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CRCS ... Center for Refenerative Cmmunity Solutions
A New Jersey 501 (C) (3)
Discussion notes for December 2016 Meeting
Burgess COMMENTARY
Peter Burgess
CRCS Annual Meeting Docs
Jonathan Cloud
Attachments10:56 AM (3 hours ago)
to matthew, me, Gus, Victoria
Thanks for agreeing to come on Friday. Here are some documents (some more finished than others), and a brief agenda:
My best regards,
Jonathan Cloud
Proposed Operating Agreement with PFS
Begin forwarded message:
From: Jonathan Cloud
Hi Genevieve:
There are a few things we’re still unclear about, so some of these items are very much open for discussion. But based on our current understandings, we’re proposing the following.
First, the context, and some special considerations:
Our goal is to provide our nonprofit with the required capital to fund an immediate launch of PACE in New Jersey and to establish a long-term, reliable revenue stream. We know that your goal is to have PFS provide a longterm profitable servicing role at a reasonable, and sustainable, cost to property owners, so as to maximize the opportunities for clean energy projects.
With regard to fees, we’ve used several models in order to make spreadsheet projections, but we’re not wedded to any particular model so long as our revenues are sufficient to sustain our operation.
With regard to the potential concern of originators/lender that our relationship is somehow tied preferentially to Greenworks, NJPACE will ensure that all projects are handled independently, confidentially, and professionally, and we will state that our arrangement with PFS is strictly a processing and servicing one.
At the same time, with regard to the practice of listing approved lenders on the website, we believe, and others have confirmed, that this provides insufficient assistance to our customers, and we reserve the right to offer financing for projects that are submitted to NJPACE with a request for our assistance with financing, and we will make all of our procedures transparent.
These are our suggestions:
(1) “New Jersey PACE” will be the Administrator of record for each municipality.
(2) PFS will be the sole processor for all projects submitted to the New Jersey PACE platform
(3) PFS will have a separate long-term contract with the municipality regarding each Assessment / project
(4) The specific roles and responsibilities of NJPACE and PFS will be set out in an “Operating Agreement” between us
(5) We project that NJPACE will enroll at least one hundred jointly-selected towns over the first five years, and, through marketing, generate close to 400 projects, at an average project size of $600,000 each ($240M total)
6) We estimate the NJPACE Budget needs for the first three as years as follows:
Year 1: $ 353,000
These include our salaries at $50k each in Year 1, increasing to $60k and $70k in years two and three. We can provide further details of our projections, understanding they’re just that, and are subject to revision
(7) The funding NJPACE requires from PFS will depend on the following:
(a) How much NJPACE can earn from the various fees involved, as well as their timing:
(b) How much PFS will pay NJPACE for each Town NJPACE signs up to launch a Program (“Launch Fees”)
(c) Whether the Launch Fees are “advances” (i.e. a “draw”) against NJPACE’s future income, or are simply payments for PFS’s rights to be the sole processor for NJPACE
(8) The timing of funding from PFS to NJPACE will reflect (a) NJPACE’s expenditure rate, and (b) how NJPACE’s revenues are earned (e.g., Town Sign-on/Launch Fees, Project/Platform Fees, Financing Fees, etc.)
(9) Our Agreement will contemplate a 3-5 year arrangement, with the provisions that a) PFS shall have the right to continue as the Processor-Servicer for any Project Assessment signed up during this period, and b) NJPACE shall remain the administrator for the towns launched during this period.
(10) The Agreement will contain termination provisions allowing for termination by either party for reasonable and customary causes. In the event that the Agreement is terminated for any reason, including expiration, the Agreement will set forth non-competition and non-disclosure requirements regarding the future business of either party in New Jersey.
Let us know how you would like to continue our conversation. Thanks
My best regards,
Jonathan Cloud
Center for Regenerative Community Solutions
The Board met on this date as previously scheduled and agreed that:
1. NJPACE & the Coalition for PACE in NJ
The Board reviewed the situation with regard to PACE legislation and the creation of the Coalition to support meaningful action in the New Year. Our ideas for the Coalition are being developed at a new web site, www.NJCoalition4PACE.net, which already has the video, audio, and slides of the webinar.
Executive Committee comments:
We have already had one conversation with a key industry contact, Mike Lemyre of Ygrene, and plan to follow up to have him help us reach the other major players. Effectively, the Coalition has become an initiative of CRCS/NJPACE, and to the extent that companies like Ygrene support the Coalition financially, that money will presumably be paid to us, to use as we see fit to serve the goals and interests of Coalition members and advance the cause of creating a robust PACE industry in New Jersey. The “PACE industry” is a really an ecosystem, and our most useful role at this point is to help organize it around the opportunity in NJ, and have it invest some resources into making the program happen here.
We’re also discussing the idea of going back to the Governor’s office and DLGS and offering to run a pilot program under the existing statute, with two or three towns, to show that it’s not risky or undermining of the mortgage industry.
2. Regenerative Cohousing Program
The Board heard a brief update on the Andover Ecovillage, and EcovillageNJ, initiatives for which CRCS is the fiscal sponsor. These programs are becoming more of a focus for two reasons: (a) the work on PACE has been set back by the Governor’s Conditional Veto, and (b) the Ecovillage group is focusing on a specific property and is engaged in negotiations to partner with the owners to develop NJ’s first eco-community.
Executive Committee comments:
There might seem initially a clear divergence between our work on PACE and the Regenerative Cohousing program, but in fact there are both direct and indirect connections. Specifically, if PACE can be introduced successfully, it will provide a significant part of the capital stack for a sustainable real estate development project. (This would make Andover Township a candidate for the pilot program.)
On a broader level, both PACE and the Regenerative Cohousing program spring from the same fundamental interest, in transforming communities, and providing new financing for eco-community development. In fact, this is really the core of what CRCS has to offer (and in the attached diagram we suggest ways of leveraging the various elements we have of this equation).
3. Global4C
The Board was briefed on the successes of the Global4C project, both in the MIT competition and at the 2015 Earth Systems Governance Conference in Canberra. The team, led by Dr. Delton Chen, and supported by us, has published a formal academic paper based on the discussions Dr. Chen led with a dozen international economists, climate scientists, and others around the world. This has also been written up at the CRCS web site as well as at the Global4C site.
4. Other Initiatives
The Board also discussed several other initiatives that are either in an early stage of development or are currently on hold. These include the development of a podcast series on Creating Regenerative Communities; an attempt to introduce a practical version of a complementary currency, currently called “Commons Credits,” Viridian, and the idea of “A Possible New Jersey,” which provides a vehicle for an integrated vision of what might be created through a combination of these efforts.
Executive Committee comments:
The attached diagram has been developed to provide “the big picture” of what some of us see CRCS as working on, providing an overview of current and future initiatives and how they might develop. In addition, we’ve registered several variations of “PossibleJersey.org,” “APossibleNJ.org,” etc. and Jonathan Cloud has posted several draft blog posts at http://possiblenj.org (the other URLs can point there or provide sister sites).
5. Housekeeping
Finally, the Board discussed several housekeeping items, including the bookkeeping and financial reporting, charitable receipts for 2015, and liability insurance. Peter Burgess agreed to look at the books and help provide formal financial reporting formats.
The “big picture” (as of December 2015):
Bound Brook Proposal: The Civic Cooperative Model
Introduction: Opportunities for Regenerative Community Development
What is “Regenerative” Community Development? (“Beyond Sustainability to Self-Renewal”)
Self-Organizing for Resilience
Both Bound Brook and South Bound Brook have issued proclamations (approved in March/April 2016, issued May 21, 2016) joining the Race to Zero Carbon. These are the first towns to do so. However, the mechanisms for implementing these commitments are unspecified. Part of what we are proposing here is an approach to achieving the Net Zero Carbon goal, through a collaborative economic transformation of the community — what might be termed, following the traditional idea of a “barn raising,” a “town raising” or “village” or “neighborhood” or “community raising” event or process.
This is designed to assist the community in elevate itself as a whole through the combined efforts of its residents and business owners.
The program proposal:
Regenerative Bound Brook Civic Cooperative Association
*Civic Association: A civic association is a type of organization whose official goal is to improve neighborhoods through volunteer work by its members. (Wikipedia)
**Cooperative Association: 'The term cooperative association signifies a business organization formed by a group of individuals for their mutual benefit. A cooperative is owned and operated by its members and is generally organized either under general business laws or under specific statutes applicable to cooperative associations. A cooperative corporation is distinct from a charitable association organized for some benevolent purpose.” (http://cooperativeassociations.uslegal.com/)
The Bound Brook Civic Cooperative that would serve as a local community development corporation, and as a vehicle for local resilience and sustainability solutions. This cooperative would have a license to use our DREAM financing model as a community redevelopment tool, attracting developers, bankers, property owners, investors, and local contractors, and undertake a local DREAM finance program. When PACE is available, the cooperative will be an established organization that can leverage it for deep retrofits and net-zero energy solutions.
In addition, the cooperative may undertake other projects based on the needs and aspirations of the community, such as buy-local and self-sufficiency programs, local food sourcing and production, local energy generation and aggregation, civic education, child- and elder-care programs, and destination programming.
Other examples might include:
Some recent examples of successful community cooperative ventures:
LOCAL INVESTING OPPORTUNITIES NETWORK (LION) Port Townsend, WA
A LION is a loosely organized network of citizens who support local businesses and invest their money locally. LIONs create opportunities for local businesses and investors to network and develop relationships. See https://www.local-investing.com/.
