SANBAG-HERO Lender Acknowledgement

ENERGY EFFICIENCY AND WATER CONSERVATION
PROGRAM FOR SAN BERNARDINO COUNTY
COMMERCIAL HERO
•
Background
The San Bernardino Associated Governments (“SANBAG”), a joint exercise of powers authority,
has established the Energy Efficiency and Water Conservation Program for San Bernardino
County (“Program”) pursuant to Chapter 29, Part 3 of Division 7 of the California Streets and
Highways Code. The Program provides an option for residential, commercial and industrial
property owners within participating jurisdictions within San Bernardino County to finance the
installation of renewable energy, energy efficiency and water conservation/efficiency
Improvements pursuant to contractual assessment agreements (each, an “Assessment Contract”)
voluntarily entered into by the participating property owners with SANBAG. Participating
property owners (each, an “Owner”) will, pursuant to their respective Assessment Contract, repay
the financing through a voluntary contractual assessment (the “Assessment”) levied against their
property (the “Owners’ Property”) which is payable through their property tax bills. The
repayment of the Assessment is secured by a lien against the Owners’ Property (each, an
“Assessment Lien”). The Assessment Lien remains until the Assessment is paid off, which is
scheduled to be five to twenty years depending upon certain factors, such as the type of
improvements to be financed and the estimated useful life of such improvements. The
Assessment Lien has the same priority as property taxes and other assessments. See California
Streets & Highways Code section 5898.30. This means that in the event of a default in the
payment of the Assessment and or foreclosure, the contractual assessment lien would have
priority over your liens.
In the event of a foreclosure by your institution, as with any outstanding property tax liens, only
the amount of the Assessment that is then and payable due or in default would need to be paid at
the time of the foreclosure. The remainder of the Assessment remains a lien on the property,
assumed by the purchaser.
In the event of a default on payment of the Assessment, the County of San Bernardino (the
“County”), acting the tax collector, would normally treat the default in the same manner as a
default in property taxes. Generally, properties are sold for failure to pay property taxes after the
taxes remain unpaid for five years. In the event of the delinquency in the payment of an
Assessment, however, SANBAG is required to initiate judicial foreclosure proceedings against
the delinquent parcel (i.e., if covenants with the purchasers of bonds sold to finance the Program
require such foreclosure), you as a lien holder would receive notice of the pendency of such
action, and have an opportunity to cure the non-payment.
There are currently a series of established PACE programs nationwide including Sonoma County,
Palm Desert, and LA County. Dozens of senior mortgage lenders have already acknowledged
PACE assessments under these programs.
•
How the program benefits the lender
o
o
o
o
o
o
o
o
o
•
Lowers default risk - improved cash flow makes it easier for property owners to
pay their mortgages.
Improves Loan‐to‐Value Ratio - buildings that are less expensive to operate
have a higher market value.
Improves property value - according to the University of California Energy
Institute's Center for the Study of Energy Markets (CSEM), “buildings with a
“green rating” command rental rates that are roughly three percent higher per
square foot than otherwise identical buildings – controlling for the quality and the
specific location of office buildings. Ceteris paribus, premiums in effective rents
are even higher – above six percent. Selling prices of green buildings are higher
by about 16 percent.”
Security - improvements are affixed to the property.
Useful life - the lien periods are generally shorter than the useful life of the
improvements installed, so existing lenders will benefit from the extra value as
added security interest after the assessment has been paid and the lien removed.
Safety and soundness - best practices framework developed to meet all
participants’ concerns.
In event of foreclosure - only the amount of the assessment that is due or in
default would need to be paid at the time of the foreclosure, while the remainder
of the assessment remains a lien on the property, assumed by the purchaser.
Lien risk minimized - non-acceleration of future assessments in the event of a
default or foreclosure limits lenders’ loss exposure only to a year or two
maximum of assessments in arrears.
Community Reinvestment - Provides opportunity to participate in the effort to
reverse climate change and reduce dependence on fossil fuel. In the current
difficult fiscal environment, there are very few avenues open to property owners
to finance the types of improvements needed to “green” their property.
Supporting a program that facilitates these changes will benefit the whole
community.
Commercial HERO eligible properties/owners
Property owners electing to participate in the Program may be individuals, associations, business
entities, cooperatives, and virtually any owner of commercial or industrial property subject to the
levy of real property taxes. Certain eligibility criteria must be satisfied and financing may be
approved only if the eligibility criteria described below are met.
Commercial HERO financing is available for commercial property owners and will only finance
eligible improvements consisting of alternative energy systems 125 kW or smaller but may
finance energy efficiency and water conservation equipment of any size (collectively, “Eligible
Improvements”).
Property owners may make more than one application for funding under the Program if additional
Eligible Improvements are desired by the property owners and the eligibility criteria and
maximum assessment amount criteria are met.
•
Commercial HERO eligible improvements
The Program affords Commercial property owners in San Bernardino County the opportunity to
take advantage of a wide range of energy-savings and water conservation/efficiency measures.
