting. b) SCEIP program transition evolving the program parameters and processes to conform with the Energy Commission program requirements, changes to processes, program documentation & web site, training of staff on the changes to the program, education and outreach about the changes to applicants and contractors, etc. Research all relevant bonding and financing strategies appropriate to the current situation, and implement one or more strategies as appropriate and possible to demonstrate the long-term sustainability of the program. Provide consulting services to the statewide web portal developer to deliver the PACE finance processing and work flow tools required for PACE program delivery, as well customization of the statewide web portal to provide the Sonoma County portal for all relevant environmental, efficiency, and clean generation programs and resources. $350, $800, $250, Sonoma County Energy Independence Program

10 CONTRACT PROJECT AREAS DESCRIPTION FUNDING AMOUNT 3. Replication Kit Provide technical support and sample documents, such as application forms and materials, RFQ/Ps, contracts, resolution language, case studies, best practices, and lessons learned, for the development of the PACE Replication Model Startup Kit for other jurisdictions interested in implementing residential PACE. Sonoma County will also engage in outreach activities specifically targeted to other local governments that will provide them with information on PACE program replication. $550, Marketing Education Outreach Marketing, education and outreach of new program elements in alignment with Department of Energy guidelines, emphasis on the benefits of audits to create energy plans for residents, this funding will help educate consumers, contractors, and local businesses about program changes and improvements, ensuring the continued performance and success of the SCEIP program while smoothly integrating enhancements and changes. $250, Audit Discount Project Program to provide discounts for building performance testing (energy audits.) $800, TOTAL: $3,000, SCEIP was subsequently awarded a $2 million Revolving Fund to accommodate contractors requests for funding on a more frequent basis. As a result, SCEIP now funds residential projects on a weekly basis, instead of monthly. Through this grant, SCEIP was afforded the opportunity to pursue many ventures that were already in process, try new concepts with the safety net of the funding, and expand the training and messaging to the customers. SCEIP was able to expand its team to accomplish these deliverables and exercise County-wide layoff mitigation through the process. The grant sunsets on March 31, 2012, and a full report will follow on each of the deliverables. IV. Challenges / Strategies Federal Housing Finance Agency (FHFA) Although initially supportive of the PACE financing concept, Fannie Mae and Freddie Mac issued an industry bulletin in July 2010, which denounced PACE financing. Through these announcements, Fannie Mae and Freddie Mac threatened to foreclose on any property utilizing their financing that becomes associated with a PACE lien. They later revised their message to 8 Sonoma County Energy Independence Program

11 instruct banks not to purchase loans with a PACE lien. This directive had a significant impact on SCEIP s program PACE is one of the most creative and successful activity. Since then, several municipalities solutions to our nation s energy crisis and it is and agencies, including the State of a common sense way to create good, green California and the County of Sonoma have jobs. Because of PACE, and the hard work of filed suit against the Federal Housing community leaders and businesses, Sonoma Finance Agency (FHFA). Mountain Village will be a 100 percent solar powered, zero-waste community. Recently, the Federal District Court from the Northern District of California ordered PACE is a win for everyone. Homeowners and the FHFA to conduct their rulemaking businesses utility costs are lowered, people are procedure. The court found that FHFA put to work, and our nation gets the benefit of violated the federal Administrative reduced energy use, increased energy Procedures Act when it issued its July 6, independence and a cleaner environment statement that prohibits Fannie Mae, Freddie Mac, and other government - Congressman Mike Thompson (D-CA) sponsored enterprises that it regulates from buying residential mortgages with PACE assessments. The process is anticipated to begin on January 20 providing the public the opportunity to enter comment (electronically or by mail) to the FHFA for at least 60 days. The FHFA is required to take the public comment into account in developing a proposed rule. FHFA will then have 30 days to publish its proposed rule, followed by another round of public comment. Program Activity As stated above, SCEIP underwent numerous changes in conjunction with the CEC grant. The most significant change was the 10 percent efficiency requirement prior to funding any renewable generation, i.e., solar project. Coincident with the implementation of program changes to support DOE guidelines per the grant instructions; program volume dropped; both generation and efficiency project volume. SCEIP staff is working closely with the California Energy Commission and local partners to determine the factors directly impacting program volume. APPLICATIONS RECEIVED FUNDING REQUESTED FUNDED ENERGY IMPROVEMENTS FUNDED WATER IMPROVEMENTS FUNDED GENERATION IMPROVEMENTS ENERGY ANALYSIS PERFORMED $31,915, $14,075, Sonoma County Energy Independence Program

