Federal support to facilitate a Property Assessed Payments for Energy Retrofits Program (2012)

Federal support to facilitate a Property Assessed Payments for Energy
Retrofits Program
Petition: 333
http://www.oag-bvg.gc.ca/internet/English/pet_333_e_37105.html

Issue(s): Climate change, federal–provincial relations, governance, and
other
Petitioner(s): David McRobert, Legal Consultant; William E. Johnston, M.A.,
LL.B.; Janet Gasparini; Love Energy Consultants; Sustainable Alternatives
Consulting Inc.
Date Received: 28 March 2012
Status: Completed
Summary: The petitioners request a review of federal policies, legislation,
regulations, and technical guidance to facilitate municipal implementation
of a Property Assessed Payments for Energy Retrofits (PAPER) program. The
petitioners describe potential benefits of a PAPER program for the federal
government, including achieving targets for reductions in energy use and
greenhouse gas emissions, as well as potential economic stimulus through
job creation.
Federal Departments Responsible for Reply: Environment Canada, Department
of Finance Canada, Natural Resources Canada, Public Works and Government
Services Canada
Petition
A PETITION TO THE AUDITOR GENERAL OF CANADA
pursuant to s. 21.1 of the Auditor General Act
respecting
Reforming Laws and Policies to promote Property Assessed Payments for
Energy Retrofits and other related measures aimed at encouraging
sustainability and community economic
development, protecting human health and fighting climate change.

for the Ministers of Finance, Environment, Natural Resources, and Public
Works and Government Services),
March 1, 2012
TABLE OF CONTENTS
A. Petition Summary
B. Introduction
C. Actions needed
D. Value differential between energy efficient and green homes and
conventional homes and buildings
E. The Urgent Challenge of Climate Change
F. Are Mirror Laws Part of the Solution?
G. Requests to Ministers and Conclusion
Supporting Materials
H Signatures and addresses of Petitioners
I. List of Supporting Materials
 A. PETITION SUMMARY
We are requesting a review pursuant to s. 21.1 of the Auditor General Act
(AGA) in order to facilitate the use of Local Improvement Charges enabling
Property Assessed Payments for Energy Retrofits, and other related
measures, to:
address climate change mitigation and adaptation challenges
promote energy efficiency and health in residential properties
provide an economic stimulus
save tax dollars and increase federal tax revenues through job
creation
provide a better world for future generations.
We also are requesting the following policy and legal reforms to current
federal energy conservation programs in all jurisdictions in Canada of:
Finance, the Environment, Public Works and Government Services, and other
departments as appropriate, as follows:
1. A review of existing policies, legislation, regulation and/or
technical guidance relating to the use of Local Improvement Charges
(LICs) to enable their use for Property Assessed Payments for Energy
Retrofits on private properties - in particular, single family
dwellings - on a cost-neutral (or slightly revenue-positive) basis to
municipalities.

The arguments and underlying rationales for our proposed reforms stem
in major part from three 2011 reports by Sonja Persram of Sustainable
Alternatives Consulting Inc.:
1. Property Assessed Payments for Energy Retrofits: Recommendations
for Regulatory Change and Optimal Program Features *
2. Property Assessed Payments for Energy Retrofits and Other
Financing Options, *
3. Strategic Recommendations for an Optimal "PAPER" Program *
These reports together provided an analysis of the barriers to energy
retrofits, a comparison of LICs and other financing mechanisms
regarding their appropriateness in funding energy improvements on
private properties, rationales for municipal engagement in this
activity, the roles of higher level governments and other
stakeholders, regulatory changes that would be required, and strategic
implementation recommendations for an optimal program. This use of
LICs is called Property Assessed Payments for Energy Retrofits, or
"PAPER."

Additional prior and subsequent Canadian and US validation for the
PAPER concept is also noted in the supporting material of the
petition.

2. We further are requesting federal support from the petitioned
departments for a PAPER program based on the following:
1. A collaboration with provincial, municipal, non-government, etc.
stakeholders to develop PAPER programs including providing
appropriate technical assistance to enable optimal energy
savings per dollar spent
2. Low interest financing; loan loss reserves based on expected
defaults; and support for addressing the scalability of energy
savings guarantees for the residential sector
3. Providing incentives like energy efficiency income tax credits
We believe a comprehensive review of the application and expansion of Local
Improvement Charges represents a singular and vital opportunity for all
levels of government in Canada, and would be consistent with the federal
government's stated policies of supporting energy conservation and
environmental protection. We look forward to responses from your
departments to this application and welcome the opportunity to make
Powerpoint presentations to you and your staff on the tremendous benefits
that a fully developed LIC program could provide to Canadians. We also
would be honoured to participate in any consultations that the affected
departments might undertake on the issues described in this petition should
the federal Cabinet decide to move forward on the initiatives described.
This petition is directed primarily at the following departments:
Minister of Finance
Minister of the Environment
Minister of Natural Resources
Minister of Public Works and Government Services
WE PETITION THE COMMISSIONER FOR THE ENVIRONMENT AND SUSTAINABLE
DEVELOPMENT TO REQUEST THAT THE MINISTERS NAMED BELOW RESPOND TO THE
FOLLOWING QUESTIONS AND ISSUES.
REQUESTS TO MINISTERS
The Hon. Jim Flaherty, Minister of Finance, the Hon. Peter Kent, Minister
of the Environment, the Hon. Joe Oliver, Minister of Natural Resources, and
the Hon. Rona Ambrose, Minister of Public Works and Government Services, to
state their departments' positions on:
a. Supporting a collaboration with provincial, municipal, non-government,
etc. stakeholders to develop Property Assessed Payments for Energy
Retrofits (PAPER) programs using LICs for energy retrofit financing.
b. The associated public benefits of PAPER programs.
c. Including within the upcoming budget, the provision of collaboration
and technical support for PAPER programs, as well as low-interest
startup financing, loan loss reserves and energy efficiency income tax
credits, in recognition of the budgetary benefits arising from the
economic stimulus associated with these programs (which include
increased direct, indirect and induced jobs, and resulting reduced
unemployment expenses and increased income tax revenues).
d. The use of Mirror Laws for PAPER.
Conclusion
The above information supports the Applicants' petition request for reviews
of existing policies, legislation, regulation and/or technical guidance
relating to the uses of Local Improvement Charges pursuant to the AGA to
enable their use for Property Assessed Payments for Energy Retrofits on
private properties, in particular, single family dwellings.
B. Introduction
S. 21.1 of the Auditor General Act provides that:
The purpose of the Commissioner is to provide sustainable development
monitoring and reporting on the progress of category I departments towards
sustainable development, which is a continually evolving concept based on
the integration of social, economic and environmental concerns, and which
may be achieved by, among other things,
a. the integration of the environment and the economy;
b. protecting the health of Canadians;
c. protecting ecosystems;
d. meeting international obligations;
e. promoting equity;
f. an integrated approach to planning and making decisions that takes
into account the environmental and natural resource costs of different
economic options and the economic costs of different environmental and
natural resource options;
g. preventing pollution; and
h. respect for nature and the needs of future generations. (Emphasis
added)
We believe that the federal departments should undertake this review of
federal laws and policies because:

