1. Policy Research Shop Support for the Policy Research Shop is provided by the Ford Foundation and by the Fund for the Improvement of Postsecondary Education, U.S. Department of Education. Policy Research Shop Renewable Energy Incentives Evaluating the Suitability of Property Tax Exemptions and PACE Financing for Lebanon, New Hampshire The contents of this report were developed under grant P116B100070 from the U.S. Department of Education. However, these contents do not necessarily represent the policy of the U.S. Department of Education, and you should not assume endorsement by the Federal Government.

2. Policy Research Shop Project Overview Investigate: – Property Tax Exemptions – Property Assessed Clean Energy (PACE) Identify: – Adoption and Fiscal Impact – Barriers and Challenges – Projections for Lebanon, NH

3. Policy Research Shop PROPERTY TAX EXEMPTIONS

4. Property Tax Incentives for Renewables State exemption or special assessment + local government option www.dsireusa.orgwww.dsireusa.org / March 2011 Puerto Rico Local governments authorized to offer exemption (no state exemption or assessment) State exemption or special assessment only 34 States + PR offer property tax incentives for renewables 34 States + PR offer property tax incentives for renewables DC

5. Policy Research Shop Background NH RSA 72:61-72 Exemptions for Solar, Wind and Woodheating systems First enacted in 1975 (solar), 1977 (wind), 1979 (wood) All amended in 2003

6. Policy Research Shop Adoption

7. Policy Research Shop Fiscal Impact – Total Cost

8. Policy Research Shop Fiscal Impact – Town Valuation Growth

9. Policy Research Shop Fiscal Impact of Exemptions

10. Policy Research Shop Incentive Effect of Exemption

11. Policy Research Shop Barrier – Awareness Must file Form PA-29 with NH Dept. of Revenue Administration – Form PA-29 on NH OEP website – Form PA-29 not on some town websites Many town assessor websites do not mention exemptions

12. Policy Research Shop Barrier – Information Online Wolfeboro, NH Bedford, NH

13. Policy Research Shop Scenario – Worst Case All residents build a $10,000 installation – Highly unrealistic, as take-up is minimal $1.3 million in forgone revenue – less than 3 percent of property tax revenues

14. Policy Research Shop Scenario – Upper Bound Maximum in any NH municipality in 2009: Wood:$120,000(Sandwich) Solar: $250,000 (Bedford) Wind: $10,000 (Hollis) Total: $380,000 Forgone revenue: $9,000

15. Policy Research Shop Scenario – Average Average total exemptions claimed: $34,000 – $800 in forgone revenue for Lebanon

16. Policy Research Shop Scenario - Caveats Assume no incentive effect Largest municipalities underrepresented

17. Policy Research Shop PACE

18. Policy Research Shop Background Property Assessed Clean Energy August 2008 Discounted Loan over 20 Years 17 States through 2009; New Hampshire in June 2010

19. Policy Research Shop How it Works

20. Property Assessed Clean Energy (PACE) PACE financing authorized by the state* www.dsireusa.orgwww.dsireusa.org / January 2011 CA: 2008 NM: 2009 CO: 2008 WI: 2009 ME: 2010 VA: 2009 OK: 2009 TX: 2009 LA: 2009 IL: 2009 OH: 2009NV: 2009 OR: 2009 NY: 2009 NC: 2009 FL: 2010 HI: Existing Authority 24 states + DC authorize PACE (22 states have passed legislation and HI permits it based on existing law) DC MN: 2010 VT: 2009 MD: 2009 GA: 2010 DC: 2010 MO: 2010 NH: 2010 *The Federal Housing Financing Agency (FHFA) issued a statement in July 2010 concerning the senior lien status associated with most PACE programs. In response to the FHFA statement, most local PACE programs have been suspended until further clarification is provided. statement MI: 2010 (C&I Only)

21. Policy Research Shop PACE- Municipal Funding Scheme Examples Funding SourcePublic Bond OfferingMicro BondsBank LoansGeneral Funds Municipal CO2 Waste Revolving Fund Program ExampleBoulder County, COBerkeley, CA Annapolis, MD, Phase II (program pending) Sonoma County, CO Town of Babylon, NY (only EE) Initial Funding Amount Issued $9.76M - authorized $40M $1.5M for the pilot phase $1.5M$28.28M$3.19M Interest Rate 5.2% (income-qualified), 6.68% (open assessment category) 7.75%Unknown7%3% http://financere.nrel.gov/finance/content/funding-sources-property-assessed-clean-energy-pace-programs

22. Policy Research Shop Case Studies Berkeley, CA – Pilot program; Originator Four VT towns – Projects must be approved by state agency Durham, NH – Authorized November 2010 – Still working to implement

23. Policy Research Shop PACE - Barriers/Challenges The Federal Housing Finance Administration won’t approve loans with PACE liens FHFA: PACE poses risks to investors -> in the event of default, they are paid before the mortgage San Francisco in June 2010-Suspended PACE as a result of FHFA Announcement; Even though it became the nation’s largest PACE program in February 2010 http://www.bizjournals.com/sanfrancisco/stories/2010/06/07/daily49.html Yet not everyone is worried about FHFA- Durham NH Example

24. Policy Research Shop Conclusion and Summary Property Tax Exemptions: – Commonplace, small fiscal impact – Potentially large individual incentive – difficulty obtaining info on program – Likely minimal fiscal impact on Lebanon PACE: – Very recent, little data on effectiveness in NH – Monitor FHFA legal challenge to primary lien