As Ontario moves to remove barriers to municipal PACE financing, Toronto prepares to embrace it
The amendments, which affect the Municipal Act and City of Toronto Act, have to do with a financing tool used by municipalities called “local improvement charges.”
If a sewer pipe is replaced, a sidewalk laid or a road repaved a town or city can spread part of the cost among affected property owners through a special charge added to their property tax bill.
To date, such charges have been limited by law to neighbourhood improvement projects. But Toronto councillor Mike Layton said the proposed changes would allow municipalities to enter into agreements with individual property owners wishing to, for example, invest in changes to their home that would reduce energy or water consumption.
“Your property itself can qualify for a local improvement charge,” said Layton, who is eager to see pilot projects launched in Toronto that would take advantage of this new municipal tool. “We’ve got to prove to people that this works.”
It’s an important development, given that the McGuinty government seems to have dropped the ball on its conservation efforts. As Gord Miller, Ontario’s environmental commissioner, recently pointed out in an annual report, “the conservation promises of the Green Energy Act remain unfulfilled” and “some commitments appear to have been quietly abandoned.”
Empowering municipalities may be one of the best ways to make up for lost time. The regulatory changes mean municipalities would be able to leverage their ability to raise cheap capital through bond issues, and then offer homeowners low-interest financing that can be paid back over 10 or 15 years through property taxes.
If designed correctly, the energy or water savings that result will more than offset the monthly or annual payments. In the case of solar, revenues from clean electricity sold to the province under the feed-in-tariff program would more than cover the local improvement charge.
An added bonus is that the local improvement charge is tied to the home, not the homeowner, so it doesn’t add to your personal debt load.
One of the key champions of this model has been Sonja Persram, president of Sustainable Alternatives Consulting Inc. in Toronto (I wrote about her efforts last November).
Persram has studied the approach closely over the past three years, working with groups such as the David Suzuki Foundation to build support among business leaders, labour groups and particularly Ontario municipalities.
“There’s been a huge amount of interest from a broad spectrum of municipalities, at all levels,” said Persram, adding that she’s pleased to see the province taking action.
Another big fan is Bill Johnston, former president of the Toronto Real Estate Board and current director with the Canadian Real Estate Association.
“The program imposes no costs upon any level of government. In fact, it may provide a small return at the municipal level,” he said. “It will create employment, generating extra tax dollars at the provincial and federal levels. Furthermore, by improving indoor air quality, health care costs will be reduced.”
Layton, anticipating that the amendments will be passed, sent a letter earlier this month to the city’s Economic Development Committee asking that it get the city manager to develop a pilot program and conduct an economic analysis in time for the committee’s October meeting.
He envisions the program being tested in four Toronto districts, starting with a focus on energy efficiency retrofits and potentially expanding to water conservation and green energy projects, including solar and geothermal.
“We’d basically pick a handful of communities where there’s interest, and give it a try,” said Layton.
The challenge between now and then is to demonstrate to the rest of council that such a program wouldn’t come at a cost to the city. The benefits, however, are that it would contribute to environmental objectives and create economic activity and jobs for the city and surrounding region.
Another plus is that, by spurring energy and water conservation, pressure it taken off of city infrastructure. In other words, more efficient use of existing infrastructure will defer the big cost of future upgrades and expansions.
“Once you present all the evidence, and maybe I’m naïve here, but I would think the majority of members of the executive committee would say it’s foolish to not approve this kind of strategy,” Layton said.
This all assumes, of course, that the province follows through.
Tyler Hamilton, author of Mad Like Tesla, writes weekly about green energy and clean technologies.