Tag Archives: local improvement charges

Ontario municipalities now empowered to offer PAPER, PACE programs to boost energy, water conservation

Maybe it’s just a coincidence, or maybe it’s clever politicking, but Kathleen Wynne made a smart move last month.

Two weeks before resigning her cabinet post and announcing her intentions to run for leadership of the Ontario Liberal Party, the MPP for Don Valley West signed amendments to two pieces of legislation that could potentially fill a gaping hole in the province’s troubled energy policy.

Exercising her authority as minister of municipal affairs and housing, Wynne approved changes to the Municipal Act and City of Toronto Act that empower all municipalities in Ontario to take the lead on energy and water conservation programs.

Specifically, municipalities such as Toronto can now use a financing tool called a local improvement charge (LIC) to help property owners finance changes to their homes that are aimed at reducing energy or water consumption.

This is important, as the McGuinty government has neglected to follow through on the conservation promises of its own Green Energy Act, despite the fact that improving energy efficiency is the lowest cost and fastest way to save energy and reduce the environmental impacts of electricity generation.

Previously, local improvement charges could only be used to finance neighbourhood infrastructure projects. If a town or city replaced a sewer pipe or repaved a road, it could spread part of the cost among those property owners that stand to benefit. This would be visible as a special charge added to property tax bills.

The amendments, first proposed back in May, now make it possible for municipalities to apply the LIC model to energy or water efficiency projects taken on by individual property owners.

So what’s the big deal? As I wrote back in June, the amendments mean that municipalities can leverage their ability to raise cheap capital through bond issues.

They can then turn around and offer low-interest financing to property owners looking to insulate their homes, add energy-efficient windows, install smart thermostats, and upgrade to high-efficiency furnaces, air conditioners and water heaters.

Property owners could then pay back the loan over 10 or more years through their property taxes, with the idea being that annual payments would be less than annual energy or water savings. Another bonus is that existing municipal billing systems can be leveraged.

There are many names for this kind of program. When focused on energy conservation, programs are often called Property Assessed Payments for Energy Retrofits, or PAPER. When designed to encourage installation of renewable energy, such as rooftop solar, it’s called Property Assessed Clean Energy, or PACE. The legislative changes in Ontario allow for both types of programs to be created.

“I would say that over 50 municipalities are so far interested in this model,” said Sonja Persram, president of Toronto-based Sustainable Alternatives Consulting Inc., who has been a major champion of the proposed legislative changes. “Of those, a fairly large number — both large and small — are keen to move forward.”

Ontario is now the third jurisdiction in Canada — behind Yukon and Nova Scotia — to embrace LICs as a method for stimulating efficiency investments by easing the upfront capital burden that often make such investments unpalatable for property owners.

Brian Kelly, manager of sustainability for the Region of Durham, said what amounts to a minor regulatory change on Wynne’s part opens the door for municipalities to stimulate major residential retrofit activity, create local jobs, and at the same time help consumers do what they need to do to lower energy and water costs.

There’s little, if any, political or financial risk to the province. But the impact is potentially huge, in terms of lowering emissions, reducing pressure on utility infrastructure, and spurring economic activity.

Toronto councillor Mike Layton, who is pushing the city to launch a pilot project as soon as possible, called the approved amendments an “exciting” development. “Staff will be bringing a pilot project in coming months and I hope we can find money to fund it,” said Layton. “It would be great if we can start getting some real pickup on this.”

The Toronto Real Estate Board, the Toronto Board of Trade, as well as several labour organizations, NGOs and business leaders, have so far backed Layton’s efforts.

As far as seeing the model expanded country-wide, Natural Resources Canada considers the approach a complement or alternative to incentive-based programs that overcomes two barriers: Upfront access to capital and a practical way to pay back loans — i.e. through municipal or local utility billing infrastructure.

“These mechanisms are key to market transformation, helping homeowners move away from reliance on government subsidies to a more market-based arrangement,” according to the ministry.

The federal EcoEnergy home retrofit program, underpinned by nearly $200 million in subsidies, only tapped into 6 per cent of Canada’s housing stock.

“This is potentially a huge spur for the Ontario economy,” said Persram, who expects to see plenty of municipal collaboration on program development. “This allows municipalities to take control of their own destiny.”

If the approach is successful, the Liberal government — perhaps one day Wynne — can take credit for the heavy lifting it has essentially offloaded.

All it took was a signature.

Tyler Hamilton, author of Mad Like Tesla, writes weekly about green energy and clean technologies.

As Ontario moves to remove barriers to municipal PACE financing, Toronto prepares to embrace it

Tyler Hamilton
 Homeowners in Ontario could soon finance efficiency retrofits and solar panel installations through an additional charge on their property taxes, but only if the province makes good on regulatory changes it proposed last month.

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.