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New energy efficiency projects will increase with EPAD financing in Kentucky

October 6, 2016
FBT Project Finance Advisors

Author: David A. Rogers

The Kentucky Energy Project Assessment District Act of 2015 (EPAD) enacted new KRS Sections 65.205 through 65.209 and implemented in the Commonwealth an efficient, local and simplified program for financing energy efficiency improvements and green alternative energy facilities using a special assessment levied by the local governmental jurisdiction – typically the city or county – on the building being improved. This is Kentucky’s version of Property Assessed Clean Energy financing, called PACE elsewhere in the country, and Frost Brown Todd LLC and CivicPoint, LLC, working with the Greater Cincinnati Energy Alliance, helped draft and lobby for the statute. As part of that process we are very proud of the flexibility provided in the EPAD Act, and equally proud of the economy of language (i.e., the use of as few words as possible.)

Basically, any property owner can choose to use EPAD to help finance energy efficiency and other green improvements to its property and certain renewable energy improvements, including solar, geo-thermal, wind and heat recovery systems. Up to 30 years of assessments may be used and by virtue of a lien on the property equal to a “property tax lien”, those assessments provide security that can easily be evaluated by banks and lenders. Put simply, you can borrow for a longer term, at lower rates, up to 100% of your project cost. That is because the assessment stays with the property, on the real estate records as an annual lien, and there is no better security for a real estate loan, not even a mortgage.   

Second, and of great importance to some persons, the EPAD loan is essentially an off-balance sheet, and is not a direct lien against the property owner. It is instead a lien against only the property.

Third, even governmental units and non-profits can take advantage of EPAD. If they choose to request an assessment against their parcels and buildings to be improved they too can obtain the financial benefits of EPAD (longer term, lower rates and 100% financing) and they need not pledge any other revenue source, general funds or taxes.           

EPAD has now been approved by the Louisville-Jefferson County Metro Government and a dozen other cities in the State. It can be approved elsewhere with a new project or as a general program.

Contact: David A. Rogers, President