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[Speaker 0]: Couple of years. I'm not here. Okay. So he was here this morning. Right?
[Chris D'Elia, President, Vermont Bankers Association]: He was.
[Speaker 0]: Yeah. Yeah. He was He had a kid issue. He he testified on that. Okay. So we are going on. S 1 we're staying on S 1 38. Have Aaron Fuller. A fur Brent burn burn. Brent? Correct? Correct. Barrett.
[Chris D'Elia, President, Vermont Bankers Association]: Sorry. Perris.
[Speaker 0]: I can read your name. I do it for a while. Okay. Aaron.
[Aaron Farris, Deputy Commissioner of Banking, Vermont Department of Financial Regulation (DFR)]: Alright. For the record, Aaron Farris, Deputy Commissioner for banking at BFR. Happy to answer questions from the bill. I had already testified in Senate and Natural Resource that being some of the concerns that we had with the bill. The main concern at that point was just whether there was language in it that contradicted itself regarding, you know, prepaying of the loan and service their penalty or not. In Vermont, generally consumer financing, there is no prepayment penalty allowed. Commercial transactions, there is. So it's just ultimately policy choice for the committee. And in this language, it looks like they said that that would be okay and that that's fair to vote. We're neutral now. We have no opinion on it, but it does comply with state law or would modify anything
[Speaker 0]: that Okay. Be So it now complies with general law.
[Aaron Farris, Deputy Commissioner of Banking, Vermont Department of Financial Regulation (DFR)]: With any other sort of commercial type financing, yeah. Would be the same terms, you know, whatever interest rate is agreed upon, or are prepayment penalties. Generally speaking, if you're financing a $10,000,000 factory, you don't want it to be paid off three months later, you want to sort of collect that interest for a longer period of time.
[Speaker 0]: Yeah, the interest figures in you. Your rate. At this point, is the way the bill stands, the banking department doesn't have any real concerns with it?
[Aaron Farris, Deputy Commissioner of Banking, Vermont Department of Financial Regulation (DFR)]: I don't have any concerns, they were addressed. Number one, it's separate from the residential program. There are some good consumer protections within the residential program that we don't wanna modify or change. It's purely just for the commercial side. So, yeah, it definitely works for for our perspective. Okay. Jennifer.
[Senator Ruth Hardy (Member)]: Thank you. One thing that we haven't worked out yet in natural resources, which hopefully we will or the bill gets officially sent here, is who the agency is. Mhmm. And I'm wondering if you guys have an opinion on that. Or if you're the right agency to do it or maybe not the right agency.
[Aaron Farris, Deputy Commissioner of Banking, Vermont Department of Financial Regulation (DFR)]: Yeah. I would I would say we're not the right agency. We don't really, you know, administer programs
[Chris D'Elia, President, Vermont Bankers Association]: like that. You're the regulator. Yeah.
[Aaron Farris, Deputy Commissioner of Banking, Vermont Department of Financial Regulation (DFR)]: We have done certain things for limited periods of time that they cope with it, but that's really not our
[Speaker 0]: ability These are thirty year mortgages,
[Senator Ruth Hardy (Member)]: they're not. Well, I mean, what it probably will be is an outside contractor that will administer the loans, but it's a question of which state agency is the contrast with that.
[Aaron Farris, Deputy Commissioner of Banking, Vermont Department of Financial Regulation (DFR)]: Yeah, that is a good question. I don't I don't I believe there was a it's a sufficiency for state agency in that regard. I don't know if they were involved
[Megan Sullivan, Vice President of Government Affairs, Vermont Chamber of Commerce]: They in the
[Senator Ruth Hardy (Member)]: do it for the residential program, but
[Speaker 0]: I think there was a discussion about how they wouldn't necessarily be appropriate for the this one. So Yes. So I figured that with the capital agency.
[Senator Ruth Hardy (Member)]: Yeah. It's just a It was up in the air. We haven't made that decision yet.
[Chris D'Elia, President, Vermont Bankers Association]: Got it. But
[Aaron Farris, Deputy Commissioner of Banking, Vermont Department of Financial Regulation (DFR)]: I don't think DFR would be a good good Okay. Homes are great.
