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Banks, nonprofit back green retrofits for homes, commercial

NORTH BAY – A Santa Rosa nonprofit and a group of local banks are looking to expand a program for financing green remodeling and retrofitting of buildings.

The program, Green Energy Loan, was recently launched by the nonprofit Global Legacy in collaboration with Exchange Bank, First Community Bank, North Coast Bank and Sonoma Bank. It started with residential buildings, sending inspectors to homes to audit the potential energy cost savings from a retrofit. The homeowner then takes out a loan for the project, using the energy savings to make monthly payments.

“An energy-efficiency retrofit is the most cost-effective home improvement project because you start getting your money back in energy savings as soon as you finish the retrofit,” said Chris Cone, coordinator of the Green Energy Loan program.

The program doesn’t change the structure of the home equity loans, but it is aimed at calling attention to the cost savings available from green retrofits, which include plugging air leaks, upgrading heating and cooling systems, improving insulation and installing solar panels.

“The premise is to encourage people to do the remodel,” said Janet Connors, a senior vice president for First Community Bank. “It doesn’t change the underwriting so much.”

Although green retrofits help borrowers save money, they typically do not let them qualify for larger loans, according to Ms. Connors. That is because the loans are based on homes’ appraised values, which do not give much weight to energy efficiency.

However, as the program expands into commercial buildings, banks will be able to take the energy savings into account because the loans are based on both the property’s appraised value and the owner’s income.

“On the commercial side, you will be able to show a higher value and thus get a higher loan,” Ms. Connors said.

The loan program was started by Sonoma County developers Dennis Hunter and Alan Strachan, who founded Global Legacy to help building owners reduce energy use and use more renewable energy. In addition to arranging the energy audits and referring borrowers to the banks, the organization can also provide direct micro-loans to small businesses if the amount of money needed is too small for a bank.

“If it is $5,000 or $10,000 or $8,000 or whatever, then it is too costly for the bank to process the loan compared to what they are going to make on the interest,” Mr. Strachan said. “We will be bringing in some money just to do the smallest loans below the threshold that a bank would do.”

Mr. Hunter is providing seed money for the micro-loans, and the organization is looking for other funding sources, according to Mr. Strachan. Mr. Strachan said the micro-lending model will work because Global Legacy can keep its processing costs lower than a bank’s.

“We don’t have a whole elaborate process of securing” a loan, he said. “You essentially count on peer pressure and the honesty of most folks that if they have money and can pay it back they will do so. We will keep track, of course, but we are also interested in facilitating the process of carbon reduction.”

Forty-seven percent of Sonoma County’s greenhouse gas emissions in 2000 came from electricity and natural gas typically used in buildings, according to the Climate Protection Campaign, the organization leading efforts to set emissions reductions goals for the county.

For more information on the loan program, visit www.greenenergyloan.com.

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