Local Improvement Charges and Property Assessed Payments for Energy
Retrofits
Local Improvement Charges are a key method by which the federal government
could leverage substantial public benefit by facilitating the municipal
financing of energy retrofits. Using a simplified, amended instrument, a
collaboration among all government levels would enable municipal
governments via an energy retrofits financing program to contribute to
achieving federal targets for reductions in energy use and greenhouse gas
emissions while providing an economic stimulus and multiple benefits to
federal budgets. Given anticipated value differentiation for green and
energy efficient homes and buildings over conventional ones, as the federal
government would be assisting in protecting homeowners' property values and
vulnerability to rising and volatile energy prices. This initiative would
also benefit current and future generations by protecting the environment
and reducing energy use and greenhouse gas emissions on a mass scale.

The federal government would benefit through savings on unemployment
insurance costs, and the Consolidated Revenue Fund could also benefit from
increased income tax revenues arising from the economic stimulus. All of
the above would comprise public benefits. 

We believe that there are significant policy and technical support
deficiencies that currently limit the ability of municipalities to
facilitate local improvements on a cost-neutral basis, and which therefore
curtails federal government benefits from this economic stimulus potential.
 
The arguments and underlying rationales for our proposed reforms stem in
major part from three 2011 reports prepared as part of a project funded by
the Ontario Trillium Foundation. These reports together provided an
analysis of the barriers to energy retrofits, a comparison of LICs and
other financing mechanisms regarding their appropriateness in funding
energy improvements on private properties, rationales for municipal
engagement in this activity, the roles of higher level governments and
other stakeholders, regulatory changes that would be required, and
strategic implementation recommendations for an optimal program. This use
of LICs is called Property Assessed Payments for Energy Retrofits, or
"PAPER."
Additional prior and subsequent Canadian and US validation for the PAPER
concept is also noted in the support material.
Canadian authorization of LICs for this purpose originated in Yukon
Territory in 1998 for solar photovoltaic installations in outlying regions
and now includes other standalone renewables providing much-needed, off-
grid electricity service for rural: residential, small-load commercial, and
other non-industrial property.1 
Authority was also enabled recently for solar thermal installations in
Halifax Regional Municipality via the province of Nova Scotia's charter
change which will provide substantial savings on residents' utility bills.
The City of Windsor recently passed a resolution requesting regulatory
change in support of a PAPER program, and King Township passed a resolution
in support of a recent request for review of the Environmental Bill of
Rights in favour of using LICs for energy improvements on private property.

Programs using a similar financing mechanism called "Property Assessed
Clean Energy" (PACE) in the US receive bi-partisan support in the 27 states
with legislative authority, because of their enormous benefits, including
significant job creation potential; contributing to $3,500 in federal tax
income and, $2,400 in state and local tax income as well as $55,400
additional economic gains per home with a $21,000 project; lender risk
reduction; and achievement of energy and greenhouse reduction targets.2
Residential PACE includes a stellar program called Long Island Green Homes
which has financed over 600 energy efficiency retrofits thus far and
provides homeowners with almost twice as much annual savings on their
energy bills as their annual retrofit repayments while making their homes
more affordable.3 Mortgage default rates in homes with PACE financing has
also been found to be one-thirtieth that of local, non-PACE homes.
Development of commercial PACE programs is also growing, enabling similar
benefits including achievement of significant reductions in energy use and
greenhouse gas emissions.
In a Property Assessed Payments for Energy Retrofits program,
municipalities would be able to utilize LICs to facilitate energy retrofit
programs at a net zero program cost. They would assess energy retrofit
financing costs plus program administrative expenses against the benefiting
private properties whose owners opt-in to the energy retrofits program.
Like LICs, repayments would be on the property tax bill, with recourse
being that any defaulted payments would be subject to encumbrance via a
priority lien. The goal would be to structure the measures financed to be
based on optimal energy savings via recommendations from energy
evaluations, and so that the annual savings exceed annual investments. The
priority lien provides a measure of security for investors enabling lower
interest rates.

Another useful mechanism in use and in development elsewhere in Canada is
utility-based on-bill financing – described in the second, financing
report. This mechanism could potentially harmonize with an LIC program, but
as of June 2011, major Ontario gas and hydro utilities had not been
considering implementing on-bill financing. Furthermore, in Ontario, large-
scale utility on-bill financing of energy retrofits would be complicated by
the multiple LDCs and gas utilities. And, according to BC's Ministry of
Energy, Mines and Responsible for Housing, their new Pay As You Save
program providing on-bill, utility financing apparently does not preclude
developing a dovetailed Local Improvement Charges program.