[Speaker 0]: Yeah. If if we if your name comes up, we'll make sure to have you back. Perfect. Yeah. You really haven't regulate, so you don't wanna be administering. I know we had to move the marketing for captive insurance out Yeah. Because you don't wanna be from going and regulating. So
[Aaron Farris, Deputy Commissioner of Banking, Vermont Department of Financial Regulation (DFR)]: I
[Senator Thomas Chittenden (Vice Chair)]: don't know if you have an opinion on this but I curious there's this one passage that I'm just trying to understand where this 90% came from. You don't have it in front of you but the bill right now contemplates that the combined amount of the assessment plus any outstanding mortgage obligations for the property shall not exceed 90% of the assessed value of that property. I'm curious, are there general guidelines for loan to value ratio cast 85 or 65%? I guess the last point I want to make on this question, if there's no mortgage, do you think that there's any concern with somebody doing 90% of the value in the PACE loan? Is that something that should be contemplated in any type of part of capital limitation?
[Aaron Farris, Deputy Commissioner of Banking, Vermont Department of Financial Regulation (DFR)]: Yeah. I guess I I don't I don't know where the 90% came from. I I don't know if it's related to what the residential bill. I haven't looked at it in a long time. If it was in there, and they just sort of copied it over. I think that was part of the reason why there's that contradiction to begin with. But, I mean, generally speaking, we don't want the valuation to be over a 100. I mean, that's just not sound lending practice in general. So the 90, I think, is just to have the owner or borrower have some skin in the game too. I wouldn't know how many commercial properties are not covered by mortgage currently either.
[Chris D'Elia, President, Vermont Bankers Association]: Following
[Senator Thomas Chittenden (Vice Chair)]: up, in Vermont we have different ways to assess commercial properties, There's the income base, what do they call it, versus the market value. Do you think that one way or the other should be used in any of those types of determinations? That's a
[Aaron Farris, Deputy Commissioner of Banking, Vermont Department of Financial Regulation (DFR)]: great question. I'm not really an expert on property tax policy, but generally, yeah, when you're evaluating commercial enterprise, there's multiple ways to
[Chris D'Elia, President, Vermont Bankers Association]: sort of determine what the value of that is. Okay. Next?
[Speaker 0]: I think most municipalities use market value, but we can ask Lee to come talk to us about that. And we've asked them on this one. I haven't they are coming at all or they are coming today? League? Yeah. On this one? I don't think we've asked them. Okay. We'll talk to the league about this one and about yeah. Especially if that's your question. Do do remember having come up here once or twice, but I know the city, at least, when I was there, used.
[Aaron Farris, Deputy Commissioner of Banking, Vermont Department of Financial Regulation (DFR)]: That's what it is for taxation purposes. Yeah. We needed from that. They'd probably be a bucket they didn't want. There
[Speaker 0]: is value in not making income sometimes. Yeah. Okay. Any other questions, Aaron? Thank you. Thank you for bearing with our YouTube schedule.
[Aaron Farris, Deputy Commissioner of Banking, Vermont Department of Financial Regulation (DFR)]: You're welcome. Thanks for
[Speaker 0]: having me. I think we will start putting that disclaimer at the bottom.
[Aaron Farris, Deputy Commissioner of Banking, Vermont Department of Financial Regulation (DFR)]: If you're tuning in.
[Speaker 0]: If you're tuning in because we may be running over or under. It's it's a guesstimate. Okay. Megan Sullivan. Chamber.