CERO COOPERATIVE Boston, MA
CERO, which stands for Cooperative Energy, Recycling & Organics (and also means “zero” in Spanish, referring to zero waste) is a multi-racial, worker-owned cooperative in Boston that collects organic waste from local grocery, cafeteria, and restaurant customers, reducing trash sent to landfill and incinerators by 50% or more. Instead of the organic waste producing methane gas in a landfill, CERO delivers the organic waste to composting facilities, where it is turned into com- post for community use.
With support from Boston Impact Initiative, the Cooperative Fund of New England, Cutting Edge Capital, and more than 80 community investors, CERO’s working-class owners were able to raise more than $400,000 in start-up capital through grants, a crowdfunding campaign, and a Direct Public Offering (DPO).
COOPERATION JACKSON Jackson, MS
Cooperation Jackson is a multi-layered plan to support economic democracy in Jackson, Mississippi, and the surrounding area.
In the state with the highest percentage of Black residents as well as the nation’s highest poverty rates, Co- operation Jackson is developing a network of cooperatives and other worker-owned, democratically man- aged enterprises including child care, urban farming, arts and culture, a café, and recycling.
In addition, Cooperation Jackson’s Sustainable Communities Initiative will start an eco-village housing cooperative, based on a community land trust developed and operated by Cooperation Jackson’s Community Development Corporation.
GROWING POWER Milwaukee, WI
Growing Power is a non-profit organization and land trust operating urban farms in Chicago, Illinois; Madison, Wisconsin; and Milwaukee, Wisconsin (its headquarters). Its farms provide job training and technical assistance in urban agriculture and grow, sell, and distribute a variety of produce, fish, meat, worm castings, and compost.
Launched in 1993 to provide Milwaukee teenagers with jobs and provide equal access to healthy, high-quality, safe and affordable food for people in all communities, Growing Power has become a national leader in sustainable urban agriculture and education, hosting workshops on topics from closed-loop aquaponics and vermiculture to anti- racism at its farms and Regional Outreach Training Centers across the country. A five-story model vertical farm is currently being developed for the Milwaukee site.
Civic Cooperatives: Powerhouse Engines of the New Economy
The 'New Economy” means different things to different people, but there’s no doubt that we are in the midst of a major economic transition, one in which many of the old rules no longer apply. Whether it is the recognition that we’re moving into a “gig economy” — one 'in which temporary positions are common and organizations contract with independent workers for short-term engagements,” which a recent study forecast will be 40% of the American workforce by 2020 — or “conscious capitalism,” or any of a hundred other new trends, tomorrow’s economy will be different from today’s. One of the most widely recognized of these trends is the “sharing economy,” which covers everything from Airbnb and Uber to Freecycle, where you can obtain used items for the cost of picking them up.
Cooperatives are clearly part of this trend. But whereas Airbnb and Uber are corporate implementations of the sharing economy, cooperatives are also a way of democratizing the economy, empowering people, and leveling the playing field. They offer people the possibility of “economic self-help,” but in groups and communities rather than as isolated, self-interested, and competing individuals. They are also a way of achieving greater economic stability and resilience, by operating in a way that is often countercyclical to that of the mainstream economy. Because they are operated for the benefit of their members, they are less subject to the booms and busts of the market, and continue to operate and maintain their value during economic downturns.
Cooperatives are not new, but they tend to be formed in waves, and are currently being reinvented for a new era. The Civic Cooperative model we’re proposing here draws on the traditional strengths of the cooperative, while adapting them to the economic conditions that exist today in communities and regions.
The Civic Cooperative Association (CCA): [our definition]
Combining the features of a co-op and a civic association, the CCA is designed to improve the neighborhood or community by creating one or more co-ops to serve the needs of the members.
*Civic Association: A civic association is a type of organization whose official goal is to improve neighborhoods through volunteer work by its members. (Wikipedia)
**Cooperative Association: 'The term cooperative association signifies a business organization formed by a group of individuals for their mutual benefit. A cooperative is owned and operated by its members and is generally organized either under general business laws or under specific statutes applicable to cooperative associations. A cooperative corporation is distinct from a charitable association organized for some benevolent purpose.” (http://cooperativeassociations.uslegal.com/)
Because most people are not that familiar with the way co-ops work, even if they happen to belong to one (such as a credit union), the first step is typically an educational one, helping people understand the benefits and requirements of successful cooperatives. The next step is to evaluate the members’ and the community’s needs to determine the best opportunities for short term success — in a community with a food desert this might be a retail fresh food operation; in other communities it could be an arts cooperative, or a housing community, or a financial cooperative, or a clean energy finance co-op — using innovative economic development tools and approaches that are emerging in the transition economy.
Co-ops are in several respects similar to employee-owned companies (actually some of them are employee-owned companies), and as such share “the employee ownership edge” (from https://www.nceo.org/articles/ownership-edge-esop-company):
Studies consistently show that when broad employee ownership is combined with a highly participative management style, companies perform much better than they otherwise would be expected to do.
'Consider, for instance, Jackson's Hardware in the author's home town, San Rafael, California, just north of San Francisco. Other than the local newspaper, Jackson's doesn't often get press coverage and few people outside of San Rafael have heard of it. It's the kind of small privately held business that makes up most of the U.S. economy and most of the employee ownership world.
'Jackson's started an ESOP in 1989 and has been 100% employee owned for over a decade. It looks like an old-fashioned hardware store. Its large pink building opens early in the morning when contractors from around the Bay Area come to shop. Throughout the day, customers come in to its maze of aisles filled with everything from light bulbs to the most specialized tools. You're quickly greeted by an employee owner who'll make sure that an expert can help you get just what you need, taking you from questions to purchase (there are no cashiers). There are lots of experts, however-Jackson's takes out regular newspaper ads filled with pictures of its 70 employee owners highlighting their long years of service.
'Jackson's is an open-book company. Weekly and monthly sales figures are posted for everyone to see. Employees know the financials and receive bonuses based on them. There are meeting about ways to improve the bottom line, and their ideas are taken seriously by CEO Bill Loskutoff. Several years ago, Orchard Supply, a chain owned by Sears, moved in a few blocks away, soon to be followed by Home Dept. Another hardware store, Yard Birds (part of a regional chain that was recently bought by Home Depot, but that maintains its identity) was just up the road. But Loskutoff says with each new opening, Jackson's sales went up as customers gained a new appreciation for the expertise and personal care they got from Jackson's owners. Yard Birds, meanwhile, closed its doors in 2006.
'The thousands of employee ownership companies have more in common with Jackson's than with either United Airlines or W.L. Gore. Typical employee ownership companies are privately held, modestly sized (100 to 300 employees), and not household names. They are more productive than their peers, generate greater employee and shareholder wealth, and are more likely to survive year after year. They have the ownership edge.
Ownership edge companies follow six essential rules:
Types of cooperatives and cooperative programs:
The DREAM Cooperative
This is a regional / state / watershed or ecosystem / national co-op, designed to support local civic and clean economy cooperatives in specific communities. It would make economic tools and resources available to the local co-ops, along with education, dynamic governance structures, and regenerative community development strategies. It would license the DREAM Financing strategy from CRCS and have the right to sub-license it to the local co-ops, generating revenues for CRCS and for private investors, and managing local DREAM programs.
CRCS provides the know-how and resources for developing a net-zero carbon footprint for the local community. Our mission states that CRCS is devoted to:
(Underlining added.)
Over the past four years, CRCS has developed the economic tools needed to transform the built environment, reduce energy waste and carbon emissions, and save property owners money.
Commercial PACE is expected to be enabled by state legislation and municipal ordinances in 2017.
DREAM is available now, for both residential and commercial properties, but needs to be pioneered, demonstrated, and implemented at the local level.
Other economic development tools, such as energy aggregation, cohousing, local currencies, local food production and distribution, are also available through the work of the civic cooperatives.
These initiatives are consistent with the goals of the Transition Movement, the New Economy Movement, the Grassroots Economic Development Collaborative, the Ecovillagers Alliance, the Race to Zero Carbon, and others.
The advantages of the cooperative model are:
We believe it takes a cooperative to raise a village. We can provide the mechanisms, and in some cases bring the investors, for self-organizing groups, neighborhoods, and communities. We don’t dictate the types of development or the priorities for each community, but facilitate the development of plans, priorities, and shared visions through place-based initiatives and regenerative design and development principles.
Organizations to Partner With
https://www.ncba.coop/about-us/organization/mission-and-values
http://coophousing.org/
http://www.hcdnnj.org/
http://reconomy.org/
http://neweconomy.net/
http://www.transitionus.org/
https://www.regenesisgroup.com/
http://fp2w.org/
NJ law on co-ops:
On May 9, 1988, the Cooperative Recording Act of New Jersey was enacted. That act, codified in the ''New Jersey Statutes Annotated'' and cited as N.J.S.A. 46:8D-1, specifies the manner in which a co-op's governing documents, including the bylaws, proprietary lease and certificate of incorporation, must be filed with the state attorney general's office. Apart from that, however, there are no other New Jersey laws specifically to regulate co-ops.
At the same time, all co-ops, which are basically corporations, must follow the requirements of the state's Business Corporation Act, codified as N.J.S.A. 14A:1-1, which sets forth basic rules about recordkeeping, shareholder meetings, elections of board members and voting.
All co-ops in New Jersey are governed by their own rules and regulations contained in the co-op's bylaws, proprietary lease and house rules. In essence, these documents delineate how the co-op is governed and run by the board. 'They should also specify the co-op's responsibilities to the shareholders and the shareholders' rights in general. (
http://www.nytimes.com/2001/11/11/realestate/q-a-the-law-on-co-ops-in-new-jersey.html?_r=0)
Co-ops and Economic Democracy
Co-ops are typically set up so that each member has an equal vote, regardless of the number of shares held. The returns are based on the number of shares or amount of investment, but members with more shares do not have more control over the organization.
