[Added 11-13-2018 by Ord.
No. 18-19]
A.
City Council hereby establishes the Commercial Property Assessed
Clean Energy Financing Program; (C-PACE), under the authority of Code
of Virginia § 15.2-958.3. Under C-PACE, the City may authorize
contracts to provide loans for the initial acquisition and installation
of clean energy improvements with free and willing property owners
of both existing properties and new construction. In addition, private
lending institutions shall be provided the opportunity to participate
in C-PACE.
B.
The purpose of C-PACE is to promote the renovation and construction
of commercial, nonprofit and multifamily buildings and structures
by incorporating renewable energy production and distribution facilities,
energy usage efficiency improvements, or water usage efficiency improvements.
City Council finds that this will promote the general health and welfare
of the community. Water usage efficiency improvements, in particular,
benefit the public water supply and wastewater treatment services
provided by the City.
C.
In establishing C-PACE, the City Council finds that Fredericksburg
has numerous older buildings with many years of remaining life, and
that the renovation, retrofit, or rehabilitation of these buildings
with qualifying clean energy improvements would make them more efficient
and reduce their greenhouse gas emissions. The rehabilitation of commercial
and industrial buildings and structures that are at least 40 years
old, in particular, supports the same public purposes advanced by
the real estate tax exemption provided for this activity.
D.
City Council further finds that the promotion and development of
new buildings and structures with energy-efficient or water-efficient
features that exceed current building code requirements, or which
use renewable energy, will enhance the real property tax base of the
City, make these buildings, if rented, more attractive to tenants,
and thereby promote employment and economic growth in the City.
The person, as defined in Code of Virginia § 1-230,
who owns or leases an eligible property and voluntarily applies for
and obtains a C-PACE loan, or that person's successor in title.
A notarized certificate from the borrower, certifying that:
The borrower is:
Current on payments on all loans secured by a mortgage or deed
of trust lien on the property;
Current on real and personal property tax payments;
Current on all federal, state, and local taxes and that there
is no federal income tax lien, judgment lien, or other involuntary
lien against the property; and
Not insolvent or in bankruptcy proceedings; and
That the title of the benefitted property is not in dispute
as evidenced by a title report or title insurance commitment from
a title insurance company acceptable to the capital provider and the
City.
A memorandum of C-PACE assessment lien, which shall:
Be executed by the borrower, capital provider, and the City;
Include the Amortization Schedule; and
Be recorded in the Clerk's office against the property at closing
to evidence the C-PACE voluntary special assessment lien and to secure
the repayment of the C-PACE financing to the capital provider.
The private lending institution that originates a C-PACE
loan, or its successors or assigns in interest; or, if City Council
appropriates funds for this purpose and, if applicable, the City.
The capital provider is the source of funding for, or the current
holder of, C-PACE loans.
As applied to qualifying improvements shall include the cost
of all:
Labor;
Materials, machinery and equipment;
Architectural, engineering, consulting (such as energy audits
and assessments, feasibility studies and reports, and financial projections),
financial and legal services;
Plans, specifications and studies;
Physical and building condition surveys;
Commissioning expenses;
Project management;
Energy savings or performance guaranty or insurance;
Post-installation evaluation, measurement and verification,
and building accreditation;
Permitting fees;
Due diligence, financing, and closing costs for the C-PACE loan,
including administrative and capital provider fees that are directly
attributable to a qualifying improvement; and
Reserves for construction period interest.
The Commercial Property Assessed Clean Energy Financing Program
created by this article.
Those procedures, rules, disclosures, and restrictions promulgated,
imposed and enforced by the program administrator for the administration
of the program.
The development of qualifying improvements on an eligible
property.
An "eligible property" as defined in § 38-503 located within the City of Fredericksburg, for which a program loan is applied for or received.
The cost of the following types of qualifying improvements to
existing buildings and structures, or new construction, on eligible
property, may be financed through C-PACE:
A.