[Megan Sullivan, Vice President of Government Affairs, Vermont Chamber of Commerce]: Good afternoon, committee. Madam Chair, thank you for having me. For the record, Megan Sullivan, vice president of government affairs for the Vermont Chamber of Commerce. Appreciate the opportunity to testify on s one thirty eight that would authorize commercial property assessed clean energy program in Vermont, and I'm here to testify generally in favor of this legislation. We think it is timely given the recent changes in federal funding. For many years, efficiency programs, clean energy program, incentives helped commercial property owners offset the cost of upgrades. Many of those incentives have been phased down or expired at the 2025, meaning fewer tools available to support investing in energy efficiency, renewable energy, and resiliency. As those federal resources become less available, state enabled financing mechanisms that leverage private capital become increasingly important. We see CPASE as being such a tool. It provides a voluntary market based way for commercial property owners to finance energy efficiency and renewable energy, water conservation, and resiliency improvements over time through property assessments, and because repayment terms can be aligned with the useful life of the improvements, C PACE can offer help offer way for projects to move forward that otherwise might stall due to upfront costs or financing constraints. The experience from other states demonstrates how this is being used in practice and why it matters for business, and I think it's important to note that we are able to look at how other states are doing this. We're not inventing a new wheel here. We're able to see what what's happening in other places. So what what I found is that there are that are using this in a variety of ways. We've seen small commercial properties that have been able to use CPASE to reduce operating costs in a town called Good Thunder, Minnesota. I'm sure I've written sort of it. There's an example of a thrift store that used CPASE financing to install LED lighting, generating meaningful annual energy savings and a strong return over time, a gas station in the same state finance lighting and HVAC upgrades, and projected significant long term cost reductions. This illustrates how a small business everyday business can improve efficiency without large upfront capital expenditures. Larger commercial and mixed use developments have also benefited. In Colorado, the statewide C PACE program has supported more than 120 projects across dozens of communities, leveraging $250,000,000 in private capital for energy efficiency and clean energy improvements. These investments have supported job creation and strengthened local commercial property markets. C PACE has also supported major redevelopment and community serving projects in Omaha, Nebraska, a $2.00 $5,000,000 mixed use downtown redevelopment project incorporated nearly $25,000,000 in C PACE financing for energy upgrades. In Chattanooga, Tennessee, a historic theater renovation relied on C PACE financing to support both preservation and sustainability improvements, and in Connecticut, C PACE helped finance the transformation of a former office building into Hotel Marcel, which is now recognized as one of the nation's first net zero hotels. Institutional and non profit properties have used C PACE as well, so YMCA in Connecticut installed a combined heat and power system and lighting upgrades using C PACE financing, generating positive cash flow in the first year of operation, and medical office buildings and other complex properties have similarly used the program to address energy improvements and financing challenges. I think these examples show how CFace is flexible, widely applicable, and capable of supporting both modest upgrades and large scale investments. They also demonstrate how private capital can be mobilized to reduce operating costs, improve building performance, and support economic activity. I want to acknowledge the practical considerations that you all have to consider in program design, particularly in the lender participation. I think earlier versions of the legislation, there were concerns raised about lean priority and interaction between CPACE assessment and existing commercial mortgages, and the current version of S-one 138 reflects meaningful progress in addressing those concerns. I think it's also worth highlighting the role of third party participants in the current draft. CPA's financing under S-one 138 is provided by private third party capital providers, not by the state or municipalities. The bill requires independent third party technical analysis before a project can proceed, adding an important layer of vigor and due diligence, and existing mortgage holders are brought directly into the process through the lender consent requirement. Together, these provisions reinforce market discipline, limit public exposure, and ensure the program operates with established financing norms. In conclusion, S 138 offers Vermont a practical, voluntary, market driven tool to support energy efficiency, renewable energy, and resiliency investments at a time when federal incentives are less available. The program can help reduce costs for businesses, increase property values, and attract private investment, and create jobs. It supports sustainable economic growth and community resilience. The success of CCPACE programs in other states demonstrates that these outcomes are achievable, and Vermont is well positioned to implement a program tailored to its own economic and policy priorities.
[Speaker 0]: Okay. Let's find out what agency administers these in other states. Maybe that
[Senator Ruth Hardy (Member)]: Yeah. I think it's variable. But, yeah, I I know this is a question we have to resolve in natural resources before we send it along.
[Megan Sullivan, Vice President of Government Affairs, Vermont Chamber of Commerce]: K. Or not. I know Efficiency Vermont does a lot of work in the commercial industrial space,
[Speaker 0]: so I don't know
[Megan Sullivan, Vice President of Government Affairs, Vermont Chamber of Commerce]: if they've said they're not right. I see pigs or
[Senator Ruth Hardy (Member)]: I don't know if it was that. I don't know. Yeah. But they I'm not sure if they came in and testified.
[Speaker 0]: I mean, I'm thinking, you know, talking about changing out your light bulbs, that was one of the first things efficiency Vermont did.
[Megan Sullivan, Vice President of Government Affairs, Vermont Chamber of Commerce]: They're doing way complex projects, commercial and industrial complex. And I think it's worth noting that this is also, when we talk about commercial property, that includes apartment buildings, right? So, the affordable housing projects that we're doing use residential PACE, they would use, and
[Senator Ruth Hardy (Member)]: they also use C PACE. One of the things that I asked, I think it's clear in here is that also could include nonprofit organizations
[Chris D'Elia, President, Vermont Bankers Association]: too.