Co-ops and taxes
Cooperative Taxes
Most businesses need to register with the IRS, register with state and local revenue agencies, and obtain a tax ID number or permit. A cooperative operates as a corporation and receives a 'pass-through' designation from the IRS. More specifically, cooperatives do not pay federal income taxes as a business entity.
Instead, the cooperative's members pay federal taxes when they file their personal income tax. Members pay federal and state income tax on the margins earned by the cooperative, though the amount of taxation varies slightly by state. Cooperatives must follow the rules and regulations of theIRS's Subchapter T Cooperatives tax code to receive this type of tax treatment. (https://www.sba.gov/starting-business/choose-your-business-structure/cooperative)
SBA and cooperatives:
Forming a Cooperative
Forming a cooperative is different from forming any other business entity. To start up, a group of potential members must agree on a common need and a strategy on how to meet that need. An organizing committee then conducts exploratory meetings, surveys, and cost and feasibility analyses before every member agrees with the business plan. Not all cooperatives are incorporated, though many choose to do so. If you decide to incorporate your cooperative, you must complete the following steps:
Advantages of a Cooperative
Disadvantages of a Cooperative
Obtaining Capital through Investors. Cooperatives may suffer from slower cash flow since a member's incentive to contribute depends on how much they use the cooperative's services and products. While the 'one member-one vote' philosophy is appealing to small investors, larger investors may choose to invest their money elsewhere because a larger share investment in the cooperative does not translate to greater decision-making power.
Lack of Membership and Participation. If members do not fully participate and perform their duties, whether it be voting or carrying out daily operations, then the business cannot operate at full capacity. If a lack of participation becomes an ongoing issue for a cooperative, it could risk losing members.
(https://www.sba.gov/starting-business/choose-your-business-structure/cooperative)
Housing co-ops vs. condominiums
While on the surface, it may seem like cooperatives (AKA co-op) are just like condos, there are some major differences between the two, specifically in regards to property ownership. Those interested in buying a co-op will still go through the same process of home selection and instead of a mortgage ahome loan is required to finance the deal. Once the cash exchange is done consumers become shareholders (generally in a limited liability corporation) not property owners.
Consumers interested in buying co-ops generally have to pass board approval before become approved as a shareholder. Co-op boards will conduct a background check similar to those conducted by mortgage lenders. Only upon approval by the board will the sale transaction go through and as a result, the property buyer will be invited to join the corporation and get a lease on their unit.
While shareholders cannot officially build equity in a co-op unit, they can certainly experience large gains from selling their shares to the next co-op owner. However, any potential buyer must also go through the same board approval process as well. As a shareholder, co-op owners have the legal right to vote on any changes regarding the association such as electing a president and project approval.
Monthly HOA payments and even assessments are part of the fiduciary responsibility. One great perk about being a co-op owner is that those monthly HOA dues cover the property taxes associated with living in a unit as it is the financial responsibility of the corporation, not the individual share holders.
Condos vs. Coops
Aside from the major financial differences between the living arrangements, there is one other primary difference between condos and coops. According to city statistics, around 43 percent of the New York city's non-rental housing is co-op. The situation is unique to the area.
While living in either type of property can provide the same sense of security there are some serious differences between the two:
Condo dwellers must pay their own property taxes, providing them with a tax break. Co-op owners do not pay their property taxes directly and cannot get any tax breaks.***
Condo buyers must secure mortgages, while coop buyers must secure loans, as they are not really buying property.
(http://www.mortgagemarvel.com/industry-news/the-difference-between-condominiums-and-cooperatives/)
***Not always true:
“Provided cooperative complies with IRC code 216, interest and real estate taxes are passed through from the corporation and are deductible by the tenant-shareholder”
(See what's-the-difference-.pdf)
(7Oct16)
CRCS Triennial Report
Summary
From our foundation in 2013 we’ve been working to bring PACE (Property Assessed Clean Energy) to New Jersey. In the process we’ve established New Jersey PACE as the principal PACE advocate in the state, have met with and educated over a hundred municipal and county officials, created a platform for contractors, and developed detailed plans for establishing a statewide, nonprofit, open-market administrative platform to review and approve PACE projects.
While the current statute effectively prevents the implementation of PACE, we continue to work with numerous parties to craft amending legislation that can be approved by the Governor, hopefully by the spring of 2017.
We have also invented a parallel financial structure that we believe can provide an alternative to PACE in those jurisdictions where it is not yet available, and perhaps be more broadly effective, using a Deed Restriction rather than a Special Assessment. Called DREAM (for Deed-restricted Resiliency and Energy Affordability Measures), I does not require state legislation or municipal approval, but can be implemented today. We have filed a provisional patent on the method, and are currently seeking support from financial institutions for several types of demonstration projects.
In addition to these two primary programs — both of which are designed to facilitate clean energy financing — we have been extensively involved in efforts to develop new eco-communities, devise a global monetary policy and complementary currency for climate mitigation, and develop local green cooperatives to assist communities with creating greater economic resilience. We are currently a fiscal sponsor to three of these programs, and provide additional support in a variety of ways, including assistance with web sites, grant applications, fundraising, etc.
Our mission, stated simply, is to assist communities in dealing with the impacts of climate change. This means creating greater social and economic as well as physical resilience. This means creating new opportunities for regenerative development, in our local communities and around the world. Community-based initiatives for global climate mitigation are one of the most promising areas for cooperative economic development, both in the U.S. and around the world.
By “regenerative development,” we mean development that is transformative, that restores the capacity of natural and social systems to heal themselves, to evolve, and to flourish. Regenerative development seeks to go beyond sustainability, to address the underlying causes of the challenges that are now facing us as a species, as communities, and as individuals.
“Regenerative approaches seek not only to reverse the degeneration of the earth's natural systems, but also to design human systems that can co-evolve with natural systems — that can evolve in ways that generate mutual benefits and a greater overall expression of life and resilience.” (Bill Reed and Pamela Mang, 2011)
We need to begin by recognizing where we are today. It is widely assumed that the election of Donald Trump signals a period of struggles and setbacks for the environment and for the planet. This need not be the case. Human beings everywhere are waking up to a different way of looking at the world, looking at what’s possible, and sharing what we intuitively know to be true with others.
We’re not simply passengers on this remarkable, living, self-sustaining Spaceship Earth; we’re also its crew. We’re the ones responsible. Though it doesn’t look like it sometimes, we’re the ones in charge. We choose how we spend our time and our money. These choices are what govern our lives and the world. Working together with others we can envision a more sustainable human future and work to make it a reality.
Our work is designed to free people up to be more fully themselves. We believe that if we can use everyone’s skills, talents, and energies, we can solve many of the problems that we face in our society and in the biosphere today. Many of us are imprisoned in old ways of thinking and reacting, and because of this we cannot find solutions to the problems that our way of life has created — and continues to create — in our communities and on the planet.
We use the tools of financial innovation, whole systems design, and of breakthrough thinking to engage communities and organizations to evolve new economic and ecological structures for the modern age. In particular, we are pioneering new approaches to financing clean energy and resilience, new governance models for cooperative organizations, and new ways of collaborating across sectors to make our communities stronger in the face of climate change, social conflict, and demoralization.
We believe in delivering meaningful community solutions. Our goal is to provide neighborhoods and communities with better choices. Our mission is to educate, to provide resources (most notably financing), and to engage ourselves and others in meaningful action. We seek to finance resiliency and clean energy, to provide better housing and food and civic engagement in underserved communities, and to create lasting self-help organizations capable of creating meaningful work for everyone.
Because we believe that people everywhere can make a difference, we are leading efforts to create new cooperative models of development, to invest locally in ways that benefit all of us, and to educate ourselves and others in the possibilities of an unimagined future. We know that we face planetary catastrophe if we don’t change the way our economy works today — we need to divest from those activities that are causing harm to the earth, and invest in ones that are restorative and regenerative. Moving from unsustainable practices to restorative and regenerative ones is what’s needed to reduce carbon in the atmosphere and put it back into the soil where it literally sustains life.
Our specific solutions include:
Providing Innovative Financing for Clean Energy and Resiliency
Our mission includes the leveraging of financial resources to enable the transition to clean energy — including both conservation and renewables — and to improved resiliency in our built environment, to withstand the growing impacts of climate change and mitigate its causes. The feasibility of this was amply demonstrated by Jigar Shah, author of Creating Climate Wealth, developer of the Power Purchase Agreement, and member of our Advisory Council. Our initial goal, as noted above, was to bring PACE to New Jersey, and we adopted “New Jersey PACE” as a DBA for CRCS for this purpose.
The principal challenge with PACE has proved, however, to be a legal one: the statute creating it in New Jersey, passed in 2011, was crippled and unusable. Subsequent attempts to amend it were pocket vetoed or conditionally vetoed by the Governor, leading to the latest version which seeks to incorporate his concerns. While we anticipate this to be successful in permitting a limited program in 2017, we have also created an alternative financing model of our own, called DREAM, based on a deed restriction instead of a special assessment. Both programs are further described below.
PACE
The promise of PACE was and remains extraordinary, but realizing it is not as simple as it first seemed. Although thirty-two states have some form of PACE legislation, only a handful have begun to truly penetrate the market. California, Connecticut, Ohio, Minnesota, Florida, and Wisconsin account for virtually of the deals, and California dwarfs the others by a factor of ten. While PACE is valuable for all types of buildings, residential is where the greatest growth is. This is still years away for the state of NJ.