12 V. Looking Forward Immediate Future Questions remain on what post-grant requirements will look like for SCEIP. The definition of such is the first priority for the program in its long-term sustainability plan and must be resolved in the first quarter of SCEIP will welcome a new Program Administrator in February 2012 and see the sunset of the CEC grant on March 31, With that, the future remains optimistic as the program continues to evolve and grow. Long Term Plans Long term, SCEIP hopes to prevail in its litigation with the FHFA. Pending the outcome, SCEIP will continue to support and advocate for legislation that promotes PACE financing, such as H.R PACE Protection Act. SCEIP will also continue to identify resources and seek funding to expand its services to the community as a whole. New Initiatives On the horizon, SCEIP first and foremost hopes to resolve the matter with the FHFA, et al. and continue to be the leading PACE program nationwide. In addition, SCEIP hopes to become the Certification Agent for the Windsor PAYS on-bill financing program. An application has been submitted and the decision is imminent. SCEIP is also looking forward to being the Hub Tool administrator for partner agencies like the Regional Climate Protection Authority (RCPA). This website is a compilation of resources for property owners, contractors, and other municipalities with action planning tools, an event calendar, access to rebates, and more. 10 Sonoma County Energy Independence Program

13 VI. Financial Statements Statement of Net Assets 11 Sonoma County Energy Independence Program

14 Statement of Cash Flows 12 Sonoma County Energy Independence Program

15 Statement of Revenues, Expenses and Change in Fund Net Assets 13 Sonoma County Energy Independence Program

16 VII. Appendix Organization Chart 14 Sonoma County Energy Independence Program

17 SCEIP Program Activity 15 Sonoma County Energy Independence Program

18 PACE Financing 1. What is PACE? PACE is a local government initiative that allows property owners to finance energy efficiency measures and renewable energy projects for their homes and commercial buildings. Interested owners opt-in to receive financing that is paid back with an assessment on their property taxes for up to 20 years. PACE spreads the cost of energy improvements such as weather sealing, insulation upgrades, more efficient heating and cooling systems, solar installations and the like over the expected life of the measures and allows the repayment obligation to transfer automatically, like other property assessments, to the next owner if the property is sold. 2. How Does PACE Work? PACE uses the same kind of land-secured financing districts that American cities and towns have relied on for over 100 years to pay for improvements in the public interest. Over 37,000 land secured districts already exist and are a safe and familiar tool of municipal finance for street paving, parks, open space, water and sewer systems, septic tank replacement, street lighting, and seismic strengthening, to name a few. Usually, the public purpose is identified in state enabling legislation. A municipality will pass a local law to establish a benefit district, a step that often entails public hearings and may require a voter referendum or right to reject. The municipality will adopt detailed procedures to ensure programs achieve the defined public purpose and protect homeowners and existing lenders. 3. Why is PACE so Important? PACE was adopted by 24 states in just two years because it made immediate sense to state and local governments. Energy efficiency is the least expensive energy we can buy because the low hanging fruit measures weather sealing and improving insulation cost so little compared to the energy saved. In Kilowatts or BTU s, the cost of saving energy through efficiency is less expensive than producing energy in the least expensive coal fired power plant. However, people don t always act in an economically rational manner, particularly because of the upfront cost barrier. Experience has shown that local municipal programs often have much higher project adoption rates than incentivized programs run by state agencies or utilities. 16 Sonoma County Energy Independence Program

