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Keeping pace with the environment

Jun 8, 2015

Michigan has thousands of old, energy-inefficient factories, apartment complexes and office buildings. Nationally, the U.S. government estimates that the average building wastes a third of the energy it uses. My guess is that figure may be even higher here. How important is that?

Huge. According to federal government estimates, building operations account for 44 percent, or nearly half, of the nation’s entire energy use. Why doesn’t the private sector do more about this?

Simple: It would cost too much. Most banks only do commercial lending for a three to five year period. Realizing net savings could take fifteen years or more, and few businesses can afford to wait that long. But there’s a little-understood program that can solve that problem, and an enthusiastic attorney named Andy Levin is its main apostle.

Five years ago, the legislature enacted PACE, which stands for Property Assessed Clean Energy, and the way it works is beautifully simple. Owners of structures which qualify find a contractor and apply for a loan. Lenders are then paid back by a special property tax assessment on the improved structure, normally for fifteen to twenty years.

If the business owner sells the property in the meantime, the special assessment travels with the property to the new owner. The entire program is structured so that energy savings will immediately be greater than the cost of the added tax assessment.

No taxpayer dollars are involved or at risk. For owners of eligible properties, it means, according to Levin, “No money down and positive cash flow.”

The number of structures that are potentially eligible is huge. Single-family homes don’t qualify, and neither do any buildings owned by government entities.

But pretty much any other building in good shape and not over-mortgaged does.

Even government entities can capitalize on this if they lease buildings; the Michigan Public Service Commission is saving hundreds of thousands in energy costs on one such structure. Levin, a former director of the Michigan Department of Energy, Labor and Economic Growth, is devoting most of his time these days into spreading the word and making this happen all over the state.

The firm he founded a few years ago, Levin Energy Partners, has a subsidiary, Lean & Green Michigan, dedicated to helping make PACE projects happen.

While businesses anywhere in Michigan are eligible, financing and administration can be smoother and easier if counties and cities vote to become a member of PACE as well.

So far, thirteen counties have done so, from Wayne, the state’s largest and most blue county, to smaller, deeply Republican ones like Montcalm, Calhoun and Grand Traverse.

There are those who may suspect this is partly a vehicle for Levin, who, after all, is a scion of the best-known political family in the state. But that’s something he firmly denies.

“This has nothing to do with partisanship,” Levin told me. He described both Washington and Lansing as broken. Instead, he sees PACE and Lean and Green Michigan as a way to get something done for both businesses and the environment outside the usual dysfunctional arenas.

What seems clear is that if PACE reaches anything like its full potential, it could have an impact on the economy far greater than anything our current lawmakers have done. (For more information, see leanandgreenmi.com.)

Jack Lessenberry is Michigan Radio's political analyst. Views expressed in his essays are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.