When we started to work on implementing the original law in New Jersey we anticipated a relatively short ramp-up. Other programs had gone through iterative legislative cycles, lawsuits, etc. and had taken on average five years to begin producing at all. We thought we could take advantage of this experience and shorten the time to launch, but numerous obstacles have conspired to prevent the introduction of the program for more than four years.
Even under the most optimistic scenario, we now anticipate seeing the possible launch of commercial PACE in NJ no earlier than April or May of 2017.
DREAM
Meanwhile, we have innovated the PACE financing model further, and outlined a model using deed restrictions rather than special assessments as the form of security, Because it has not, apparently, ever been done, we are applying for a process patent on the model, and have definite ideas as to how it should be implemented. Its application is broader, simpler, and less costly than PACE, and it can be used in any jurisdiction that utilizes our form of land tenure (which goes back to the Middle Ages).
By enabling third-party investment in property improvements under a lease, installment, or service agreement, DREAM (which stands for “Deed-Restricted Resiliency and Energy Affordability Measures”) can be used to provide off-balance-sheet, capital investment in value-added improvements to properties, that can be securing by an agreement that is registered on title.
PACE and DREAM constitute powerful economic development tools, if used in a coordinated fashion in communities. Along with other innovative financing programs, they can revitalize local economies and strengthen the self-sufficiency of local communities. And they serve multiple goals, mitigating CO2 emissions, reducing costs to local businesses, and improving the built environment,
There are several ways to deploy these tools, and scale their implementation. Large commercial projects, and easily-replicable residential ones, will attract major investors. At a community level, however, the most practical way may be through the creation of civic cooperatives, built around the idea of a clean economy, increasing prosperity without bankrupting the future.
Building the New Cooperative Movement
The UN designated 2012 as the International Year of Cooperatives, and suggested that the cooperative enterprise might become the dominant business model in the 21st century. Co-ops are a key element in the effort to create a regenerative, community-based form of capitalism. Their notable advantages over traditional businesses include greater stability, greater worker and member collaboration, and a fairer distribution of economic outcomes.
There’s a long but little-known history in America of individuals and organizations getting together and cooperating for mutual benefit. In particular, In Collective Courage (2014), Jessica Gordon Nembhard has documented the remarkable role of mutual cooperatives in transforming the lives of former slaves and bringing many into the economic mainstream. Yet as a business model, the cooperative is largely unrecognized as one of the most stable and successful forms of entrepreneurial organization. We’re working with the Ecovillagers Alliance and others to renew the co-op model and use it to assist neighborhoods and communities to develop a more resilient culture and more democratic institutions.
Based on this involvement, we intend to pilot a scalable, self-financing cooperative business model for communities to fulfill on their potential — and build the capacity to do so into the future.
Starting with the formation of a “Civic Cooperative,” the approach includes award-winning regenerative processes from the Story of Place Institute and REconomy as well as many other sources.
Outcomes range from accessible and affordable:
We’re also exploring the creation of a Nonprofit Cooperative Alliance, to foster greater collaboration amongst local and national nonprofits, and use our collective resources more effectively to foster the new cooperative movement.
Designing Innovative Global Strategies for Fighting Climate Change
We know that climate change is the biggest challenge humanity has ever faced, and that “business as usual” is the principal (and the only controllable) source of excessive greenhouse gas emissions. We’re proud to be supporting a partnership with Paul Hawken, Project Drawdown, the Center for Climate Protection, and EconoVision to implement Dr. Delton Chen’s Global 4C proposal for a complementary currency to fight climate change. (See www.Global4c.org.)
Community Currencies for Local Regenerative Economic Growth
Credex, TVM, 8 capitals, environmental and social TVM, commons credits and the contribution economy
Center for Regenerative Community Solutions
Residential Fellows Program
We have a unique opportunity for one or two graduate students interested in regenerative design and development to live with us in Bedminster, NJ in 2017. Our nonprofit, the Center for Regenerative Community Solutions, is located in the the building, and we’re willing to accommodate a partial internship or specially-customized program for the right individuals, at little more than the cost of the room. The program includes dinners with speakers and special guests.
Speakers Bureau/Events at Our Location
We have a number of qualified speakers, beginning with ourselves, members of our Board of Directors and Advisory Council, and professional colleagues. We’re available for community groups, civic associations, cooperatives, and faith organizations. We also host salons.
Mentoring Program
We have knowledgeable and experienced individuals willing to provide mentorship services to self-managing groups, helping us learn together everything from dynamic governance to collaborative investment to organizational effectiveness and high performance.
Joining the Transition Movement
We are offering an opportunity to join with the Transition Movement and its REconomy project, with the New Economy Coalition, the Pachamama Alliance, the Great Transition Institute, and many others in creating a shift in consciousness and in action.
Transformational Leadership
We invite you to explore avenues for developing your own servant leadership capacity and stewardship through earth-conscious transformation.
Global Policy Initiatives
We are the fiscal and policy sponsor for Dr. Delton Chen’s Global 4C monetary policy proposal for combatting climate change. Working with a growing number of national and international collaborators, we offer internships in alternative currencies, carbon drawdown technologies, and global climate policy.
A Possible New Jersey
Locally, we are spearheading efforts to revision and reimagine our future, as a state at the heart of the NY Metro area and the several contiguous bioregions it contains. We’re involved in promoting state legislation for Property Assessed Clean Energy (PACE) financing and other renewable energy and clean economy initiatives.
Leading the New Cooperative Movement
There is a resurgence of interest in the cooperative business model, and new applications are being developed in many parts of the country. We are working at the leading edges of such collaborative economic systems, using elements of dynamic governance, financial permaculture, and regenerative design. Cooperative concepts and projects include local Civic Cooperatives, Clean Energy and Economy Co-ops, cohousing initiatives and other.
Local Community Redevelopment
We work with local communities to become economically, ecologically, and socially self-reliant, self-sustaining, and self-regenerating. If you’re drawn to working at the community level, we have opportunities for individuals of all ages, including youth and seniors, and of all backgrounds, to develop your own path to a meaningful and supportive right livelihood.
Building Ecovillages & Cohousing Neighborhoods
We are fiscal sponsors for both Ecovillage NJ an the Ecovillagers Alliance, and combine real estate development expertise, community engagement skills, and ecological principles to support a network of over 650 individuals looking for new homes statewide.
Nonprofit Experience
We have opportunities in every area of nonprofit work and organization, and a growing financial base of support.
Research & Publications
Watch for Town Raising: A Regenerative Community Playbook
(coming Fall 2017). Case studies, innovative solutions, systems design, and thought leadership in grassroots chaordic organizing.
©CRCS 2017
Connect with us today if these are interesting opportunities for you or your group.
And support us to expand this work at www.CRCSolutions.org/contribute.
DREAM Financing*
Development Plan
Executive Summary
Deed-restricted Resiliency and Energy Affordability Measures (DREAM) financing is a method of financing clean energy and other improvements by securing the financing via deed restriction or covenant attached to the property. The key element of this solution is that the responsibility for repayment be able to survive a default or foreclosure, and expire only when the cost of the improvements has been recovered.
Key Features of DREAM Financing
To the best of our knowledge, DREAM financing represents a business model that has not been tried previously. The laws surrounding covenants, deed restrictions, and easements go back to English Common Law, and are thus mainly governed by judicial precedent. We have found no reason why the method should not work, but state legislation may ultimately be desired to define and clarify the applicability of these laws to the security of financing improvements to properties as being in the public interest. To determine whether or not such legislation is necessary or desirable we need further legal and other assistance and research.
We are therefore proposing an initial “proof of concept” effort, and are seeking financial support to carry this out. DREAM has a wide potential application — locally, state-by-state, and nationally. It may be applicable to any sort of improvement, on any type of property, with a couple of key considerations which we have identified through our preliminary research, e.g., that the improvements are beneficial to the property independently of the owner, that financing is not structured as a loan to the property owner, and some other caveats.
How would DREAM work? Let’s suppose that ABC company has a proposed $1 million solar project that depends on the “no upfront cost, positive cashflow, off balance sheet” approach that DREAM represents. If approved by attorneys for both the property owner and the investor, the project would proceed on the basis of a long term lease or service agreement secured by a deed restriction, covenant, and an easement permitting the removal or disconnection of the equipment in the event of a default.
If such a project can be identified as part of the proof of concept phase, then we may look at any further questions this raises. On particular, we may seek mortgage lender acknowledgement or consent. If possible we may also seek a declaratory judgment validating the approach.
The project would need to conform to the highest standards of performance and verification, and other inducements may be provided to hedge against any risk that the project might not hold up under existing deed restriction laws. An informal discussion of these laws, including the citation of the most widely quoted opinions and precedents and an analysis of pros and cons, is attached to this proposal.
It is our view that DREAM financing is viable under existing property law. We are however open to the possibility that the approach might require state legislation explicitly confirming this practice.
The ultimate business objective for DREAM Financing is that it be implemented as widely as possible wherever a suitable land ownership regime is operative. CRCS proposes to help establish DREAM programs, and as a nonprofit collect a small royalty contribution from each program. Consequently, for the purpose of exploring this possibility, I have personally filed a provisional patent on the method or “business process.”
While this provisional patent is in my name, my intention is to assign most or all of the rights to the Center for Regenerative Community Solutions (CRCS), a NJ-based 501(c)(3) nonprofit corporation. The mission of CRCS is to educate and assist communities in addressing the impacts of climate change, and to provide resources and support to individuals and communities to mitigate and adapt to the consequences of excess carbon emissions. We do this by creating and implementing alternative financing models and community development strategies.