19 PACE, more than just a financing tool, is a uniquely self-supporting programmatic approach to encouraging energy efficiency and renewable energy projects in local communities. Frequently Asked Questions 1. General Information Q. How does SCEIP work? Property owners apply for the program, describing the energy and/or water saving improvement(s) they wish to make. If approved, the county and the property owner enter into an assessment contract and implementation agreement, through which the county pays the final cost of the improvements. The county places an assessment lien on the property, and the property owner repays the county for the improvements as an assessment on his/her property tax bill over a 10- or 20-year period. Q. What is SCEIP? The Sonoma County Energy Independence Program (SCEIP) offers property owners the opportunity to finance energy and water efficient property improvements through the property tax system. It is an innovative new effort to improve energy efficiency, water conservation and renewable energy generation, thereby reducing greenhouse gas emissions. Q. Who can participate in SCEIP? Any residential, commercial, or industrial property owner in Sonoma County may participate in the program provided the following requirements are satisfied: Applicant(s) is/are legal owner of the property described in the Application (the "Property"). Property is developed and located within Sonoma County. Mobile homes that are not affixed to real property and subject to secured property tax are not eligible. Property Owner is current on all property taxes. Property Owner is current on mortgage(s). For commercial property, lender has given consent to SCEIP Financing. Property Owner is not in bankruptcy and the property is not an asset in a bankruptcy. If property owner has been in bankruptcy in the past three years, additional requirements apply. See program report for details. If property is subject to loan modification because of default or delinquency, additional restrictions apply. See program report for details. 17 Sonoma County Energy Independence Program

20 For SCEIP, "residential property" is defined as single-family properties with 1-to-4 residential units; "commercial property" is all other property. Q. How do I apply for SCEIP? Applications may be submitted electronically at downloaded and printed, or obtained at the SCEIP storefront at 404 Aviation Blvd, Suite 200, Santa Rosa. Q. Can I use SCEIP for my business property, or just my house? SCEIP is intended for improvements on residential, commercial, and industrial properties. You do, however, have to be the property owner, not a tenant, and different requirements are applicable to business property. You can review these on line at Q. What if the property owner is a trust? Property owners must supply documentation that the party(ies) signing the documents are authorized to sign legal documents on behalf of and bind the trust. Q. The improvement I am planning requires a building permit. Can I get that from SCEIP too? No. You or your contractor must obtain all required permits from your local authority. Q. Can I be paid for doing my own SCEIP work on my property? Licensed, professional contractors working on their own property may request SCEIP financing for materials, cost of their work crew s labor and overhead but not for their own time. The labor and time of the contractor is not included. Since labor can only be paid if work is done under a licensed contractor, unlicensed owner-builders cannot pay themselves or anyone not performing labor under the supervision of a licensed contractor. For example, you may not pay your handyman for the installation of a tankless water heater, unless your handyman is working under the supervision of someone with a valid contractor s license. Q. If a city adopts the Sonoma County program, can that city still participate in another AB811 program? Yes. 18 Sonoma County Energy Independence Program

21 Q. What action defines the start of my project, (which would preclude my participation in SCEIP)? A project is defined as "started" and not available for participation in the program when labor associated with the construction or installation of improvements has occurred on-site. Actions not defined as "starting" include: audits, estimates, being 'in contract' with a vendor, including the delivery of materials. Labor should never begin prior to contract signing. SCEIP is not responsible for any expenses incurred if your application is not approved for some reason or other issues arise prior to contract signing. Q. Can I use SCEIP financing to "flip" houses? If a property is already on the market to be sold, or expected to be listed "for sale" prior to the disbursement of SCEIP funds, then it is not eligible for SCEIP funding. SCEIP funds are available if a property owner chooses to make energy/water efficient improvements to the property before it is put on the market; however, all work must be completed and the final disbursement must take place prior to listing the property for sale. Q. Can I apply to SCEIP for work that is already completed? No, AB 811 does not allow us to fund improvements that have already been installed. A project where the permit has been "finaled" cannot be accepted by the program. AB 811 also prohibits using the program for refinancing improvement costs. A property owner that has already pulled a permit and/or has a bid or signed contract for a project may apply to the program as long as no work has been started and no other funding has already been provided. Q. How much financing is available to me? What are the terms? Assessment amounts cannot exceed 10 percent of the current market value of the property. The minimum advance from SCEIP is $2,500. Amounts from $2,500 to $4,999 will be set for repayment in 10 years. Projects over $5,000 may be repaid over a term of either 10 or 20 years, at the property owner s option. Projects of $60,000 up to $500,000 will require approval by the Program Administrator. Projects valued at $500,000 and above will require specific approval by the Board of Supervisors. 19 Sonoma County Energy Independence Program

