Saturday, October 20, 2012

Property Assessed Clean Energy, Health Care for County Employees, County-Wide Official Pay

This week, we had a County Services committee meeting. We first considered a resolution that would create a Property Assessed Clean Energy (PACE) district. There was a presentation by Andy Levin of Lean and Green Michigan. He talked about how creation of this program would be a tremendous economic development driver in the county. All funding would be from private sources. Commercial and industrial property owners would save energy and money by making buildings more energy efficient. Buildings more be comfortable and attractive to tenants. It would put county workers to work with the retrofits. It would raise the tax base over time. And there would b no risk to the county. This was created and allowed by PA 270 of 2010, which allows PACE for commercial, industrial, and multi-family property throughout the county (but not residential homes). It allows flexible financing arrangements, and up to 100% financing. No downpayment would be needed, and the whole energy project can be financed. This would be friendly to banks as well because if there was already a mortgage, the bank that holds the mortgage on the property has to give consent. Another benefit is that PACE would help property owners to pay the mortgage because they will have increased property values and taxes, so banks are likely to give consent. All traditional energy efficiency improvements can be financed - lights, windows, HVAC, thermostat, permeable parking lots, and everything that makes a building use less energy and use water more efficiently.

The PACE district can be financed through a special assessment mechanism. This would provide for secure, long-term financing. There are no taxpayer dollars, no Tax Increment Financing, nothing public. Business owner can voluntarily take on a special assessment if they choose. The special assessment would be first in line for payoff should a bankruptcy happen, so it is secure for whoever lends the money. The debt is on the land, not on the person. So if the property is sold, the new property owner has the debt. Typical bank loans are 3-5 years, and when the loan is paid off the company is still in the red. PACE, on the other hand, is a 7-20 years loan. It would be for the useful life of the restoration. Their is a lower, fixed interest rate due to stronger lien position and reduced risk for lender. The contractor that does the work must guarantee the savings, and the contractor must write a check for the difference if it doesn't happen (according to law). Lean and Green has private partners (banks and private funds) that can finance these projects, and there are private funders looking to finance deals. The county votes to get into the program, which is statewide, and can vote to get out at any time. There is no contact and no county dollars encumbered. Additionally, this can satisfy the state revenue sharing requirements in terms of the cooperation component (20% of the dollars that the county receives). On Tuesday, there be a public hearing on the PACE districts, then the resolution can be adopted. This has been used for office buildings, corporate headquarters, data centers, synagogue, funeral homes, etc.

Commissioner Grebner had several excellent questions. He asked if bonds are sheltered from federal taxes. The answer was that bonds are not federally tax advantaged but are state tax advantaged, which makes a difference with state banks. There is no liability for the the county. Questions were also asked about delinquent taxes and was told they are not part of this. The community has the option regarding whether or not to turn over taxes when they are delinquent. The County Treasurer gets to decide.
27 states and the District of Columbia have these. There were also questions about whether this applies to agricultural property, and the answer is that it does apply (except for incinerators and digesters). Additionally, water reclamation projects are included. Wells and reservoirs and other water conservation are going to request this. Farms are eligible. There were also questions about the special assessment. The answer is that it is guaranteed and is handled by the county, which would be a new thing for Ingham County and similar to the drain office. There were many follow up questions about what happens to the property if there are lot splits and the parcel is developed for another purpose. The administration burden can be worked in to the project costs and recaptured by fee on property owner. Also, we are not precluded from any other firm that wants to do this outside of Lean and Green. We can create another district or could replace the existing entities. Others can also work in the district if the county takes action to allow for this. Treasurer Schertzing was asked if this will be a big burden for him, and he responded that it won't be. He said that the county does economic development and this fits into that model.

Finally, questions were asked about how the length of the time frame is set. The answer is that Lean and Green requires an investment grade audit of the energy conservation measures, then approves that the financing is less than the useful life of the equipment. This is based on the weighted average of the equipment. It is up to the parties to decide on the time frame. Some want longer, some don't want long term debt. The County Treasurer gets the final determination, but this is usually driven by market conditions. Commissioner Grebner commented that this is a powerful tool because it is a burden on the land and not the owner, and because it has priority over a mortgage. People with money at stake could use this as a new tool. Commissioner Grebner commented that this can be used for mobile home parks and other water uses, and Lean and Green needs to be ready for all of the activity that would come as part of farmland and other water issues. The resolution now goes to a public hearing on Tuesday then will come back for consideration the week after in committee.

The second big issue that we looked at was the resolution regarding health care options for county employees. We have a health care coalition, which is a coalition of our employee unions that decides on health care options. There were three options on the table at the last health care coalition meeting:

option 1 - status quo
option 2 - move to Blue Cross Blue Shield but retain the high cost plan, which would not create much in savings and would create a new vendor and all the trouble that comes with a new vendor (new rules, new cards that may not be available in time for open enrollment). option 3 - move to BCBS without the high cost plan which would ***

Although the county staff highly recommended the third option, the coalition passed option 1 on an 11-10 vote. It was pointed out, though, that they were split on the provider but did not want to eliminate the high plan. The resolution before us recommended status quo. The Commissioners wanted to move to Blue Cross without the high plan but need the health care coalition to agree as part of collective bargaining in order to create the savings. We amended the resolution to authorize staff to go with the existing option or with the commissioner-preferred option and allow for staff to try to convince the Health Care coalition again that this is the best plan for the county employees and county with the appropriate information. The UAW indicated that they are supportive of the county position. This resolution passed unanimously.

Finally, we dealt with a resolution setting the salary compensation for county-wide elected officials. These are the elected officials that serve the entire county, excluding the judges which are set by the state. The resolution included the same salaries for 2013 and 2014 for the Sheriff, Prosecutor, Treasurer, Clerk, Register of Deeds and Drain Commissioner that they had in 2012. The resolution also requires current these county-wide elected officials to contribute an additional 1.8% of gross wages to employee retirement, increasing the total contribution to 10.26% (which does not apply to county-wides under the new hybrid plan). Commissioner Vickers praised the work that Register of Deeds Hertel has done and was concerned that Hertel will be making less than the new Clerk. All committee members agreed that we should eventually have the Clerk, Drain Commissioner, Register of Deeds, and Treasurer to be equal when there are new people in the offices. With the state of the budget and the cuts we have had to make, though, no one moved to increase the salaries to match. Vickers did move to reduce the county clerk by $6,000, though, but there was no support for the motion.

Sorry for the late posting, but I have been busy lately. But more on that later...17 days until the November 6, 2012 general election!

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