Our initial goals under the current development plan are to
Our estimated costs for this are approximately $100,000. We are looking for suitable private or public sponsors for this work. If you are interested in supporting this work, or collaborating with us, please contact in confidence:
Jonathan Cloud
The following attachments are available in conjunction with this document:
The following section of the proposal describes our current business development strategy.
Please contact us if you have ideas you want to discuss with us.
Business Development Strategy (updated December 22, 2016)
Now that it’s clear that PACE will not be available in NJ until April 2017 at the earliest, our goal is to move forward with the implementation of DREAM as rapidly as possible. There are several avenues that would appear to be worth pursuing right away:
Our own web site
Social Impact Investors & Investment Funds
Community Development Corporations & CDFIs
Cooperatives, especially the proposed DREAM Cooperative
Legal, accounting, engineering, & architectural firms
SSP Architects?
Affordable Housing & Commercial/Industrial Real Estate Developers
Attachment A: Flow Chart and Stakeholder Diagram
Attachment B: Analysis of the Legal Requirements for DREAM Financing
The following is a nontechnical discussion of the use of deed restrictions, covenants, and easements based on the classic texts in this field. The purpose is to explain as clearly as possible the legal requirements for making DREAM work in an area which even many attorneys find muddled and confusing. These are not legal opinions, and there are questions that can only be resolved by structuring transactions and observing the outcomes, or by new legislation making explicit the implied legitimacy of these transactions.
It will be apparent from both this and the following section (Attachment C), that sustaining the validity of a Deed Restriction is a somewhat complicated process, with factors which the average contractor and property owner will be unable to determine without the assistance of an attorney specialized in these matters. Our expertise includes a careful analysis of the conditions needed to ensure the success of a Deed-Restricted transaction. In addition, as a result of our prior work in designing and partially implementing a Property Assessed Clean Energy (PACE) program, we believe we have the knowledge and expertise to create open-market DREAM financing programs for specific jurisdictions, and to assist others in creating such programs.
“Originally,” as Margot Rau has stated:
“real covenants were contracts, rather than property interests. Early common law did not allow assignment of contract rights or delegation of contract duties. A mechanism was therefore needed to enable rights and duties of the original covenanting parties to pass to their successors in title.”
That mechanism is known as a deed restriction or restrictive covenant. The essential element of a deed restriction is that it survives a change in ownership.
“The theory of covenants running with the land distinguishes between personal and real promises made by landholders to allow real promises to run with the land. Personal promises are incidental to any interest in land. Real promises are intimately associated with landholder status. Therefore, it may be economically or socially important for these promises to bind or benefit future holders of the land. If a covenant affecting land use cannot survive changes in ownership, it loses meaning when the covenanting parties no longer retain title to the land which the covenant affects.”
This essential element is also the key to making DREAM financing work. The repayment obligation must survive not only the ordinary sale or transfer of ownership, but also foreclosure as a consequence of mortgage or lien default. The key to this is that the contract between the property owner and the improvement provider includes a provision requiring the property owner to place a deed restriction on the property that conforms to the proper practices for valid deed restrictions or covenants, and grants an easement allowing access to the improvements until such time as the obligation is discharged.
There are traditionally four elements that are required to ensure the enforceability of a deed restriction or covenant:
“Over the centuries, common-law rules developed to distinguish covenants that ran with the land from those that were extinguished with changes in ownership. To run with the land, a covenant must meet the following requirements: (1) Form—the proper form must be followed in making the covenant; (2) intention—the parties making the covenant must intend that it run with the land, and not be personal to them; (3) touching-the promise must concern the land; and (4) privity-there must be privity of estate between the various parties.”
Most energy and other efficiency and resiliency improvements are likely to meet these criteria. The agreement with the property owner must be in writing and registered with the appropriate title authority (in NJ a county). It must state that the intention of both parties is that the obligation shall run with the land, and is not a personal promise that is incidental to any interest in the property. The obligation must directly concern the land, which is to say that the improvements have to be permanently affixed to the property or integrated into its operation. Finally, there must be “privity” between the parties, which is to say that there must be a contractual relationship that involves a shared interest in the land. This latter is the most complicated, and gives rise to some uncertainty as to how the law may be applied, so it requires further discussion. Rau states:
'’Privity’ describes a relationship between people: privity of contract, a contractual relationship; privity of estate, a shared interest in land. The requirement of privity of estate is the most complex of the four rules because three types of privity of estate —horizontal, mutual, and vertical — may be required for covenants to run with fees.”
Consider a simple clean energy improvement, the installation of a solar PV system. The transaction may be structured as a sale, a lease, or a service agreement such as a power purchase agreement (PPA), and may be treated differently under law depending on the type of transaction. If, for example, the owner is simply paying off the financing of an improvement, that financial obligation may be viewed as merely a lien and subordinate to any prior liens, such as a mortgage. For our purposes we will therefore assume that the transaction is structured as a lease or service agreement. That is to say, the improvement provider owns the physical improvements, which are made to the owner’s property on condition of the payment of the lease or service agreement for the contract period. The obligation to fulfill the agreement clearly meets the first three requirements to run with the land. Does it meet the fourth?
There is an assumption that privity is created with a transfer or property sale, but this is not the only way that such a relationship can be created. Again, using Rau:
To establish a shared interest in the property the agreement may require the granting of an easement, permitting the service provider to enter the property and remove or disable the system in the event of nonpayment. Such an easement gives the improvement provider a direct interest in the land, thereby establishing that the transaction is a “real estate transaction.”
It would seem logical, therefore, that an agreement concerning improvements to the property, including an easement permitting access to such improvements, should survive both a sale and a seizure of any kind. To the extent that the property continues to benefit from the improvements, the then-current owner should be obligated to continue to pay the costs of such improvements.
The important question is not, however, whether this makes sense. It’s whether it will stand up in a court of law. This can only be determined in one of two ways: by establishing a precedent in which a court has held that such an agreement is binding upon all successive owners, or by passing legislation making it explicit that such transactions will survive any transfer until such time as the obligation is fulfilled or retired.
Our intention is to “test the waters” with transactions that are additionally guaranteed or insured, in order to determine both the market acceptability and the legal enforceability of the agreement. If, after practical application, it appears necessary to obtain further statutory authority to establish the legal condition of transferability and survivability, such legislation will be proposed to our state legislature.
Attachment C: Q&A Regarding the Use of Deed Restrictions
We’ve had the following exchanges with several advisors:
NY Attorney (April 16, 2016):
You are to be congratulated for trying to develop an alternative to PACE- particularly one where there is no municipal authority involvement.
I have consulted with one of my colleagues and done a bit of cursory research myself. I have to agree with the statement in your memo to the effect that the law surrounding deed restrictions is a bit 'murky'! However, I am not sure I have ever heard of a deed restriction that also carried with it a payment obligation. Generally, they are proscriptive rather than prescriptive. While I have not looked, there may be some limited prescriptive situations where a deed restriction might provide, for example, that if you grow crops on a parcel, you may have some payment obligation to an adjoining parcel. But even if such a case exists, it is not really analogous to the DREAM proposal.
Here are a few concerns I have about DREAM. initially, I would point out that if something does not make sense, it is less likely to stand up in court. Generally, good laws tend to reflect common sense. Bad ones may reflect all sorts of biases.
There are, as you know, two main types of tangible property--real and personal. As I mentioned on our call, with respect to solar, the standard industry approach is to treat the solar panels and related equipment as personal property. This characterization accomplishes two things--it allows the financing to be governed by the Uniform Commercial Code, rather than real estate law, so that the financing does not conflict with an existing mortgage holder's rights and makes it clear that a foreclosing mortgagee would have no claim to the solar assets--and it also makes clear that the solar assets are not so permanently affixed to the real estate so as to become fixtures which the mortgage lien would cover and which could not be removed in the event of a default on the related financing.
The DREAM approach seem to mix the two concepts. On the one hand, the need for an easement is to allow the equipment to be removed upon a default under the financing arrangement. This implies that the assets financed are personality. On the other hand, for a deed restriction to have applicability, it has to relate to the real property, and thus, the equipment needs to be treated as a fixture-permanently attached to the real estate and not removable. The PACE approach avoided this characterization issue by the levy of an assessment which remained regardless of whether the asset was personal property or a fixture and whether it was removed or remained on the property.
Further, if the payment obligation is contained in a lease arrangement, then a determination would need to be made as to whether it was a true lease (in which case, title to the equipment remains in the lessor) or a finance lease, (in which case title is usually held in the lessee). If it were a true lease, this would imply that the equipment is personal property and a deed restriction would not seem to apply. If it were a finance lease, that would have implications for mortgage holders mentioned below.
I am not sure how you would capture the concepts required in a 'service agreement'. The cost of the services would have to reflect the cost of the equipment as well as any service actually provided--so that, in essence, the service contract may be deemed a disguised purchase agreement.
Accordingly, in any court case, I believe you would be forced to choose one treatment or the other. While I understand that PACE is used for many other assets besides solar, I do think that in the case of solar, the major installers are so wedded to the idea that those assets are personal property, they would not support any other treatment.
I think you will need to take into account the likely reaction of the banks to the proposed type of restriction. As mentioned, most deed restrictions prohibit subsequent owners from doing something--for example, maintaining a junkyard on the property or planting tall trees on the property. But, to my knowledge, except in the case of statutory entities such as co-ops, condominiums and time share estates, they typically do not require the property owner to pay money to another party. Therefore, it would seem highly unlikely that the banking industry would look at the DREAM approach any differently than PACE and attack it on the same grounds--that it is not truly a deed restriction, but a loan disguised as such (particularly in the case of a finance lease) and a violation of their priority contract rights.
