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1.2 Lender Consent

Most commercial mortgages have a Due on Encumbrance clause that gives the mortgage-holder the right to call the loan due if additional debt is placed on the property without the lender’s consent. Given this clause and the complexity of commercial mortgages, a commercial PACE program requires applicants to get the written consent of their existing mortgage-holder(s) in order to apply for financing. An example of a lender consent form used by the Sonoma County Energy Independence Program (SCEIP), along with information on PACE to help lenders become more comfortable with the concept, is available on the SCEIP website3 and in Attachment C. Lender Information and Acknowledgement Form from Sonoma County Energy Independence Program (SCEIP).

1.3 Davis-Bacon and Prevailing Wage

Section 1606 of the Recovery Act specifically requires that all laborers and mechanics performing work on any project “funded directly by or assisted in whole or part by” Recovery Act funds be paid prevailing wages as determined by the Secretary of Labor.4 Consequently, commercial PACE financing programs that use ARRA funds as a credit enhancement5 are subject to Davis-Bacon prevailing wage requirements. Grantees/subgrantees and contractors/subcontractors must (a) ensure that all laborers and mechanics performing work on such projects are paid prevailing wages as determined by the U.S. Department of Labor (see www.wdol.gov/Index.aspx) and (b) comply with all of the reporting requirements of the Davis-Bacon Act.

1.4 National Environmental Policy Act (NEPA)

ARRA funds used for credit enhancement of a financing program— including a debt service reserve fund, interest rate buy-down, or third-party loan insurance—maintain their federal character; therefore, programs that use funds in this manner are subject to federal requirements including the National Environmental Protection Act (NEPA). Many, if not all, of the projects that are eligible for financing under a commercial PACE program should qualify for a categorical exclusion (CX) determination (PART 1021 National Environmental Policy Act Implementation Procedures Subpart D Appendix B5 [Actions to Conserve Energy]). A categorical exclusion applies to projects that DOE has determined do not normally have a significant negative environmental impact and, therefore, are not required to prepare an environmental assessment or environmental impact statement. A complete list of DOE’s CXs can be found in Appendices A and B to Subpart D of DOE’s NEPA Regulations.6 Grantees can complete the State Energy Program (SEP) and Energy Efficiency and Conservation Block Grant (EECBG) Program NEPA Templates7 if a proposed project meets the CX requirements. The Template helps grantees submit streamlined information about proposed projects that will allow DOE to review their potential impacts and expeditiously apply CXs. Program planners should seriously consider restricting eligible efficiency improvement measures to those that qualify for a categorical exclusion. If a program does not limit financing to only those project types that adhere to the Template, DOE is required to conduct a NEPA review for individual projects that would typically include an Environmental Assessment and/or an

3 4 www.sonomacountyenergy.org/lower.php?url=quick-links EECBG Program Notice 10-004A “Guidance on Implementation of the Davis-Bacon Act Prevailing Wage Requirement for Energy Efficiency and Conservation Block Grant Recipients Under the American Recovery and Reinvestment Act of 2009.” Credit enhancement refers to techniques used by debt issuers to raise the credit rating of their offering and thereby lower their interest costs. See Section 4.1 Credit Enhancement for details. http://apps1.eere.energy.gov/state_energy_program/doe_guidelines_nepa.cfm http://www1.eere.energy.gov/wip/nepa_guidance.html 5 6 7


Chapter 13


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