[Senator Ruth Hardy (Member)]: Yeah. We're doing an upgrade with some of
[Speaker 0]: those projects. Yeah. So some of those are housing subjects. Yes.
[Senator Ruth Hardy (Member)]: But I mean, but the example I used is there's a nonprofit in my community that's done a significant amount of energy upgrades that they could have potentially used this project.
[Speaker 0]: Other questions to provide? K. Thank you. You got off easy. Great. Okay. You're coming I kinda just Thanks. With high expectations.
[Chris D'Elia, President, Vermont Bankers Association]: Which way do we wanna go, mister?
[Megan Sullivan, Vice President of Government Affairs, Vermont Chamber of Commerce]: You are
[Speaker 0]: going to help us understand this.
[Chris D'Elia, President, Vermont Bankers Association]: Okay. I think I can do that. For the record, Christina, President of Vermont Bankers Association, thank you for the opportunity to come in and testify on CPACE. Roughly So, 38 other states have CPASE statutes, which I think you've got in the background. It's an opportunity for a municipality to create a district. You're using the taxing authority of the municipality for the collection of the payments on the note. It runs with the property. It could be upwards of thirty years, or at least the life of the improvements that have been made. And I don't know the extent of its use in other states, but I've heard witnesses who have testified that they manage these programs in a few other and this worked out well. From our perspective, when we first learned of this, we were one contrasting it with what we had done quite a few years ago with a residential PACE program, because I think you and I sat across from the table
[Speaker 0]: on that as well. Remember doing it. I
[Chris D'Elia, President, Vermont Bankers Association]: was channeling Tom Candid when I was thinking That's about right. And if you have questions on residential PACE, can share a perspective on that. But what was most important in looking at this, and I had a conversation with Senator Chittenden about this early on, was a commercial PACE loan is quite a bit different than a residential PACE loan. And when you look at the scale of what might occur, we're not talking about 15 or $20,000 in front of a mortgage. We're talking about what could be several $100,000 or more on a commercial property that already has a loan on it for a million, 2,000,000, 3,000,000, whatever the amount is. And for us and Grant, a number of those commercial loans have a partnership with Vita. So we have a portion of the loan, VIDA has a portion of the loan, we take a priority position and then VIDA is in a second position behind us. The commercial piece, because it's treated like property taxes, would be in a priority position in front of the commercial lenders. And in researching what the other states have done and what you now see in 01/1938, or will see in 01/1938 from the Natural Resources Committee is a lender consent. So how does that play out? Ann Cummings owns a commercial property, she owns Bar Hill over here. She's doing quite but she's got, you know, dollars 1,500,000.0 loan on the property. And she would like to avail herself to a commercial pace because Montpelier had set up a district. And she's looking for a couple of $100,000 to go ahead and invest in energy efficiency measures. The lender consent is, in my opinion, designed to do things. One, quite frankly, it's designed to protect the commercial lenders' interest because they're out there for a million 5. And to have 200,000 gentlemen in front of them is not gonna happen, quite candidly. My bankers have told me that if lender consent were not in the bill, they would not make a commercial loan in a commercial piece. It would be too risky. Then you got
[Speaker 0]: probably would do most of the municipality. I can't see Montpelier saying, well, Barry Street's gonna be our Yeah. It'll be downtown.
[Chris D'Elia, President, Vermont Bankers Association]: Yeah. I think in general terms, I mean, the way we did it with the residential was the whole, there was a particular district that encompass numerous properties.
[Speaker 0]: Yeah.
[Chris D'Elia, President, Vermont Bankers Association]: And then the party that was obligated was the one that took out the residential base loan. That's if the municipality wasn't the lender. Here, you've got other entities that are putting up money to be the lenders, so there's a little risk in the municipality. So what you have here is lender consent. It started with lender notification, that for us did not go far enough. Lender consent is where Ann Cummings comes to her lender, the lender looks at it and says, Ann, you know, we see the full depth and breadth of what you've got here and we can't agree to a commercial PACE loan because it's putting too much risk on our loan that we've made to you. However, I can see where Ann comes in and Ann owes $50,000 on a loan or something less. And when you look at the risks associated with that, the risks are less and therefore doing the commercial PACE loan because they want to invest $200,000 we could get to that point where absolutely, yeah, that makes sense. And we could just as easily do that for you. Now, may not be at the term that you're gonna get with PACE or the interest rate, we'll have that conversation. But what it does is it really protects, quite frankly, the lender's interest in that commercial loan by having the lender consent. And that was what we appreciated in the work that's going on in Natural Resources and what I believe 38 other states do.