One final observation: a deed restriction is, obviously, typically contained in a deed. In DREAM, there is no conveyance actually contemplated. So, the question to be answered under each state law would be--can you create a deed restriction without a deed--I.e., by just filing, as the owner of the property, a document declaring that title to the property will be subject in the future to the particular payment obligation.
These are my thoughts so far. Clearly, this approach is not without its challenges. But I will continue to think about it to see if I can come up with positive suggestions. I hope the above is helpful.
Best Regards
Our reaction (April 16, 2016):
Very thoughtful comments.
What occurs to me immediately is the likely need for a piece of legislation that would enable this by statute, as is the case with a condominium, for example. The justifications for it would be (a) that it is in the public interest for these improvements to be made (which is the justification for PACE), (b) that it enhances the value of the property, possibly without encumbering the property owner with additional debt (especially if the obligation is to pay a lease or service fee), and (c) it could be required to be cashflow positive or neutral (e.g., SIR>1), although this probably limits its application to resiliency improvements.
But the some of the other points you raise are important ones that likely need to be resolved in any case. It would seem, for example, that if the arrangement was to support a PPA or true lease, and that the property belongs to the lessor, then it can certainly be viewed as personal property. On the other hand, just to state the obvious, the solar and energy efficiency improvements are affixed to the real property and are meant to improve the property, so the obligation to pay for them seems very much like the condominium situation (which is charging fees for maintenance and for services like landscaping and snow removal).
We have contractors and installers who will not care about the distinction, but simply want to be able to offer no-money-down financing to their clients, and for whom the contract could be written in any number of different ways, so long as they can finance 100% of the deal.
As for registering the deed restriction without actually having a deed, this is a puzzle for me as well. I went to the County Clerk’s office in Somerset County and told them I needed to register a deed restriction and they handed me a form (which I’ve scanned and attached), which states that it is a Deed and transfers the land for the sum of $10. Presumably this could be transferred between the parties and then transferred back, but this seems like a ploy. (Interestingly, the person at the counter told me this was the form to use if no money was changing hands, but if there was money the document would need to be drawn up by an attorney.)
Perhaps the better route to register it as an easement, like a utility easement, which remains in effect until the improvements are paid off. I’m not sure how to register easements either, but I think they can be done without a transfer of title, since the contractors tell me they already get an easement when they sell a solar system. I also have a friend who is an LSRP, and writes easements with regard to remediation, which presumably restrict the current owner as well as any subsequent owners. Again, I’m not aware of situations where the easement is specifically tied to a guarantee to pay, but I found this in a discussion of easements at http://www.realestatelawyers.com/resources/real-estate/land-use-zoning/new-jersey-easement-law.htm:
Express Easements – An express easement is created by signing a written document such as a deed or a contract which sets forth the location and dimensions of the easement as well as how the easement may be used and by whom it may be used. An express easement might also contain the following provisions relating to:
Could it then also require the grantee to pay for the improvements provided?
This same site also says “In modern residential real estate practice, Covenants, Conditions, and Restrictions (CC&R’s) serve the same function as negative easements.”
Of course this still skirts the question of whether the easement is effectively securing a lien which is subsequent to the first mortgage holder, and which would ordinarily be wiped out in a foreclosure.
But could we then reach an agreement with the mortgage lender, first, to maintain the easement, and second, to require payment of the fee by any subsequent owner after the foreclosure sale? The first mortgage lender would then be entitled to get paid out and disregard any subsequent liens, but would effectively affirm the terms of the easement. (Though it’s not clear what happens when the bank owns it and the property is vacant, so no one is getting the benefit of the solar or the conservation improvements – presumably they would not expect to pay for them, though they might incur other costs related to the property, e.g., to keep the power on and the heat on to prevent the pipes from freezing, etc. Could the DREAM payments also be seen as paying for utilities? Could the solar installer or the investor sue or somehow use the easement to induce payment?)
So you’ve certainly raised some important and unanswered questions. I hope we can provide answers to these questions — and if necessary propose legislation that would make this use of utility easements sustainable. Let’s keep thinking. Thanks
P.S. One further thought. Perhaps the way around the problem of registering a deed restriction without the property changing hands is simply to make the owner sign an agreement to place a deed restriction on the property at the time of resale, which I’ve seen done as a “deed rider for projects in which affordability restrictions survive foreclosure” (http://www.townofbourne.com/sites/bournema/files/file/file/lip_deed_rider.pdf). (My thanks to Victoria for this suggestion, based on comments in one public meeting about the town’s “placing a deed restriction' on an owner’s property to make it an 'affordable unit' in perpetuity.)
I also found something described as a 'RESALE RESTRICTION, REFINANCE RESTRICTION, AND OPTION TO PURCHASE AGREEMENT,' which stimulates a further thought about using some sort of option to guarantee the improvement. Not sure how this would work, or whether it could survive foreclosure (unless enabled to do so by statute), but it might be another possibility.
Does this make sense? Thanks
NY Attorney (April 17, 2016):
I think you may be able to place a deed restriction without a transfer, somewhat like an easement. Perhaps, your local lawyer would have a view on that. However, an agreement to do something in the future, which can be breached by the contracting party, would not be a finance-able arrangement.
A couple of thoughts in response.
As you know, a fixture is some kind of equipment that is so integrated into the operation of a building that the building cannot properly function without it. It then becomes part of the real estate. What constitutes a fixture can be as murky as a deed restriction!
We think that solar panel systems are not fixtures because they can be mounted on the roof and removed. The building can operate with power from a utility and so the solar system is not essential. Doors, windows and the electric wiring inside a building probably are fixtures. I believe that escalators have gone both ways. The point is that I think you need to have fixtures to have a deed restriction be applicable.
With regard to the analogy to the condominium arrangement, that reference may be problematic. Primarily because condo, co-op and time share arrangements are designed to affect multiple family housing schemes, not just a single property. This is, of course, one of the lines of attack against PACE as not being a true assessment since it only impacts one property at a time.
In my real estate days, I have created plenty of easements. It is not that complicated a process. You need a surveyor to map out the path of the easement and provide a metes and bounds description of it. That, along with the legal description of the parcel affected gets attached to an agreement between the property owner (grantor) and the recipient of the easement (grantee). The agreement sets forth the purpose of the easement, who can use it, how long it will remain in force and any other key points. It then gets recorded in the real estate records in the town or county where the deed to the property is recorded. Obviously, there is a legal expense attached to that and you need a lawyer who has some competence in this area.
I doubt that most installers actually get easements. I think they just get a right of entry which is a lot less formal and may or may not work if they ever have to enter a property to remove a panel.
You ask if the grantee could be made to pay for the improvements. As described above, it is the grantor of the easement who receives the improvements in our case. I am not aware of any form of easement that would allow for that-but hey, we are trying to break new ground!
A true easement could survive a mortgage foreclosure or a sale of the property. Most mortgages would prohibit the establishment of an easement without the mortgagee's prior consent (except, in some cases, for utility easements) if you wanted the easement to have priority over the mortgage.
Hope this is helpful.
GE Comments (April 18, 2016):
In reference to:
GE: More murkiness: Many of our proposed PACE improvements will be non-solar, such as energy conservation (in-building wiring, bulbs, motors, controls, etc.) and indoor-outdoor resiliency improvements like hardened walls, safe rooms, protected water sleuths, building piles, berms, and special shingles, windows, etc.
In reference to:
GE: Yes, and no: it depends on what you mean by “improvements”. The grantor (property owner) grants an easement to the grantee (recipient or Investor) and receives the PACE improvements, but the grantee receives the rights associated with the easement. Both parties receive improvements of a sort, the benefits accruing from the transaction. Does this help?
In reference to:
GE: Indeed, we insist.
Most mortgages would prohibit the establishment of an easement without the mortgagee's prior consent (except, in some cases, for utility easements) if you wanted the easement to have priority over the mortgage.
GE: OK. We’re back to Lender Consent, with which we whole-heartedly concur. Remember, our current priority is COMMERCIAL PACE. IMHO, doing Residential PACE with deed restrictions would be a circus.
Real Estate Developer (April 18, 2016):
Interesting approach but still has some challenges from an investor rating perspective. Lack of control of offtaker, restrictions on mortgage and equity line ratios, deed restriction position (post mortgage and tax liens).
Summary of Issues and Questions:
Attachment D: DREAM Financing: Illustrating the Process
Consider the following types of projects:
Each of these has calculable benefit in terms of revenue, savings, or risk reduction, determining the return on the investment being made by the improvement.
Note this investment is not a “loan” to the property owner secured against the property’s economic value, but is a contract secured by a covenant specifying the performance of certain conditions in return for a direct improvement of the property, i.e., making it more energy efficient, resilient, or capable of generating its own energy, etc. The contractual language includes the deed restriction, and the deed restriction records the contractual agreement against the title of the property, including an easement or right of entry and repossession as well as a promise to pay according to whatever terms are agreed, e.g., as installment payments, power purchase payments, etc. for the term specified. At the end of the specified term the obligation is discharged and the deed restriction is revoked or rescinded.
Here is the flow chart from Appendix A showing this visually:
As noted in the flow chart, the process involves the property owner and the contractor (or installer or service provider) agreeing on making eligible improvements, and then together structuring the deal with the investor, which is embodied in the contract and the deed restriction with assistance from the program administrator. The committed funds then flow to the contractor as the work is completed. At the conclusion, the property owner begins making the monthly or quarterly payments to a servicer, who then forwards them to the investor or investor’s agent.
