Edina has become the first Minnesota city to allow businesses that make energy-efficient improvements to their properties to pay for those improvements through their property taxes.
The Edina Emerald Energy Program allows "property assessed clean energy," better known as PACE. Minnesota passed a PACE law in 2010, and is one of 27 states with the program.
City Council members approved the program last month. Some members were wary of being the state pioneer for the program, which they worried could become a financial liability for the city if a property that used the program went into foreclosure. But City Manager Scott Neal assured the council that if a property were foreclosed on, the city would be first in line for repayment, even before mortgage holders.
"If there was a default situation here, we might not get paid right away, but we would always get paid," he said.
Under Edina's program, only commercial and industrial properties in the city are eligible. The city would not lend public money to a business but would serve as an intermediary using special assessments on the business owner's tax bill as a conduit to attract private financing.
By getting the city involved, businesses should be able to line up loans more readily because lenders would be assured of repayment. On a loan taken out directly by the business from a lender, the lender would not have such assurance because mortgage holders and other creditors could be in line to be paid first if a property went into foreclosure.
Edina's decision to make only commercial and industrial buildings eligible is a departure from the pioneering program in California's Sonoma County, where over the past two years PACE has helped fund more than $53 million in projects in more than 2,400 homes and 77 commercial properties.
While the program has been praised for creating jobs and cutting energy use, federally chartered mortgage lenders Fannie Mae and Freddie Mac have objected to the program because PACE loans are first in line for repayment on foreclosed properties.