Renewable energy production and distribution facilities, including,
but not limited to, solar photovoltaic, solar thermal, geothermal,
wind, fuel cells, biomass systems, biogas or methane recovery systems.
B.
Energy usage efficiency systems reasonably expected to reduce the
energy usage of the eligible property, including but not limited to,
high-efficiency lighting and building systems, heating, ventilation
and air-conditioning (HVAC) upgrades, air duct sealing, high-efficiency
boilers and furnaces, high-efficiency hot-water heating systems, combustion
and burner upgrades, fuel switching, heat recovery and steam traps,
cogeneration systems, building shell or envelope improvements, reflective
roof, cool roof or green roof systems, weather-stripping, fenestration
and door improvements and modifications, insulation (both in walls,
roofs, floors and foundations and in HVAC systems' radiant barriers),
building energy management systems, process equipment upgrades, and
other forms of conservation; provided, that for qualifying improvements
that are part of a new building or structure, such qualifying improvements
shall exceed the minimum energy efficiency requirements of then-applicable
law, ordinance, regulation or code.
C.
Water usage efficiency improvements, such as recovery, purification,
recycling and other forms of water conservation. For new construction,
these improvements qualify for C-PACE financing only if they exceed
the minimum water usage efficiency requirements of then-applicable
law, ordinance, regulation, or code.
D.
Construction, renovation or retrofitting of eligible property directly related to the accomplishment of any purpose listed in Subsection A, B or C, above, whether such qualifying improvement was erected or installed in or on a building or on the ground, it being the express intention of the City to allow qualifying improvements that constitute, or are part of, the construction of a new structure or building to be financed with a C-PACE loan.
E.
Any other category of improvement approved by the City Manager as
qualifying for financing under C-PACE, with the concurring written
opinion of either the City Attorney or other legal counsel engaged
to serve as counsel for C-PACE that such improvement is authorized
by or consistent with the commonwealth's authorizing legislation for
C-PACE programs.
F.
The sample list of eligible improvements published by the Mid-Atlantic
PACE Alliance dated June 2018 is nonexhaustive and may be used as
a guide in determining which proposed improvements qualify for C-PACE
funding.
A.
Eligible properties include all assessable real estate located within
the City of Fredericksburg, with all buildings located or to be located
thereon, whether vacant or occupied, whether improved or unimproved,
and regardless of whether such real estate is currently subject to
taxation by the City, other than:
B.
Eligible properties shall be eligible to participate in C-PACE.
A.
The capital providers for C-PACE may be private lending institutions.
Public funds may be the source of C-PACE funding to the extent appropriated
for that purpose by City Council.
B.
The time period during which borrowers shall repay the C-PACE loan
shall not exceed the weighted average useful life of the qualifying
improvements or 20 years, whichever is less. However, the maximum
term of a C-PACE loan for solar improvements shall be 25 years.
C.
C-PACE loan payments shall be combined with the City's real property
tax billing and collection, and payable into the treasury of the City.
The Treasurer shall apply any loan payment first to the City's real
estate taxes, penalties, and interest which are due and payable on
the date of receipt of the payment, and second, upon having paid all
real estate taxes due, to the C-PACE voluntary special assessment
in accordance with the C-PACE loan documents. The borrower shall notify
the capital provider and the Treasurer if any C-PACE loan payment
is a prepayment, at the time the payment is made.
D.
The interest rate of a C-PACE loan shall be determined by mutual
agreement of the borrower and the capital provider.
E.
All of the costs incidental to the financing, administration, and
collection of the C-PACE loan shall be borne by the borrower. C-PACE
is intended to be self-financed through fees that are designed to
cover the costs to design and administer the program, including the
compensation of any third-party administrator. The City Manager shall
collect a nonrefundable program application fee from the borrower
upon receipt of an application for C-PACE financing. In addition,
the City shall impose a fixed fee to be collected with each loan payment,
which shall be stated in the written contract between the City, borrower,
and capital provider. The amounts of these fees shall be established
by City Council by resolution from time to time as needed.