In the event that the property owner defaults on the payments, the investor’s recourse (after the servicer has attempted to collect) is to sue under the terms of the contract and exercise the options specified in the agreement and the deed restriction. The final security for the payments being made is the deed restriction, requiring the performance under the contract as a condition of the sale or transfer of the property.
One element not shown in the flow chart, but imposed by the administrator under our program, is a requirement for written mortgage lender consent for the improvement. As in the case of a PACE assessment, all commercial projects will be expected to get mortgage lender consent, even though this is not a strict legal requirement. Mortgage lenders are expected to approve DREAM projects for the same reason they accept PACE ones: their collateral is being improved at no cost to them, and their borrower is getting an increased cashflow and other benefits.
Having lender consent also minimizes the risk that a foreclosure would trigger legal action to void the deed restriction. Avoiding this risk is key to the success of the deed restrictions to become a new asset class, similar to PACE certificates, and attract mainstream investors. The only significant differences between DREAM contracts and PACE certificates are that they are privately arranged deals, do not require state legislation or municipal approval, and are privately collected. But if the results are directly beneficial to the property, the security should be comparable, and at a lower administrative cost.
The benefits to any community in terms of economic development, reduced energy costs, and reduced emissions are significant. All of the eligible projects save money for owners, reduce climate risk, and increase the value of their asset.
Here are a couple of worked financial examples. The first is actually from a PACE proposal, but the logic is the same for DREAM, and some of the features of this solar proposal could even be improved (e.g., by extending the term of the loan, including financing for other building improvements, etc.):
The following example is for a Non-Profit business located in Cape May County who wants to install a solar system under the PACE financing model. Their solar system consists of 1334 solar panels which equals 409,000dc watts. The proposed solar system will be installed on carports covering their parking spaces and on the available roof space. That amount of solar panels will ELIMINATE their annual electric bills. Here are the numbers:
As you can see the solar system will pay for the financing and make a profit at the end of the year. Financing is a 20 year bank loan at 6.5% interest. SREC price is a conservative amount of $155 each. Current price is $215 each and will continue to go up as time goes on. Electric savings is based on their current Supply and Transmission (Delivery) charges from their electric utility company. Since this is a Non-Profit business they cannot take advantage of the 30% federal tax credit nor the accelerated depreciation as a Commercial business would.
Here are the numbers for the same size solar system for a Commercial Business:
And here’s an energy conservation example for a multi-unit building in Washington, DC, showing an increase in net asset value of $1,500,000 (8.9%), at an estimated project cost of $550,000:
Similar examples could be developed for other improvements, some based on reduced insurance costs for resiliency improvements, and so on.
Attachment E: Market Description
A New Approach to Financing Clean Energy
We know that the major obstacle to conservation, renewables, resiliency, and other energy and property improvements is not technological but financial—it’s access to the capital needed to fund these measures. DREAM Financing finally overcomes this barrier.
DREAM stands for “Deed-restricted Resilience and Energy Affordability Measures” —an innovative financing technique that directly addresses the major problem that property owners confront when trying to upgrade their buildings with green improvements. They are often reluctant to use or borrow capital to make such improvements, even though they may pay off in a relatively short period of time. The ability to leverage mainstream investment financing is critical to getting these improvement projects done.
Deed restrictions are recorded agreements, by property owners, that are intended to bind them, and future owners, to meeting certain requirements. These requirements can include the repayment of an investment over time until it is paid off. They are recorded with the County, but are essentially private contracts, enforceable by law through the courts. In addition to a Restrictive Covenant requiring the user to continue making payments on the improvements we recommend registering a simultaneous Easement touching the physical property, and obtaining mortgage lender consent where there is a mortgage on the property if that mortgage has a covenant barring further encumbrances.
A New Business Model
DREAM financing represents a new business model, one that is needed to truly help unleash the clean energy revolution. But DREAM can do more than provide clean energy financing. Essentially, any property improvement that is sufficiently beneficial to the owner to provide a return to an investor can be financed this way. The owner agrees to make a certain number of payments over a certain period of time, the agreement being secured by a covenant or deed restriction. The deal may, but need not be, structured as a loan; if it is more advantageous it can be an installment contract, a lease agreement, or some other form of arrangement (typically depending on the desired tax treatment).
Moreover, DREAM contracts should be securitizable—providing the agreements are fully documented and the project fully validated. (This is essential if DREAM is to fulfill a role similar to PACE in states where PACE is not working.)
How It Works
DREAM is special financing program that allows property owners to finance up to 100% of approved clean energy, resiliency, and other measures, with no cash investment, as an on- or off-balance sheet transaction. A Covenant or Deed Restriction is placed on the property, guaranteeing repayment. The cost of the improvements is spread over their expected life, up to 30 years. Projects can achieve positive cash flow immediately, because savings are designed to be greater than the financing repayments. If the property is sold, the repayment obligation transfers automatically to the next owner. Because payment is tied to the property and its title, low cost capital can be raised from the private sector to finance a wide range of profitable and socially beneficial improvements.
What Can Be Financed
In principle, a Deed Restriction or Covenant could be used to guarantee the repayment of any type of obligation. But courts are unlikely to uphold transactions that fail to improve the property, and owners are unlikely to find buyers with illegitimate restrictions. For this reason it’s essential that the program be administered by a qualified entity that can ensure the improvements are beneficial. The easiest way to demonstrate this is to limit the program to energy efficiency and other improvements with a savings-to-investment ratio greater than 1, since these are beneficial for the mortgage lender as well as for the property owner, while also serving the public interest by reducing CO2.
Providing it is used properly, DREAM financing can be a win-win-win. Perhaps it may initially be challenged by the banking industry; but its repayment can be financially subordinated to the first mortgage lender while preserving the lien status, and it can also be demonstrated to be beneficial to mortgage lenders, by improving the value of their collateral without further encumbering the borrower. DREAM transactions can also be structured as leases or other agreements that cannot be challenged by mortgage lenders as detrimental to their lien priority, since the Covenant or Deed Restriction is not a lien. It does not necessarily take priority over a mortgage default, but it should survive a foreclosure, with the ultimate obligation on the property owner to comply at all times with the terms and conditions of the Covenant, which can be written to be enforceable by the investor.
1. DREAM Financing plan (attached) and potential Newark project
2. Current status of PACE legislation
3. Proposed agreement with PFS (see below)
4. CRCS Triennial Report Draft
5. Global 4C status
6. Ecovillages report
7. Bound Brook proposal
8. Other business
Executive Director
Center for Regenerative Community Solutions, a 501c3 NJ Nonprofit Corporation
New Jersey PACE
8 Revere Drive, Basking Ridge, NJ 07920
Office 908-396-6179 ~ Cell 908-581-8418 ~ Fax 908-842-0422
www.NewJerseyPACE.org ~ www.CRCSolutions.org
Subject: Basic elements of the proposed Operating Agreement with PFS
Date: December 9, 2016 at 2:23:59 PM EST
To: Genevieve Sherman
Cc: Gus Escher
Year 2: $ 231,000
Year 3: $ 277,000
i) Application fee (to be rolled into the total amount financed)
ii) Administrative/Platform Fee, paid by the Project to NJPACE separately from the processing / servicing
iiI) Any ongoing fees for our continued involvement, oversight, etc. (expected to be minor)
iv) Financing Fee, paid to NJPACE by projects that ask NJPACE to secure financing
Executive Director, New Jersey PACE
Center for Regenerative Community Solutions, a NJ 501c3 Nonprofit
NewJerseyPACE.org
8 Revere Drive, Basking Ridge, NJ 07920
Office 908-396-6179 ~ Cell 908-581-8418 ~ Fax 908-842-0422
Annual Meeting of the Board of Trustees
Agenda & Minutes
Friday, December 18, 2015
The Clean Plate Kitchen, Clinton, NJ
... the Minutes of prior meetings, if any, were approved
... notice of this and prior meetings shall be considered as given
... all members of the Board were present
Victoria Zelin & Jonathan Cloud
Center for Regenerative Community Solutions
As of: Thursday, December 22, 2016
... Problem: Social Cohesion — Solution: Civic Association*
... Problem: Lack of Economic Vibrancy — Solution: Business Cooperative Association**
... Problem: Economic Disparity — Solution: Civic Cooperative, Green Economy Co-op
... Problem: High Energy Costs & Lack of Energy Efficiency — Solutions: PACE, DREAM, Green Energy Co-op
... Problem: Rundown Look — Solution: DREAM Financing
... Problem: Slow/Unequal Economic Recovery — Solution: Clean Economy Cooperative
... Opportunity: the Race to Zero Carbon
... Opportunity: Ecovillage Bound Brook
... An urban agriculture / fresh food / community garden
... Educational programs on dynamic governance, financial management, ESL, etc.
... Local downtown business program (similar to a BID, but controlled by its members)
... A local investment vehicle
... A green energy / clean economy co-op program
... The DREAM Cooperative (see further below)
... The “Story of Place” visioning process (as an extension or continuation or follow-up to the visioning process that led to last Master Plan)
• Provide a financially meaningful ownership stake, enough to be an important part of employee financial security.
• Provide ownership education that teaches people how the company makes money and their role in making that happen.
• Share performance data about how the company is doing overall and how each work group contributes to that,
• Train people in business literacy so they understand the numbers the company shares.
• Share profits through bonuses, profit sharing or other tools.
• Build employee involvement not just by allowing employees to contribute ideas and information but making that part of their everyday work organization through teams, feedback opportunities, devolution of authority, and other structures.