22 Q. What is the interest rate being charged to participants? The current interest rate for SCEIP assessment contracts is 7 percent simple interest. The interest rate is fixed at the time the assessment contract and implementation agreement are signed and will not go up. Q. How might the long-term financing strategy of the program impact my assessment contract? The funding available for SCEIP assessments, and the bonds issued for disbursed projects, are currently issued by the Sonoma County Financing Authority, and held by the Sonoma County Treasury. For the sustainability of the program, the County is negotiating long term financing of these bonds. Selling these bonds to long-term investors will replenish our initial funding supply. 2. Program Finance Information Q. Why should I participate in SCEIP, as opposed to a regular home equity loan? SCEIP financing has several advantages that you may want to consider: Easy and simple to qualify Financing is not based on the owner's annual income Assessments do not appear on your credit report Assessments are paid semi-annually along with your property taxes Assessments may be passed to subsequent property owners, if your buyer's new lender agrees. For financial reporting, these transactions would be treated the same as other assessments on your property. Q. Is there an early payment penalty? If so, how much is it? The initial bond financing your improvements is held by the Sonoma County Treasury, and there is no penalty while the County Treasury holds the note. However, in order to continue to provide funding for Program growth, this investment will at some point be converted to long-term bonds. Bond purchasers generally require an early payment penalty/premium of up to 3 percent, based on current conditions. Please note that while you can pay your assessment off completely, SCEIP cannot accept partial prepayments. 20 Sonoma County Energy Independence Program

23 Because SCEIP is financed through the sale of bonds, any early payoff would need to include interest due until the next semi-annual bond payment date, which under state law is either March 2 or September 2. Q. Can I participate in SCEIP if my property is under water? Emerging Federal guidelines for Property Assessed Clean Energy (PACE) programs such as SCEIP require that we consider the amount of debt on a property relative to the market value of the property. We must limit funding through our Program for properties where the total debt (including SCEIP financing) exceeds the market value. We have therefore refined our evaluation of properties termed "under water. The sum of all liens against the subject property cannot exceed 100 percent of the market value of the property as determined through an automated valuation method. If your request exceeds this limit, you may resubmit your application (1) for a lower amount not exceeding the 100 percent limit calculation or (2) with a recent appraisal by a California licensed appraiser certifying a property value that will achieve the 100 percent limit calculation. Calculation: sum of all lien balances against the property / assessed value or market value, whichever is greater, is less than or equal to 100 percent. The federal guidelines reflect the concern raised by mortgage lenders in this depressed real estate market. We regret that this restriction may prevent or delay some very worthwhile projects from obtaining SCEIP financing, and we would encourage property owners to reapply when the real estate market recovers some of its value. Q. How long does it take to receive payment once my project is finished? Between 5 and 35 days. SCEIP processes checks on the first County business day of every month. To ensure timely payment, property owners (and their contractors) should submit all necessary paperwork regarding the completion of the work to SCEIP at least 5 county business days before the end of the month. Q. Is the interest paid to SCEIP simple interest? Yes; however, because taxes are only paid twice a year, depending on when your project is funded, there may be a component of interest, required for a bond payment before you pay your taxes that will be added to your principal ("capitalized interest"). Simple interest is then charged on this new principal amount for the duration of the assessment. 21 Sonoma County Energy Independence Program

24 Q. Can I include energy and water evaluation/audit costs in my SCEIP application even if they are paid beforehand? Yes, expenses for evaluations, audits, and engineering are all recoverable. Q. What about any rebates or tax credits associated with my improvements? Rebates or other incentives that are received at the time of project completion or shortly thereafter (by either the property owner or the contractor) so as to reduce the costs of a project at the outset will not be included in the financing amount. For example, if the total cost of solar project is $50,000 and the owner is entitled to an immediate rebate of $10,000, SCEIP financing will be limited to $40,000. However, rebates that are contingent on performance or that are not available to the property owner at or shortly after completion of the project, so as to be available for use to pay for the project, do not affect the amount of SCEIP financing. Tax credits that may eventually be available to a property owner and would vary based on applicable tax brackets are not taken into account in determining the SCEIP financing amount. Q. When does the County place the assessment lien on my property? The lien is placed at the time the assessment contract and implementation agreement is signed. Q. If the improvements increase my property value, will my property taxes go up? This can be a complicated issue, but the short answer is generally no. Certain projects are exempt. Applicants are encouraged to call the Sonoma County Assessor's Office at (707) for clarification. Q. My mortgage company pays my property taxes. Will they take care of this, too? Yes, however you need to advise your lender of the assessment on the property, so that the proper amount can be set aside for both your taxes and the SCEIP assessment. It is a good idea to check with your lender before you apply to SCEIP, as some mortgages might prohibit participation without your lender s consent. Q. What happens if I can't make the payments? Failure to pay the SCEIP assessment would be just like failing to pay your property taxes. Penalties and interest charges would apply until the assessment is paid. The county would, ultimately, have the right to foreclose on your property. 22 Sonoma County Energy Independence Program