[Speaker 0]: So the way this would work, if I went for PACE loan, so I'm understanding it, The vision is that that PACE loan would come from a third party, not where I've got my mortgage, but because that's all they do, I would theoretically maybe get a better rate or something. So
[Aaron Farris, Deputy Commissioner of Banking, Vermont Department of Financial Regulation (DFR)]: but
[Speaker 0]: that's another low, yeah, where I know you don't you are prime. You don't want anything else ahead of you. So you can say, no, you owe us 1,000,000. You can't take out another half 1,000,000 to finance Correct. Putting on a better roof with more insulation and solar panels and whatever. But you might say, alright. You know, we're looking at your income and gym sales are up, so we would be okay with $100,000 loan from a third party.
[Chris D'Elia, President, Vermont Bankers Association]: Each one is gonna be looked at on an individual basis of the individual circumstances for each borrower, but you put a lot into your statement. Number one, representative Hardy was very astute in pointing out the potential risks for municipalities. If this isn't done correctly for them, you're using the taxing authority, if you will, or repaying the loan over a period of time. That can work very well. If it's delinquent, it's only delinquent for that small amount, not for And the full it spreads out the costs over a longer period of time than what you would typically see in a commercial note, which could be seven, ten, fifteen years. So the payment amount's gonna be smaller and that can also have an impact on your borrowing costs, your interest rate. What the way this bill goes, and I think rightly so, because of the risk in the municipality is this bill contemplates a third party who is going to administer the program, whether it's one of these outside companies or whether it's Vito or whoever decides to step up to the plate, they're the ones that are gonna design the parameters around the program, they're gonna create that booklet that's gonna inform everybody about it, And they're the ones that are ultimately putting their money up, not the municipality.
[Speaker 0]: I was gonna say, what is the risk to the municipality?
[Chris D'Elia, President, Vermont Bankers Association]: If you use a third party funder, there's really, I see little, if any, risk.
[Speaker 0]: Okay.
[Chris D'Elia, President, Vermont Bankers Association]: If the municipality were to bond and They borrow
[Speaker 0]: took out debt and then They're the ones. On the hook. Okay. Not
[Chris D'Elia, President, Vermont Bankers Association]: you could intended to mean that the recipient is the one on the hook, ultimately, if that PACE recipient playing, your investors are gonna wanna get paid. Yeah. They're gonna look to you to exercise your taxing authority, and that's a much
[Aaron Farris, Deputy Commissioner of Banking, Vermont Department of Financial Regulation (DFR)]: bigger risk.
[Chris D'Elia, President, Vermont Bankers Association]: Yeah, that's
[Senator Ruth Hardy (Member)]: what I would, I founded over and over and over again in in natural resources was I didn't want this to be a risk to municipalities. People didn't want it to raise taxes or or add
[Speaker 0]: to their bond Right. Yeah.
[Senator Ruth Hardy (Member)]: Obligation or anything. The way it's structured now, the only thing the municipality has to do is my understanding is register the lien and the property records.
[Speaker 0]: Right. Right. Okay. And we can do that
[Chris D'Elia, President, Vermont Bankers Association]: We can do
[Speaker 0]: for the
[Senator Thomas Chittenden (Vice Chair)]: For a lot of
[Speaker 0]: sewer assessments or, I mean, his special
[Chris D'Elia, President, Vermont Bankers Association]: assessments go on. You're also with this, the way it's contemplated in the bill, when you're relying on a third party, I think your opportunity for more municipalities to consider this probably increases because they don't have to come up with the resources to build the structure within that community, you're now relying on that third party to do it all. And we know our municipalities, a lot of them just don't have the capacity to do what they're doing today, let alone set up a commercial peace program. So that third party entity out here plays a really key role for doing all of the legwork for that municipality and then making it available within their community.
[Speaker 0]: So what if I go belly up and I still owe third party 100,000 and I still owe you a half 1,000,000?