Housing co-ops
Consumer co-ops
Producer co-ops
Food co-ops
Purchasing co-ops
Business co-ops
Investment co-ops
Worker co-ops
Co-op financing organizations (Credit Unions)
Farmers co-ops
Rural electric co-ops
Social service co-ops
Insurance co-ops (Mutual Associations)
Clean energy co-ops
Platform co-ops and other emerging models
Civic Cooperative Association (our foundational community model)
... Providing local communities with educational services on the effects of climate change and other related issues that can affect their long term ability to regenerate their ecological and economic systems,
... Providing local government institutions with assistance to undertake actions and initiatives to reduce and ameliorate present and expected extreme weather and other climate change effects,
... Providing small businesses and non-profit organizations with funding to undertake actions and initiatives to reduce and ameliorate present and expected climate change effects in low and moderate-income communities, including communities impacted by Hurricane Sandy.
... Citizen engagement
... Democratic participation and control
... Local jobs and economic development
... Long term organizational viability
... Community-driven initiatives (local food production and distribution, local clean energy generation, educational initiatives, cohousing and affordable homes, bikeways and walkways, local currencies, credit exchanges, community-based climate initiatives, etc.) based on local priorities and opportunities
... Local self-sufficiency and community development vs. gentrification and conventional real estate development
...
A cooperative is a business or organization owned by and operated for the benefit of those using its services. Profits and earnings generated by the cooperative are distributed among the members, also known as user-owners.
... Typically, an elected board of directors and officers run the cooperative while regular members have voting power to control the direction of the cooperative. Members can become part of the cooperative by purchasing shares, though the amount of shares they hold does not affect the weight of their vote.
... Cooperatives are common in the healthcare, retail, agriculture, art and restaurant industries.
... File Articles of Incorporation. The articles of incorporation legitimizes your cooperative and includes information like the name of the cooperative, business location, purpose, duration of existence, and names of the incorporators, and capital structure. Once the charter members (also known as the incorporators) file with your state business entity registration office and the articles are approved, you should create bylaws for your cooperative.
... Create Bylaws. While the law does not require bylaws, they do need to comply with state law and are essential to the success of your cooperative. Bylaws list membership requirements, duties, responsibilities and other operational procedures that allow your cooperative to run smoothly. According to most state laws, the majority of your members must adopt articles of incorporation and bylaws. Consult an attorney to verify that your bylaws comply with state laws.
... Create a Membership Application. To recruit members and legally verify that they are part of the cooperative, you must create and issue a membership application. Membership applications include names, signatures from the board of directors and member rights and benefits.
... Conduct a Charter Member Meeting and Elect Directors. During this meeting, charter members discuss and amend the proposed bylaws. By the end of the meeting, all of the charter members should vote to adopt the bylaws. If the board of directors were not named in the articles of incorporation, you must designate them during the charter meeting.
... Obtain Licenses and Permits. You must obtain relevant business licenses and permits. Regulations vary by industry, state and locality. Use our Licensing & Permits tool to find a list of federal, state and local permits, licenses and registrations you'll need to run a business.
... Hiring Employees. If you are hiring employees, read more about federal and state regulations for employers.
... Less Taxation. Similar to an LLC, cooperatives that are incorporated normally are not taxed on surplus earnings (or patronage dividends) refunded to members. Therefore, members of a cooperative are only taxed once on their income from the cooperative and not on both the individual and the cooperative level.
... Funding Opportunities. Depending on the type of cooperative you own or participate in, there are a variety of government-sponsored grant programs to help you start. For example, the USDA Rural Development program offers grants to those establishing and operating new and existing rural development cooperatives.
Reduce Costs and Improve Products and Services. By leveraging their size, cooperatives can more easily obtain discounts on supplies and other materials and services. Suppliers are more likely to give better products and services because they are working with a customer of more substantial size. Consequently, the members of the cooperative can focus on improving products and services.
... Perpetual Existence. A cooperative structure brings less disruption and more continuity to the business. Unlike other business structures, members in a cooperative can routinely join or leave the business without causing dissolution.
... Democratic Organization. Democracy is a defining element of cooperatives. The democratic structure of a cooperative ensures that it serves its members' needs. The amount of a member's monetary investment in the cooperative does not affect the weight of each vote, so no member-owner can dominate the decision-making process. The one member-one vote philosophy particularly appeals to smaller investors because they have as much say in the organization as does a larger investor.
The Center for Regenerative Community Solutions 2013-2016
What we’ve accomplished in the past three years, and what still remains to be done.
... Innovative Financing for Clean Energy and Resiliency, through PACE (Property Assessed Clean Energy) and DREAM (Deed-restricted Resiliency and Energy Affordability Measures)
... Building the New Cooperative Movement
... Regenerative Cohousing and Ecovillage Development
... Global 4C, an international monetary strategy to mitigate climate change
... Commons Credits, a community currency for local regenerative development
... healthy food
... environmentally sustainable housing
... leadership development
... right livelihoods (including jobs and entrepreneuring)
... well-being, satisfaction, and peace of mind
A Remarkably Different 501(c)(3) Nonprofit
Innovative Financing for Affordable Energy Improvements
Thursday, November 10, 2016—Friday, December 23, 2016
Jonathan Cloud
Center for Regenerative Community Solutions
8 Revere Drive, Basking Ridge, NJ 07920 | jcloud@crcsolutions.org | 908-581-8418
... Secures financing against the property, not the owner Yes
... Can be used for any registered property Yes
... Provides a credit enhancement Yes
... Requires state legislation Maybe
... Requires municipal approval and involvement No
... Can finance any worthwhile improvement Yes
... Priority lien No
... Transferable to subsequent owners Yes
... Typically structured as a loan No
... Typically structured as an operating lease or service agreement Yes
... Easily supports third party tax equity Yes
... Can be treated as an off-balance sheet item Yes
(a) confirm the overall concept through outside legal analysis and assessment;
(b) create “pilot” or “demonstration” projects of interest to investors;
(c) identify interested investors;
(d) work with selected neighborhood and community groups to identify applications in underserved areas; and
(e) make contact with a network of national policymakers who can support the implementation of the program.
8 Revere Dr., Basking Ridge, NJ 07920
jcloud@crcsolutions.org • 908-581-8418
Attachment A: Flow Chart and Stakeholder Diagram
Attachment B: Analysis of the Legal Requirements for DREAM Financing
Attachment C: Q&A Regarding the Use of Deed Restrictions
Attachment D: Market Description
*... Social Impact Investors & Investment Funds (in addition to PSI)
*... Community Development Corporations & CDFIs
*... Cooperatives, especially the proposed DREAM Cooperative
*... Legal, accounting, engineering, & architectural firms
*... Affordable Housing & Commercial/Industrial Real Estate Developers
*... A full patent application
*... A Clean Energy Homes web site (e.g., Rogier’s) bringing together contractors and investors
*... A community revitalization strategy (e.g., for Bound Brook) financed through DREAM
... Horizontal privity exists whenever two parties participate in a real estate transaction.
... Mutual privity can coexist with horizontal privity. There is mutual privity if the parties have common rights in property.
... Vertical privity arises only after the original covenanting parties make their agreement. It exists between the grantor and grantee of an estate burdened or benefited by a covenant.
... Maintenance
... Payment of Property Taxes;
... Payment of Insurance
... Termination;
... Default; and
... Liability and Indemnification.
We think that solar panel systems are not fixtures because they can be mounted on the roof and removed. The building can operate with power from a utility and so the solar system is not essential. Doors, windows and the electric wiring inside a building probably are fixtures. I believe that escalators have gone both ways. The point is that I think you need to have fixtures to have a deed restriction be applicable.
You ask if the grantee could be made to pay for the improvements. As described above, it is the grantor of the easement who receives the improvements in our case. I am not aware of any form of easement that would allow for that-but hey, we are trying to break new ground!
A true easement could survive a mortgage foreclosure or a sale of the property.
... Can a deed restriction carry a payment obligation?
... Real vs. personal property, especially in the case of solar PV
... Will DREAM apply equally to a finance lease vs. true lease?
... Would a service agreement be seen as a disguised purchase?
Lender consent, subordination, and persistence; lender agreements
... Can a deed restriction be registered apart from a deed transfer?
... Is it comparable to an easement?
... What’s the difference between an easement and right of entry?
... Do we need a specific piece of legislation?
... In an easement, who is the grantor (the land owner?) and who is the grantee (the investor?)?
... Can the grantee enforce the grantor’s obligation to pay, and if so how?
... In a foreclosure, would the bank continue to make payments (as the would for utilities)?
... Can the owner be contractually required to record a deed rider at the time of sale? Can it be done at any time? Can it be done through a “resale restriction”? Would such a contractual obligation provide security to the investor?
... Can a deed restriction’s legitimacy be demonstrated by having both parties receive a benefit? i.e., “The grantor (property owner) grants an easement to the grantee (recipient or Investor) and receives the PACE improvements, but the grantee receives the rights associated with the easement. Both parties receive improvements of a sort, the benefits accruing from the transaction.”
Should the transaction be viewed as a loan, a lease, or a service agreement?
... renewable energy projects such as solar PV
... energy efficiency improvements
... conservation measures
... resiliency improvements such as flood proofing
... Annual Electric Savings $96,114
... Annual SREC Income @ $155 each $78,409
... Annual Total $174,523
... Less Annual Payments @ 6.5% $152,184 20 year bank loan
... Annual Net $22,339
... Annual Electric Savings $96,114
... Annual SREC Income @ $155 each $78,409
... Annual Total $174,523
... Less Annual Payments @ 6.5% $152,184 20 year bank loan
... Annual Net $22,339
... 30% Federal Tax Credit $510,260
... MACRS 5yr. depreciation $340,174 1st year
... Total Net Benefit First Year $872,773