We believe that the federal Departments and Agencies should undertake this
review to protect municipalities' rights to facilitate energy retrofit
financing and enhance residents' quality of life because it addresses the
following barriers:
Home owners often plan to move before they believe they will recoup their
investment in energy improvements (for instance, this likely would be a
factor in members of the military who move domicile approximately every two
years). This mitigates the business case for homeowner investment in costly
energy improvements that would reduce energy use and greenhouse gas
emissions. PAPER would allow any financing balance to be continued to be
repaid by a new owner on sale of the property.
Low interest loans need to be available on an equitable basis,
particularly in the current scenario of rising and volatile energy prices.
However, the private sector tends to provide lower interest rates to people
with higher income levels. Having security would enable banks to finance
municipalities in a PAPER program at lower interest rates, which would be
passed on to the owners.
Owners may have competing uses for their available cash or financing, and
may not want to add to their debt load. LICs (and PAPER) would provide
dedicated financing that is not reflected on owners' personal debt totals
since it is associated with the property. This was a major benefit in the
US Long Island Green Homes initiative.
Private sector lenders are not focused on optimizing energy savings per
dollar spent, but on the ability to repay. Owners have knowledge gaps about
the kinds of measures that would result in optimal energy savings, and tend
to focus on (for example) window replacements – which have a long payback
period. On a mass scale, money spent on such retrofits would not leverage
optimal reductions in energy use and GHG emissions to help achieve
municipalities' – and federal – targets. This mechanism would allow the
private sector to participate in energy retrofit financing at a more
affordable scale.
In a PAPER program, municipalities would have control over the measures
financed and therefore over the attainment of targets. The focus would be
on financing (non-portable) energy efficiency measures that would result in
a net annual savings on homeowners' energy bills from the first year.
Private sector (or most utility-based) financing allows a maximum five
year term – and therefore, predictability of interest rate. This makes it
less affordable for homeowners for whom the payments would exceed energy
bill savings. Market research conducted in 2010 for the City of Toronto on
this mechanism found that 82 per cent of homeowners financed their energy
retrofits with cash or savings. Of homeowners who conducted energy
improvements in the previous 5 years, about one-half had spent $5,000 or
less. And, of homeowners who did not do all of the energy improvements
recommended from an energy assessment, 66 per cent (57 per cent of all
homeowners) had found them too expensive. Affordability and available
financing also limits the level of energy savings and GHG emission
reductions that could be achieved with the energy improvements.
A PAPER program would allow for longer financing periods (e.g. 10-20 years)
at a fixed interest rate, as this is a feature of LICs. It also would allow
closer matching of the financing term with the useful life of the asset.
Mortgage re-financing could fold in energy retrofit financing however the
interest rate is not predictable beyond a 5-year duration and this makes
payback difficult to calculate. Moreover, LIC-based financing, with the
added security afforded by a priority lien in case of default, allows
investors to finance municipalities at much lower interest rates, which
would be passed on to homeowners. 42 per cent of homeowners in the City of
Toronto's market research said they would be interested in purchasing an
energy efficient home with an outstanding energy efficiency loan, lower
monthly bills and higher resale value.
Non-turnkey programs require homeowners to hire and oversee workers and
work, for which they may not feel sufficiently experienced or
knowledgeable. A municipally-facilitated PAPER program could allow turnkey,
neighbourhood-scale retrofits, and provide a level of quality assurance
which could result in as much as 30 per cent cost savings arising from
economies of scale compared to other programs. These savings would be
shared between the municipality and the homeowner.
As well, when municipalities obtain financing for LICs via general
obligation bonds these funds are adjusted from municipal debt totals due to
the income stream.

Since most of the research has been related to single family dwellings, and
the institutional, commercial and industrial as well as multi-unit
residential building sectors have different characteristics, requirements
and challenges, we have requested of one provincial government4 a three-
phase approach in order to:
1. Implement regulatory change for Local Improvement Charges to enable LICs
to be used for energy retrofits on single-family residential properties
immediately by municipalities (all tiers).
2. Regulate to allow LICs (or another financing mechanism with a priority
lien) to be used for property assessed payments for energy retrofits in
other sectors. This would require time to conduct research to:
a. Assess the applicability of this mechanism for and confirm optimal
changes needed regarding energy retrofits to the small business, multi-unit
residential building and commercial/industrial sectors.
b. Ascertain the applicability of this mechanism for financing municipal
infrastructure energy improvements in municipally-owned homes and buildings
that are rented, and determine what changes would be needed for these
purposes. Since municipal owner-occupied properties would not be subject to
rent or payments in lieu of taxes, it may be appropriate to determine the
suitability of the mechanism in this separate case as well.
c. Ascertain the applicability of this mechanism for financing
institutional infrastructure energy improvements. [Some properties make
payments in lieu of taxes which are current-value assessment based. Others
like universities and hospitals make "heads and beds" payments (based on
enrollments and the number of available beds respectively).]
d. Ascertain the applicability of this mechanism for district energy
systems.
3. Create the opportunity for developing a Canada-wide PAPER program for
one or more sectors.