F.
The minimum amount of any single C-PACE loan shall be $20,000. The
maximum amount of any single C-PACE loan shall be $5 million. The
maximum aggregate dollar amount that may be financed through C-PACE
is $15 million. In the event that applications for C-PACE financing
appear likely to exceed the maximum aggregate dollar amount, priority
shall be given to applicants on a first-come, first-served basis.
G.
The program administrator is authorized and directed to prepare program
guidelines for C-PACE loans. The program guidelines shall include,
without limitation:
(1)
Disclosures about C-PACE fees, costs, and program processes;
(2)
Eligibility requirements for participation in the program by capital
providers, contractors and other PACE stakeholders;
(3)
Eligibility requirements for borrowers and C-PACE improvements and
projects; and
(4)
Suggested underwriting criteria, including, without limitation, underwriting
guidelines established by the Virginia Department of Mines, Minerals,
and Energy or the Mid-Atlantic PACE Alliance Regional C-PACE Toolkit
published in June 2018, such as financial ratios related to:
H.
Additional requirements.
(1)
Every borrower, on behalf of itself and any affiliated entities,
whether in existence at the time of the C-PACE application or created
thereafter, and any of its individual shareholders, principals, managers
or other associated individuals, shall:
(a)
Waive the right to bid, either directly or indirectly, on the
property at any auction held in the course of foreclosure for delinquent
real estate taxes or the C-PACE voluntary special assessment; and
(b)
Waive the right to occupy, possess, or use, either directly
or indirectly, any eligible property for a period of five years after
the date of the foreclosure auction.
(2)
Every borrower shall:
(a)
Waive all defenses, affirmative or otherwise, to the foreclosure
action related to any collection suit brought for the nonpayment of
any C-PACE obligation. This waiver shall apply to any litigation action
initiated under the laws of the Commonwealth of Virginia or any administrative
collection action as afforded the City of Fredericksburg Treasurer
or her duly appointed collection agent;
(b)
Waive all defenses to the imposition of personal liability for corporate officers as permitted under Virginia Code § 58.1-3965(F) and the collection thereof as stated in Subsection H(2)(a) above;
(c)
Agree to provide a confession of judgment pursuant to Virginia
Code § 8.01-432 et seq., if requested by the City or the
capital provider to accompany any note related to the financing for
any Qualifying Project.
(d)
These waiver provisions shall be a burden that runs with the
land intended to bind successors or assigns in title while any C-PACE
obligation remains outstanding.
A.
A draft contract specifying the terms and conditions of C-PACE loan
agreements is adopted as an appendix to Ordinance No. 18-19, which
established C-PACE. Each C-PACE loan agreement shall be in substantially
the form established by the draft contract, with such additions, deletions
or alterations as permitted by this article.
B.
The City Manager is authorized to enter into C-PACE loan agreements
on behalf of the City. The City Manager may procure program administration
services if needed, to the extent that funds for this purpose are
appropriated.
C.
The parties to any C-PACE loan agreement shall be the borrower, the
capital provider, and the City.
D.
The City Manager may not execute any C-PACE loan agreement unless
the conditions for the priority status of the voluntary special assessment
lien are met, in addition to the underwriting requirements.
E.
The C-PACE loan documents shall include provisions for the amendment
of the C-PACE loan agreement. No capital provider or borrower may
amend any C-PACE loan agreement without consent of the City, as evidenced
by the signature of the City Manager, which shall not be unreasonably
withheld, conditioned or delayed.
A.