The Program is intended principally for retrofit activities to replace outdated inefficient
equipment and to install permanently affixed new equipment that reduces energy or water
consumption or produces renewable energy. However, the Program is also available for the
owners of properties on which new businesses are located that wish to add energy efficiency,
renewable energy, and water conservation/efficiency Improvements to such businesses.
•
Commercial HERO eligible costs
Eligible costs of Eligible Improvements may include the cost of equipment and installation.
Installation costs may include, but are not limited to, energy and water audit consultations, labor,
design, drafting, engineering, permit fees, and inspection charges. Installation is completed by a
qualified contractor of the Property Owners’ choice or by the Property Owners if self-installing.
•
Commercial HERO eligibility criteria summary
o
o
o
o
o
o
o
Applicant property owner(s) must be the owner(s) of record;
Mortgage debt lender(s) have given acknowledgement to Program financing;
Property owner(s) must be current on property taxes and the property owner(s)
certify(ies) that such owner(s) have not had a late payment on their property tax
more than once during the prior three (3) years (or since the purchase of the
property if owned by such property owner(s) less than three (3) years);
Property owners must be current on all property debt for a period of six (6)
months prior to the application, including no payment defaults or technical
defaults (or since purchase if the property has been owned less than six (6)
months by the current owner(s)), through funding;
Property owner(s) or their affiliated companies have not been involved in a
bankruptcy proceeding during the past seven (7) years and the property proposed
to be subject to the Assessment must not currently be an asset in a bankruptcy
proceeding;
All individual property owners must sign the application, Assessment Contract
and all required notices. For properties owned by corporations, LLC’s or LLP’s,
signatures by authorized representatives and/or corporate resolutions are
required;
Property must not have any liens other than lender debt or liens recorded by
community facility districts or similar financing districts;
o
o
o
o
Improvement costs are reasonable in relation to property value. Proposed
Improvements must not exceed 10% of the market value of the property;
Property has a debt service coverage ratio of 105% or higher;
Mortgage-related debt on the property plus the principal amount of the
contractual assessment does not exceed 90% of the market value of the property;
and
The total annual property tax and assessments, including the contractual
assessment, on the property will not exceed 5% of the property’s market value, as
determined at the time of approval of the contractual assessment.
A.P.N:
Commercial HERO File No:
LENDER ACKNOWLEDGEMENT OF OWNER PARTICIPATION IN ENERGY
EFFICIENCY AND WATER CONSERVATION PROGRAM FOR SAN
BERNARDINO COUNTY
THIS ACKNOWLEDGEMENT (“Acknowledgement”) is granted this ____________day
of _______________________, 20_____, by ________________________, a
__________________________ (“Lender”), and for the benefit of Property Owner (“Owner”),
______________________________, and the SAN BERNARDINO ASSOCIATED
GOVERNMENTS a joint exercise of powers authority (“SANBAG”), acting on behalf of the
Energy Efficiency and Water Conservation Program for San Bernardino County.
RECITALS
A. The San Bernardino Associated Governments (SANBAG) is a joint exercise of
powers authority the members of which include the County of San Bernardino (the “County”) and
numerous cities and water districts in San Bernardino County (each, a “Member Agency”).
B. Owner has applied to the Program to finance the amount of $_______________ , to be
paid back with interest as an assessment on Owner’s real property, described in Exhibit B
attached hereto (“Property”), over a period of _______________ years.
C. Owner has previously executed a deed of trust dated ___________________, to
Lender, as trustee and beneficiary thereunder, covering the Property, to secure a promissory note
in the sum of $______________________ , and recorded on ___________________,
____________ as Instrument No. ______________________ in the Official Records of San
Bernardino County (“Deed of Trust”).
D. Owner has executed, or is about to execute, an Assessment Contract with SANBAG
(“Assessment Contract”) by which SANBAG will disburse funds to Owner in a principal amount
not to exceed $__________________________ (“Disbursement”) to finance the purchase and
installation of Improvements, and such Disbursement will be payable with interest, upon terms
and conditions described in the Assessment Contract.
E. Pursuant to Chapter 29, Part 3, Division 7 of the California Streets and Highways
Code, repayment by Owner under the Assessment Contract will be by a statutory assessment
levied against the Property (the “Assessment”) notice of which shall be recorded against the
Property in the Official Records of San Bernardino County, and which Assessment, together with
interest and any penalties, shall constitute a lien (the “Lien”) on the Property, and shall be
collected in installments on the property tax bill in the same manner as and subject to the same
penalties, remedies and lien priorities as real property taxes.
ACKNOWLEDGEMENT
Lender acknowledges that it has been informed of Owner’s participation in the Program, and
agrees that Owner’s execution of the Assessment Contract will not constitute a default under
Lender’s Deed of Trust.
LENDER:
Lender Officer to sign:
By: ___________________________________
Signature
___________________________________
Name
___________________________________
Title
___________________________________
Date