Items 1, 2 a) and 3 would mirror the introduction of regulatory /
legislative changes in other jurisdictions, such as the State of
California. (In some California programs, both homes and commercial
properties could participate. In the case of Berkeley, the program was
offered to both but taken up only by homeowners. The Long Island Green
Homes initiative served only homes.)
C. Actions needed
The general legal and policy changes that are required to implement
Property Assessed Payments for Energy Retrofits for private homes are
summarized below:
1) Recognize the public benefit of the private property energy
improvements. PAPER-like programs in the US were criticized on the grounds
that the municipal programs' activities on private property were not deemed
a public benefit – despite the benefits to all levels of government
including to federal government budgets – and therefore, to taxpayers; and
the resulting energy savings and greenhouse gas emission reductions.
2) Contribute to a collaboration with provincial, municipal, non-
government, etc. stakeholders to develop PAPER programs including providing
appropriate technical assistance to enable optimal energy savings per
dollar spent.
3) Include within the upcoming budget, the provision to PAPER programs of
collaboration and technical support, low-interest financing, loan loss
reserves based on expected program defaults, and energy efficiency income
tax credits in recognition of the federal budgetary benefits arising from
these programs (including direct, indirect and induced jobs producing
reduced unemployment expenses and increased income tax revenues).
4) Contribute support for research to assess the applicability of this
mechanism for and confirm optimal changes needed regarding property
assessed payments for energy retrofits of other sectors. 
5) Contribute to developing a Canada-wide PAPER program for one or more
sectors.
6) Contribute support for federal provision of mirror legislation for
provinces and territories, to help provide clear authority to
municipalities for utilizing Local Improvement Charges to finance Property
Assessed Payments for Energy Retrofits on private, single family
residential properties.
D. Value differential between energy efficient and green homes compared to
conventional ones
There is an anticipated value differential between energy efficient and
green homes compared to conventional ones due to a home appraisal addendum
recently introduced by the US Appraisal Institute with sample guidance to
be published in the March 2012 issue of the Appraisal Journal. Commercial
case studies and a course are also expected soon from the US Appraisal
Institute, with an eventual impact on Canadian appraisals of both homes and
buildings anticipated in the future.
Consequently, as value impacts property taxes, homeowners looking ahead may
find challenges to today's business case for home energy retrofits due to
an anticipated, associated property tax increment. Given that energy
retrofits uptake would be expected to positively impact federal budgets,
uptake could be facilitated by providing federal tax credits for homes with
an enhanced energy efficiency rating in an economic stimulus similar to the
successful home renovation tax credit.
E. The Urgent Challenge of Climate Change
It has been argued that "Climate change is one of the most significant
environmental challenges the world has ever faced. We are already seeing
the effects of climate change in Canada. The potential impacts on our
health, economy and environment require us to take action."5
In commenting on Canada's environmental performance in 2004, the
Organization for Economic Cooperation (OECD) noted:
The high priority [Canada] gives to climate change is based on the widely
shared public perception that vital national interests are at stake, given
the potentially adverse effects of inaction on, for example, coastal cities
and wetlands, commercial agriculture and the viability of forestry, Arctic
culture, and ocean circulation patterns and other global life support
systems.6
The United Nations Intergovernmental Panel on Climate Change (IPCC) in
commenting on the rise in GHG emissions noted that:
[t]he amount of carbon dioxide, for example, has increased by more than 30%
since pre-industrial times and is still increasing at an unprecedented rate
of on average 0.4% per year, mainly due to the combustion of fossil fuels
and deforestation. We know that this increase is anthropogenic...7
F. Are Mirror Laws Part of the Solution?
One of the most important conundrums related to preventing and controlling
environmental problems is the lack of a coherent constitutional framework
to regulate trade and economic activities and promote national policy
development.
One of the most effective ways to respond to the coordination problems
posed by the Canadian Constitution is the passage of mirror laws based on a
shared understanding of what needs to be done. Thus, if a consensus can be
developed about what is required our federal, provincial, territorial,
aboriginal and municipal governments, it should be possible, at least in
theory, to sit down with other stakeholders and develop a coherent policy
and process framework within current constitutional framework. This
obviates the need to re-open the Canadian Constitution, an untimely
proposition during the next four years of a Conservative Majority
government.
Key Precedents for Mirror Laws in Canada
There are a number of key precedents for mirror laws in Canada, including:
Canadian Environmental Protection Act, 1999
Species at Risk Act, 2003
Transportation of Dangerous Goods Act, 1984
Workplace Hazardous Waste Information System, 1986
Mirror laws provide an opportunity for our federal, provincial,
territorial, aboriginal and municipal governments to sit down with other
stakeholders and develop a coherent policy and process framework within
current constitutional framework. Developed properly, the framework can
arguably provide a chance to ensure that important public policy goals are
achieved. Without doubt mirror laws are an effective and proven way to
address gaps and overlaps in the Canadian constitutional framework.
G. REQUESTS TO MINISTERS
WE PETITION THE COMMISSIONER FOR THE ENVIRONMENT AND SUSTAINABLE
DEVELOPMENT TO REQUEST THAT THE MINISTERS NAMED BELOW RESPOND TO THE
FOLLOWING QUESTIONS AND ISSUES.
The Hon. Jim Flaherty, Minister of Finance, the Hon. Peter Kent, Minister
of the Environment, the Hon. Joe Oliver, Minister of Natural Resources, and
the Hon. Rona Ambrose, Minister of Public Works and Government Services, to
state their departments' positions on:
a. Supporting a collaboration with provincial, municipal, non-government,
etc. stakeholders to develop Property Assessed Payments for Energy
Retrofits (PAPER) programs using LICs for energy retrofit financing.
b. The associated public benefits of PAPER programs.
c. Including within the upcoming budget, the provision of collaboration
and technical support for PAPER programs, as well as low-interest
startup financing, loan loss reserves and energy efficiency income tax
credits, in recognition of the budgetary benefits arising from the
economic stimulus associated with these programs (which include
increased direct, indirect and induced jobs, and resulting reduced
unemployment expenses and increased income tax revenues).
d. The use of Mirror Laws for PAPER.
CONCLUSION
The above information supports the Applicants' petition request for reviews
of existing policies, legislation, regulation and/or technical guidance
relating to the uses of Local Improvement Charges pursuant to the AGA to
enable their use for Property Assessed Payments for Energy Retrofits on
private properties, in particular, single family dwellings.
H. Signature & Addresses of Petitioners
[Original signed by Bill Johnston]
Bill Johnston
36 Willowbank Boulevard
Toronto, ON M4R 1B6
[Original signed by Peter Love]
Peter
Love
President
Love Energy Consultants
34 King St. East, Suite 600
Toronto, ON M5C 2X8
[Original signed by Sonja Persam]
Sonja Persram
President
Sustainable Alternatives Consulting Inc., &
Author, 3 Reports on Property Assessed Payments for Energy Retrofits
121 Ling Road, Suite 407
Scarborough, ON M1E 4Y2
T: 416-324-9388
[Original signed by Janet Gasparini]
Janet Gasparini
191 College Street
Sudbury, ON P3C4T9
[Original signed by David McRobert]
David McRobert
Legal Consultant
3 Burrows Street
Peterborough, ON K9J 0A1
C: 647 234 4677
E: [email protected]
Cc: Mr. Gary McNamara,
President, Association of Municipalities of Ontario &
Mayor, Town of Tecumseh
Mr. Brock Carlton, Chief Executive Officer,
Federation of Canadian Municipalities
I. List of Supporting Materials
Halifax Regional Municipality Charter change to use LICs for energy
retrofits:
Province of Nova Scotia, Bill No. 112 as passed, regarding the Halifax
Regional Municipality:
http://nslegislature.ca/legc/bills/61st_2nd/3rd_read/b112.htm 
Councils' Resolutions and letters of support for PAPER:
The City of Guelph, letter of support: http://www.sustainable-
alternatives.ca/City_of_Guelph_Letter_of_Support_PAPER.pdf
The City of Windsor Resolution, Council Minutes, October 17, 2011,
http://www.citywindsor.ca/cityhall/City-Council-
Meetings/Documents/Council_Minutes/2011/October%2017,%202011.pdf
The Township of King, letter of support (Resolution was passed January 16,
2012), http://www.sustainable-
alternatives.ca/King_Township_Resolution_LICs_Financing_Energy_Retrofits.pdf