A C-PACE loan shall be secured by a voluntary special assessment
lien in the amount of the initial C-PACE loan amount, plus all interest,
penalties, fees, costs and other amounts accrued or accruing thereon
in accordance with the C-PACE loan documents against the property
where the qualifying improvements are being installed, the existence,
terms and conditions of which shall be evidenced by the recordation
of C-PACE memorandum in the Clerk's office of the Circuit Court of
the City of Fredericksburg. The capital provider shall record the
memorandum at closing. The capital provider shall inform the Commissioner
of Revenue of any changes to the anticipated yearly assessment, and
the Treasurer of any changes to the amortization schedule, on or before
July 1 of each year for which C-PACE loan payments are due.
B.
The voluntary special assessment lien shall have the same priority
status as a property tax lien against real property so long as:
(1)
A written subordination agreement, in a form and substance acceptable
to each prior lien holder in its sole and exclusive discretion, is
executed by the holder of each mortgage or deed of trust lien on the
property and recorded with the special assessment lien; and
(2)
A borrower certificate is submitted to the City prior to recording
the C-PACE memorandum.
C.
The City's obligation to remit C-PACE payments to the capital provider
shall be a limited obligation, only payable if and when installment
payments are received from the borrower and not applied by the Treasurer
to the City's real property taxes, penalties, and interest as directed
by this article. The Treasurer shall promptly process, deposit, and
credit C-PACE installment payments no later than 45 days after receipt.
D.
Voluntary special assessment lien.
(1)
The voluntary special assessment lien, and the C-PACE memorandum,
shall not be amended without the City's consent, except as provided
in the C-PACE loan documents, including, without limitation, the capital
provider's transfer, assignment, or sale as provided in this section.
The City's consent shall not be unreasonably withheld, conditioned
or delayed. C-PACE loans may be transferred, assigned or sold by a
capital provider at any time during the loan term without consent
from the borrower or the City or any other party; provided that the
capital provider shall:
(2)
The Treasurer shall not be obligated to remit C-PACE payments to
a new capital provider unless a recorded copy of the C-PACE assignment
has been provided to the Treasurer at least 30 days before the next
installment payment due date. Recordation of the C-PACE assignment
shall constitute an assumption by the new capital provider of the
C-PACE rights and obligations contained in the C-PACE loan documents.
E.
The voluntary special assessment lien shall run with the land. That
portion of the assessment that has not yet become due shall not be
eliminated by foreclosure of a property tax lien.
F.
The voluntary special assessment shall be payable to the Treasurer
in installments over a period of years, due at the same time as real
property taxes. C-PACE loans shall not constitute a pledge of the
faith and credit of the City.
G.
Delinquent payments shall be subject to all fees and collection methods
permitted under the laws of the Commonwealth of Virginia for the collection
of delinquent taxes.
H.
The Treasurer shall enforce the voluntary special assessment lien
in the same manner that a property tax lien against real property
is enforced. The Treasurer shall be entitled to recover costs and
expenses, including attorneys' fees, in a suit to collect a delinquent
installment of an assessment in the same manner as in a suit to collect
delinquent property taxes, including utilizing any administrative
remedies provided by Virginia law. The costs and expenses recovered
by the Treasurer shall be in addition to any costs, expenses, interest,
or other amounts due and owing to the capital provider in accordance
with the C-PACE loan documents. For the purposes of enforcement of
the voluntary special assessment lien herein, any eligible property
which has an outstanding voluntary special assessment imposed pursuant
to this article shall be enforceable after June 30 following the first
anniversary of either the real estate tax or the special assessment
having become due under the authority of Virginia Code § 58.1-3965.1.
Borrowers and capital providers participate in C-PACE at their
own risk. The City makes no representation or warranty as to the validity,
enforceability, priority, or any other character of any C-PACE loan
agreement or voluntary special assessment lien, and borrowers and
capital providers agree to release and hold the City of Fredericksburg
harmless from and against any and all liabilities, claims, suits,
liens, judgments, damages, losses and expenses, including, without
limitation, reasonable legal fees and costs arising in whole or in
part from acts, omissions, breach or default of borrowers or capital
providers in relation to or under the performance of any C-PACE loan
agreement.