25 Q. What happens if I sell my property before the assessment is paid off? Because SCEIP financing is an assessment against the property and not a personal lien, under state law the assessment can stay with the property until it is paid off. However, recent directions from the Federal Housing Finance Agency, Fannie Mae and Freddie Mac have led many lenders to require that the entire assessment be paid before property is transferred. The County disagrees with this position and is engaged in litigation to attempt to reverse this position. Until the matter is resolved, however, repayment may be required before any transfer or refinancing of the property is approved by a lender. The assessment will appear on any title search of your property. State law requires disclosure of the assessment in any negotiation about the sale of your property. Q. Are my tax dollars being used to improve someone else's property? No. SCEIP participants will repay Sonoma County's treasury investment, with interest. SCEIP will, in turn, charge participants an interest rate and administrative fees that ensure the program s costs are recovered. Therefore, the program will be revenue neutral to Sonoma County. Q. Is my SCEIP assessment tax deductible? Although we cannot give tax advice, we believe the United States Code is fairly clear: Title 26, United States Code, section 164(c) Deduction denied in case of certain taxes. No deduction shall be allowed for the following taxes: (1) Taxes assessed against local benefits of a kind tending to increase the value of the property assessed; but this paragraph shall not prevent the deduction of so much of such taxes as is properly allocable to maintenance or interest charges. An allocation between annual payments of interest and principal is provided at the time of disbursement. If you have any questions, you should of course contact your tax adviser. 3. Eligible Improvements Information Q. What improvements can I finance with SCEIP? Improvements must be permanently affixed to the property. In general, the type of improvements contemplated by SCEIP would include: High efficiency windows Solar and/or tankless water heaters 23 Sonoma County Energy Independence Program

26 Solar panels Upgraded wall and roof insulation "Smart" irrigation controllers High efficiency HVAC systems For a more comprehensive list, see Appendix "A" in the Program Report. Owners may also propose improvements that are not on the list as "custom" applications. These will be reviewed on a case-by-case basis, with the ultimate goal of increasing energy and water efficiency. None of these measures would typically cause an increase in property tax assessment of the property. Q. What if my improvements are a mixture of repairs and energy improvements? State law limits the SCEIP program to energy and water efficiency improvements. Repairs and/or new construction outside the improvements do not qualify. Therefore, if certain repairs need to be done before, during, or after the improvement project takes place, you must bear the cost of those repairs outside of the SCEIP assessment. An example would be dry rot discovered during the installation of energy efficient windows. The cost of the new windows and their installation would be covered, but the repair of the dry rot would not. Program staff can assist in clarifying these types of issues. Q. I want to remove sheetrock to install better wall insulation. Will SCEIP cover the removal, replacement and painting work, or just the insulation? Maybe. SCEIP staff will need to review these kinds of issues on a case-by-case basis evaluating the age of building, framing, and wall materials such as the plaster, and existing insulation. Q. If I am building an addition onto my house and doing energy upgrades at the same time, can I still apply for SCEIP financing? The program cannot finance the construction of the new addition. You may, however, apply to SCEIP for the energy upgrade portion. You should obtain separate bids for the energy improvements and the new construction. Energy improvements eligible under the program could include solar for the entire structure, upgrades to windows and insulation in the existing structure, and system wide improvements to HVAC and water heating. 24 Sonoma County Energy Independence Program

27 Q. Is artificial turf or xeriscaping covered by SCEIP? No, but high efficiency irrigation controllers and some irrigation controllers and some irrigation components are covered. Q. Are greywater systems allowed? Some local jurisdictions permit greywater systems. Please check with your local jurisdiction before applying. Your application would then be reviewed by Program staff to insure that it met other Program criteria (i.e., saves water). Q. Can SCEIP be used to finance solar leases or PPA agreements? Yes. Legislation passed authorizing PACE programs to finance certain Power Purchase Agreements (PPA s) in California. The contract language between the property owner and the solar leasing agent must conform to SCEIP requirements prior to entering into a SCEIP contract. 25 Sonoma County Energy Independence Program