US PACE legislation:
Bipartisan support for a similar mechanism to property assessed payments
for energy retrofits is evidenced by 27 States' legislation. See property
assessed clean energy (PACE) under incentives on DSIRE (Database for State
Incentives for Renewable Energy) website: www.dsireusa.org
PAPER Reports by Sonja Persram published in 2011:
Property-Assessed Payments for Energy Retrofits: Recommendations for
Regulatory Change and Optimal Program Features
http://www.sustainable-alternatives.ca/PAPER_Persram_for_DSF.pdf
Property-Assessed Payments for Energy Retrofits and Other Financing
Options.
http://www.sustainable-alternatives.ca/PAPER_+_other_financing_options_-
_Persram_for_DSF.pdf
Strategic Recommendations for an Optimal PAPER Program.
http://www.sustainable-
alternatives.ca/Strategic_recommendations_for_an_optimal_PAPER_program.pdf
Request for review of Ontario Environmental Bill of Rights:
PAPER Supporters' Request for Review of the Ontario Environmental Bill of
Rights: http://www.sustainable-
alternatives.ca/EBR_Review_PAPER_Jan_11_2012.pdf
Other resources including links on US mechanism similar to PAPER i.e. PACE:
Allen, G.; Persram, S.; Kani, M.; and Lester, S., Assessment of North
American Property-Attached and Other Financing Programs For Low-Rise
Residential Energy Retrofits, Final Report Prepared for the City of
Toronto, Toronto Environment Office, December 2010
Appraisal Institute (US), Residential Green and Energy Efficient Addendum,
regarding appraising green and energy efficient homes, 2011
http://www.appraisalinstitute.org/education/downloads/AI_82003_ReslGreenEner
gyEffAddendum.pdf
Fuller, Merrian, Enabling Investments in Energy Efficiency: A study of
energy efficiency programs that reduce first-cost barriers in the
residential sector, Energy & Resources Group, UC Berkeley, prepared for
California Institute for Energy and Environment, May 21, 2009
http://wpui.wisc.edu/files/webcontent/reports/Residential%20Financing%20Whit
e%20Paper.pdf
Home Performance Resource Center, Best Practices for Residential Energy
Retrofit Program Design: Financing Incentives and Recommendations, March
2010
http://www.hprcenter.org/sites/default/files/ec_pro/hprcenter/best_practices
_financing_and_incentives.pdf
LaScelles, Eric, Canadian Mortgage Market Primer, June 17, 2010
http://www.td.com/document/PDF/economics/special/td-economics-special-
el0610-cdn-mort-market-di.pdf
Long Island Green Homes www.ligreenhomes.com
Morrison Park Advisors, Tower Renewal Financing Options Report, May 2010,
http://www.toronto.ca/city_manager/pdf/tr_financing_options_report.pdf
Natural Resources Defense Council, PACE Now, Renewable Funding, LLC and The
Vote Solar Initiative, Property Assessed Clean Energy (PACE) Programs White
Paper: helping achieve environmental sustainability and energy
independence, improving homeowner cash flow and credit profile, protecting
mortgage lenders, and creating jobs, May 2010,
http://www.renewfund.com/resources/resources
PACENOW www.pacenow.org
Peters, Roger; Horne, Matt; and Heap, Nicholas, Using Local Improvement
Charges to Finance Building Energy Efficiency Improvements: A Concept
Report, Pembina Institute, May 1, 2004, http://www.pembina.org/pub/170
Peters, Roger; Whitmore, Johanne; and Horne, Matt: Using Local Improvement
Charges to Finance Energy Efficiency Improvements: Applicability Across
Canada, Pembina Institute, June 1, 2005 http://www.pembina.org/pub/197
Toronto Real Estate Board, Letter of Support Re: Property Attached Payments
for Energy Retrofits (PAPER) Financing Program, March 25,
2011 http://www.sustainable-
alternatives.ca/TREB_Letter_of_Support_PAPER.pdf
U.S. Department of Energy, Guidelines for PACE Financing Programs, May 7,
2010:
http://www1.eere.energy.gov/wip/pdfs/arra_guidelines_for_pilot_pace_programs
.pdf
Market and health-based research
Canadian Medical Association, No Breathing Room: National Illness Costs of
Air Pollution, 2008, http://www.cma.ca/index.php/ci_id/86830/la_id/1.htm
City of Toronto Home Energy Financing Survey, Ipsos Reid, 2010 (full
disclosure: with assistance from Sustainable Alternatives Consulting Inc.
for survey development and results analysis) 
Ipsos Reid Public Affairs, Green Home Improvement Program Qualitative
Research Final Report, February 2009 for Climate Change Central
Sandhu, Parminder and Willis, Paul (Willis Environmental Services Ltd.) and
Wang, Kitty, Mims, Natalie, and Bell, Mathius (Rocky Mountain Institute),
Opportunity Assessment of Strategies to Increase Private Sector Investment
in Energy Efficiency, August 2009, prepared for BC
Hydro http://www.mendeley.com/research/opportunity-assessment-strategies-
increase-private-sector-investment-energy-efficiency-prepared-bc-hydro/
SES Research (Ottawa), Municipal Enviro-Loans for Energy Efficiency and
Alternative Energy Study, for the City of Ottawa, June 2007
ENDNOTES
1Yukon Department of Community Services, Rural Electrification Policy and
Guidelines, http://www.community.gov.yk.ca/property/retp_guide.html
2 PACENow, PACE: Property Assessed Clean Energy: Making the Case for PACE
Legislation, July 2011: http://pacenow.org/blog/wp-content/uploads/Making-
the-Case-for-PACE-Legislation.pdf
3 Persram, Sonja, Property-Assessed Payments for Energy Retrofits:
Recommendations for Regulatory Change and Optimal Program Features,
2011. See: http://www.sustainable-
alternatives.ca/PAPER_Persram_for_DSF.pdf
4 See PAPER Supporters' Request for Review of the Ontario Environmental
Bill of Rights: http://www.sustainable-
alternatives.ca/EBR_Review_PAPER_Jan_11_2012.pdf
5 Project Green notes at p. 34 that:
More than half of Canada's GDP is substantially affected by climate and
weather, including forestry, agriculture, fishing, hydro-electricity
generation, transportation and tourism. Climate change is affecting entire
sectors and regional economies. It also contributes to extreme weather
events that are even affecting the safety and security of Canadians.
6 See OECD 2004 Environmental Performance Reviews: Canada at p. 187.
7 http://www.grida.no/climate/ipcc_tar/wg1/044.htm
[top of page]
Minister's Response: Environment Canada
5 June 2012
Mr. Bill Johnston and Co-signatories
276 Merton Street
Toronto ON M4S 1A9
Dear Mr. Johnston and Co-signatories:
I am writing in response to your environmental petition no. 0333, pursuant
to section 22 of the Auditor General Act, regarding measures aiming to
promote property-assessed payments for energy retrofits.
The issues raised in your petition relate mainly to energy and the federal
budget process and, as such, they fall outside of my department's mandate.
My colleagues, the Honourable Joe Oliver, P.C., M.P., Minister of Natural
Resources, and the Honourable James M. Flaherty, P.C., M.P., Minister of
Finance, will, therefore, respond to the questions that fall under their
respective areas of responsibilities.
Sincerely,
[Original signed by Peter Kent, Minister of the Environment]
The Honourable Peter Kent, P.C., M.P.
c.c.: The Honourable Joe Oliver, P.C., M.P.
The Honourable James M. Flaherty, P.C., M.P.
The Honourable Rona Ambrose, P.C., M.P.
Mr. Scott Vaughan, Commissioner of the Environment and Sustainable
Development
[top of page]
Minister's Response: Finance Canada
10 August 2012
Mr. Bill Johnston
276 Merton Street
Toronto, ON M4S 1A9
Mr. David McRobert
Legal Consultant
3 Burrows Street
Peterborough, ON K9J 0A1
Mr. Peter Love
President
Love Energy Consultants
600- 34 King Street East
Toronto, ON M5C 2X8
Ms. Sonja Persram
President and CEO
Sustainable Alternatives Consulting Inc.
407-121 Ling Road
Scarborough, ON MlE 4Y2
Ms. Janet Gasparini
105-30 Ste Anne Road
Sudbury, ON P3C 5E1
Dear Messrs. Johnston, Love, and McRobert, and Mses. Persram and Gasparini:
This correspondence is to acknowledge that, pursuant to Section 22 of the
Auditor General Act, the Department of Finance received a copy of your
Environmental Petition #333 on April 12, 2012.
The enclosed response addresses Question (c) in your petition, which
recommends:
Includ[e] within the upcoming budget, the provision of collaboration and
technical support for [Property Assessed Payments for Energy Retrofits]
programs, as well as low-interest start-up financing, loan loss reserves
and energy efficiency income tax credits, in recognition of the budgetary
benefits arising from the economic stimulus associated with these programs
(which include increased direct, indirect and induced jobs, and resulting
reduced unemployment expenses and increased income tax revenues).
Budget 2011 announced that the cornerstone of Canada's approach to climate
change and clean air will be a sector-by-sector regulatory system,
consistent with the approach followed in the United States . Moreover,
since 2006, the government has provided significant support for energy
efficiency programs. For example, Budget 2011 provided an additional $400
million in 2011-12 to extend the ecoENERGY Retrofit — Homes program to
allow homeowners to make energy efficiency improvements to their homes
bringing the total amount of funding provided to the program to
approximately $1 billion. More recently, the government has announced $195
million over five years, starting in 2011-12, for ecoENERGY Efficiency
Initiatives to help improve energy efficiency through Canada's building
codes, new housing standards, industrial practices, vehicle labels and
consumer appliances.
The introduction of a federal energy-efficiency tax credit would raise both
policy and administrative concerns. In particular, providing tax
recognition for expenses for energy-efficiency upgrades would be
inconsistent with the treatment of non-taxable assets such as a principal
residence. Neither expenses related to owner-occupied housing nor capital
gains on principal residences are recognized for tax purposes. The symmetry
of this approach preserves neutrality in the tax treatment of principal
residences. In addition, lower utility costs and increased property values
act as incentives for homeowners to undertake energy-efficiency upgrades.
Such a credit would also be complex to administer given that it would be
targeted to a specific subset of home renovations, something which the tax
system is not well-equipped to manage. In addition, it would be difficult
to limit such a credit to individuals participating in the programs as
proposed in your petition. Homeowners undertaking energy-efficiency
upgrades outside the programs would seek expansion of the credit to include
them. The introduction of such a credit would also impose a significant
fiscal cost to the Government of Canada at a time of fiscal constraint. As
a result, any proposal of this nature would have to be carefully reviewed
to ensure it would lead to an effective use of funds.
Furthermore, I note that your petition has also been sent to my colleague,
the Honourable Joe Oliver, Minister of Natural Resources, who is
responsible for energy efficiency policy and programs. I am confident that
Minister Oliver will give careful consideration to your recommendation for
collaboration and technical support for Property Assessed Payments for
Energy Retrofits programs, low interest start-up financing and loan loss
reserves.
The remaining questions (a), (b) and (d) do not fall under the purview of
the Department of Finance. As noted above, the Minister of Natural
Resources is responsible for energy efficiency policy and programs. I am
confident that he will address these questions you have raised in your
petition.
Thank you for writing.
Yours sincerely,
[Original signed by James M. Flaherty, Minister of Finance]
James M. Flaherty
c. Mr. Scott Vaughan, Commissioner of the Environment and Sustainable
Development
The Honourable Joe Oliver, P.C., M.P.
[top of page]
Minister's Response: Natural Resources Canada
14 August 2012
Mr. David McRobert
Legal Consultant
3 Burrows Street
Peterborough, Ontario K9J 0A1
Mr. Peter Love
President
Love Energy Consultants
34 King Street East, Suite 600
Toronto, Ontario M5C 2X8
Ms. Sonja Persram
President, Sustainable Alternatives Consulting Inc.
Author, Three Reports on Property Assessed Payments for Energy Retrofits
121 Ling Road, Suite 407
Scarborough, Ontario M1E 4Y2
Ms. Janet Gasparini
30 Sainte Anne Road
Suite 105
Sudbury, Ontario P3C 5E1
Mr. Bill Johnston
276 Merton Street
Toronto, Ontario M4S 1A9
Dear Petitioners:
Please find enclosed a response to Environmental Petition no. 0333 to the
Commissioner of the Environment and Sustainable Development, pursuant to
section 22 of the Auditor General Act, regarding policies, legislation,
regulation and/or technical guidance relating to the uses of Local
Improvement Charges pursuant to the Auditor General Act to enable their use
for Property Assessed Payments for Energy Retrofits on private properties,
single family dwellings.
I am responding to questions pertaining to our mandate. Your petition was
received by Natural Resources Canada on April 12, 2012, and I understand
that my colleagues, the Honourable Peter Kent, Minister of the Environment;
the Honourable James M. Flaherty, Minister of Finance; and the Honourable
Rona Ambrose, Minister of Public Works and Government Services, will be
responding under separate cover to the questions that fall within their
portfolios.
I trust that you will find this information helpful.
Yours sincerely,
[Original signed by Joe Oliver, Minister of Natural Resources]
The Honourable Joe Oliver, P.C., M.P.
Enclosure: (1)
c.c.: Distribution list
DISTRIBUTION
Mr. Scott Vaughan, Commissioner of the Environment and Sustainable
Development
The Honourable Peter Kent, P.C., M.P., Minister of the Environment
The Honourable James Michael Flaherty, P.C., M.P., Minister of Finance
The Honourable Rona Ambrose, P.C., M.P., Minister of Public Works and
Government Services

Environmental Petition No. 333
Policies, legislation, regulation and/or technical guidance relating to the
uses of Local Improvement Charges pursuant to the Auditor General Act to
enable their use for Property Assessed Payments for Energy Retrofits on
private properties, single family dwellings.
Questions and Answers
What is NRCan's position on:
A. Supporting collaboration with provincial, municipal, non-government,
etc. stakeholders to develop Property Assessed Payments for Energy
Retrofits (PAPER) programs using Local Improvement Charges (LICs) for
energy retrofit financing?
We have carefully reviewed both the petition and the three 2011 PAPER
reports referenced in the petition and commend the proponents on the
considerable effort that has been put into developing the PAPER model. The
reports provide a good analysis of the barriers to residential energy
efficiency retrofits. They also review several Innovative Financial
Mechanism (IFM) options that are available to municipalities and we note
that they propose a specific model, the PAPER model, for adoption by
municipalities that want to use LICs to finance residential energy
efficiency improvements.
Like many stakeholders, including provinces, municipalities and utilities,
Natural Resources Canada (NRCan) is interested in exploring how IFM models
could be used to extend the reach of residential home energy efficiency
retrofits in Canada. IFMs address many barriers to greater investment in
residential energy efficiency, such as providing access to upfront capital
for retrofit measures and the ability to transfer outstanding balances from
energy efficient improvements to a subsequent home buyer at time of sale.
NRCan believes that these models could offer a market-based option to
complement or as an alternative to incentive programs.
NRCan, along with our provincial, territorial, municipal and utility
partners, is currently looking at several IFM models, such as on-bill
utility financing and LICs. Despite the broad interest for these new
models, few have been tested in Canada. NRCan believes several IFM models,
including the PAPER model, are worthy of pilot testing in the marketplace.
Given the diversity of legislative, regulatory and policy frameworks
supporting energy efficiency in different provinces, several models may be
needed to deliver on the full potential of IFM.
Given the potential of IFM, NRCan is already supporting pilots by providing
full access to its EnerGuide Rating System (ERS) infrastructure (including
certified energy advisors, licensed service organizations, energy analysis
software, evaluation procedures and protocols, electronic file submissions
systems, file processing, home labels and home energy upgrade
recommendation reports, technical support, quality assurance), and has
signed data sharing agreements with the proponents to enable them to use
the ERS data files to administer their programs. This support is currently
helping the City of Nelson's EcoSave program, the City of Vancouver's Home
Energy Loan Program and the development of the Pay as You Save on-bill
financing program by BC Ministry of Energy and Mines.
The ERS infrastructure provides partners with the tools and processes for
energy evaluators to rate and label a building's energy use performance,
help homeowners make smart energy retrofit decisions and provide results
based metrics for their energy efficient programs. This is aligned with the
recommendation made in the PAPER report which recognizes the need for
skilled energy evaluators to provide advice on energy efficient
improvements. Taking advantage of the ERS infrastructure also simplifies
and greatly reduces the cost to partners who run an IFM program, since
establishing a new residential energy efficiency rating system would be
very costly and would lead to confusion in the market place when trying to
compare homes. Given the ubiquity of ERS as the national labelling system
for Canadian retrofit programs, using ERS provides a one-stop-shop for
multiple offerings for Canadian homeowners (e.g. by using ERS, the
homeowner could be able to access innovative financing, provincial
incentives, utility incentives, and participate in multi-listing service
voluntary labelling).
NRCan also notes that with over one million ERS labels issued, the
continued use of the ERS as a common energy rating label is very
advantageous for IFM programs, as it provides respected and well understood
standardized information that is needed to scale up retrofits in Canada.
The ERS is supported under the Government of Canada's ecoENERGY Efficiency
initiatives which are providing $195 million through to 2016 to support
energy efficiency in all sectors of the economy.
B. The associated public benefits of PAPER programs?
As mentioned in our answer to question number 1, we believe IFM such as
PAPER can help increase the number of retrofits that will be taking place
in Canada. As such they will help deliver the many benefits associated with
energy efficiency retrofits.
With regard to these benefits, NRCan recognizes that improving energy
efficiency is one of the fastest, greenest and most-cost effective ways to
save energy, increase domestic jobs, increase energy security and reduce
greenhouse gases. Since beginning operations in 1998, NRCan's Office of
Energy Efficiency has a mandate to strengthen and expand Canada's
commitment to energy efficiency, which it has done through cooperation with
many partners, including the provinces and territories and through the
delivery of programs such as the ecoENERGY Retrofit-Homes program. Over the
last five years, this program has helped over 600,000 Canadians increase
the energy efficiency of their homes, generating billions in economic
activity. Participants have reduced their energy consumption and are now
saving more than $400 million annually. In total, NRCan has retrofitted
approximately six percent of the Canadian residential housing stock. IFMs
offer a market-based natural follow-up to this program.
Energy efficiency home retrofits have the additional benefit of increased
property values, reduced exposure to uncertainty regarding rising energy
prices, improved indoor air quality, and improved comfort. Energy upgrades
also create local jobs and benefit the Canadian economy. Thousands of jobs
are created in the home renovation industry and many eligible products such
as insulation, doors, and windows have a high Canadian content.
In addition to the benefits associated with energy efficiency, IFMs offer
the added benefit of addressing two key barriers that limit the number
Canadians that are able to engage in energy efficiency home retrofits. They
do this by providing access to up-front capital for retrofit measures at
low-to-zero net carrying costs and the ability to transfer outstanding
balances to a buyer at time of sale. The various models of IFM also share
the underlying principle that low-risk collection mechanisms – utility
bills and property tax bills – together with longer amortization periods,
enable financing to be offered on terms that allow the savings generated
from energy efficiency and renewable energy investments to cover a
significant part of the financing repayment. These mechanisms are key to
market transformation, helping homeowners move away from reliance on
government subsidies, to a more market-based arrangement, whereby utilities
or municipalities finance retrofits through utility bills or municipal tax
bills.
C. Including within the upcoming budget, the provision of collaboration and
technical support for PAPER programs, as well as low-interest start-up
financing, loan loss reserves and energy efficiency income tax credits, in
recognition of the budgetary benefits arising from the economic stimulus
associated with these programs (which include increased direct, indirect
and induced jobs and resulting reduced unemployment expenses and increased
income tax revenues)?
While the most recent budget did not include new funding to support IFM
programs such as the PAPER program, the Government of Canada announced in
February 2012 that it is investing $195 million in the ecoENERGY Efficiency
initiatives over five years to maintain the Government of Canada's momentum
towards improving energy use in Canada. This investment will ensure that
provincial, territorial and municipal governments, along with utilities,
continue to have access to ERS infrastructure while they pilot IFM models.
NRCan will also continue to play a role as a collaborator and provide
technical support, expertise, information and tools that improve energy
efficiency in the residential housing sector. This is a significant
contribution to IFM and there are no plans, at the present time, for
additional investments that would allow NRCan to offer additional financing
support for IFM pilots or programs.
With regards to your suggestion to include an energy efficiency income tax
credit within the upcoming budget, I understand that my ministerial
colleague from the Ministry of Finance will respond.
D. The use of Mirror Laws for PAPER
We have considered your suggestion regarding the use of mirror laws to
facilitate the introduction of IFM in Canada and have concluded that the
collaborative approach NRCan has taken to advance energy efficiency in the
residential sector remains the best approach moving forward. In addition,
we note that the use of LIC by municipalities to support home retrofit is
typically facilitated by writing enabling legislation into relevant
provincial and municipal government acts and regulations. The authority to
amend these acts and regulations falls within the realm of exclusive
provincial jurisdiction and, as such, makes the mirror law approach
difficult to apply. An example of this is the Halifax Solar City
initiative, described in the petition, where the Halifax Regional
Municipality Charter needed to be amended by the province of Nova Scotia to
enable the use of LICs to provide financing to individual homeowners for
solar improvements.
As is indicated in the PAPER reports, the development of energy efficiency
policies (and programs) often requires the involvement of many levels of
government. Since its creation, in 1998, the Office of Energy Efficiency
has recognized the need to work collaboratively with other jurisdictions.
This collaborative approach is a key element to the success of NRCan's
housing programs, including the ERS and its ecoENERGY Retrofit-Homes
program, which included partnerships with 12 of the 13 provinces and
territories. In the case of ERS, the next generation of the system is being
developed in consultation with provinces, territories and over 150
stakeholders' organizations. The result will be an ERS that continues to
meet the increasing demands of the many stakeholders using ERS for the
housing energy efficiency needs, including those seeking to deliver IFM
programming.
As reflected in your petition and in the PAPER reports, IFM is now
receiving increased attention in Canada and this is reflected in the
discussions, partnerships and exchanges of information that are taking
place between jurisdictions and with other stakeholders such as utilities.
NRCan is committed to be an active participant in these forums. We will
continue to provide technical expertise and to encourage jurisdictions to
create a supportive legislative and regulatory environment to facilitate
the large scale adoption of IFM in Canada.
[top of page]
Minister's Response: Public Works and Government Services Canada
26 July 2012
Ms. Sonja Persram
President, Sustainable Alternatives Consulting Inc.
121 Ling Road, Suite 407
Scarborough, ON M1E 4Y2
Mr. Peter Love
President, Love Energy Consultants
34 King St. East, Suite 600
Toronto ON, M5C 2X8
Ms. Janet Gasparini
191 College Street
Sudbury, ON P3C 4T9
Mr. David McRobert
Legal Consultant
3 Burrows Street
Peterborough, ON K9J 0A1
Mr. Bill Johnston
36 Willowbank Blvd.
Toronto, ON
M4R 1B6
Dear Petitioners:
Thank you for your Environmental Petition No. 333 dated March 1, 2012, on
promoting Property Assessed Payments for Energy Retrofits and related
measures.
The mandate of Public Works and Government Services Canada is to provide
common services for the various departments, agencies and boards of the
Government of Canada. As such, the issues in your petition, which deal with
municipal local improvement charges, do not fall under the purview of
Public Works and Government Services Canada.
I understand that the Honourable Joe Oliver, Minister of Natural Resources,
and the Honourable James Flaherty, Minister of Finance will each be
responding to your petition. Ministers Oliver and Flaherty are responsible
for certain activities which are more directly related to the issues raised
in your petition, and I am confident that they will address the questions
you have raised in their responses to you.
Thank you for your interest in this important matter.
Yours sincerely,
[Original signed by Rona Ambrose, Minister of Public Works and Government
Services]
Rona Ambrose
c.c. Mr. Scott Vaughan, Commissioner of the Environment and Sustainable
Development
The Honourable Joe Oliver, P.C., M.P., Minister of Natural Resources
The Honourable James Michael Flaherty, P.C., M.P., Minister of Finance
The Honourable Peter Kent, P.C., M.P., Minister of the Environment