[Chris D'Elia, President, Vermont Bankers Association]: So that's where we have the problem and why lender consents again is important. You look at the order of priority and that's who gets PACE first. If you a $500,000 loan and you got a $200,000 PACE loan and the project goes belly up and you're gonna move to a tax sale, excuse me, the municipality is gonna be in the first position to collect that $200,000 Then whatever is left will go to the financial institution. And if there's anything left, which probably there won't be, Vida would be if Vida's involved, Vida would be would
[Speaker 0]: be So but that because it's collected, it's a lien. A municipal
[Chris D'Elia, President, Vermont Bankers Association]: I'm sorry.
[Speaker 0]: It gets to backtrack. You're correct.
[Chris D'Elia, President, Vermont Bankers Association]: Yeah. I know where you're going.
[Speaker 0]: It's getting collected like property taxes.
[Chris D'Elia, President, Vermont Bankers Association]: But it's not for the full amount. I'm sorry. I'm running too quickly. What is delinquent is the amount for that particular year So or two it's not, I'm sorry, it's not the full $200,000 it's whatever that twelve month
[Speaker 0]: Okay. So it's ten
[Chris D'Elia, President, Vermont Bankers Association]: Twelve months
[Speaker 0]: working. 10,000 that are delinquent. Right. Right. And it goes to tax sale. Yep. There's still a 150,000 owed.
[Chris D'Elia, President, Vermont Bankers Association]: That stays with the property?
[Speaker 0]: The property. So whoever buys the property is buying the obligation to pay off that loan, and you and Vida get the cash.
[Chris D'Elia, President, Vermont Bankers Association]: Whatever, whatever After left after you liquidate assets, buildings, whatever you used as collateral for that loan. However, I will also add that the experience with new owners coming in is often they don't wanna see any existing liens on the property. So that might be another issue that you grapple with at the time that is sold. I might buy your commercial enterprise, but I'm not buying it with a $150,000 lien on it.
[Speaker 0]: Even though you're getting all the solar panels on the roof, which I'm sure
[Chris D'Elia, President, Vermont Bankers Association]: is the If you're
[Speaker 0]: finding it well, yes. Even if someone owner hasn't stripped them and sold them, which is also been known to happen at least in residential properties. I don't
[Chris D'Elia, President, Vermont Bankers Association]: I don't recall the third party entities and testimony talking about whether they ever reclaimed the assets or not.
[Speaker 0]: I don't think they knew. Okay. So we
[Chris D'Elia, President, Vermont Bankers Association]: will with the property.
[Speaker 0]: Yeah. The assets stay Yeah. The assets do. I know. Yeah. At least in residential properties, they go bankrupt. Some former owners Yeah.
[Senator Ruth Hardy (Member)]: The property everything. They're kind of really small that they be sold. They testify on the default rate and
[Speaker 0]: it was really small. Minimal. Yeah.
[Chris D'Elia, President, Vermont Bankers Association]: Because you've got that extended taxing Yeah, I appreciate it. Because it's treated like a property tax lien and you're going against from, you know, fifteen years to a thirty year payment, it's really spread out. So I agree, they did talk their delinquencies were quite minimal. Yeah. So ultimately at the end of the day, unless it's changed, what I think is going to pass out of natural resources is a bill that we can certainly live with because it's got that protection in there with lender consent. And I think it also protects the municipalities from taking out unnecessary obligations.
[Senator Ruth Hardy (Member)]: We've tried really hard to untangle this.
[Aaron Farris, Deputy Commissioner of Banking, Vermont Department of Financial Regulation (DFR)]: But if I understood what you said earlier in your testimony, you thought that relatively few lenders would agree.
[Chris D'Elia, President, Vermont Bankers Association]: The consent piece, if relatively few would agree, depending on the circumstances of that borrower and the risks are too high that they would not get repaid in the event something were to go wrong with that commercial loan. So again, if I've got a large sum of money that's outstanding on that loan, I doubt very much that a lender is gonna consent. But then you could have numerous commercial properties that maybe don't have any debt that could avail themselves of something like this. It just depends on the individual's service.
[Speaker 0]: Yes. I mean, a lot of our downtowns, you know, move on to save people for quite a while. Couldn't put an elevator after the back.
[Chris D'Elia, President, Vermont Bankers Association]: I don't deal with that. Don't deal with that. Call call. Yes. Here's our.
[Senator Thomas Chittenden (Vice Chair)]: Great testimony. So when your two examples, the first one where somebody was over leveraged on the property and then second one where they have a little bit left, maybe they've owned the property for twenty, thirty years. Right. That's where I think see me if you agree with this, could be advantageous because if they don't have long term, interests in the property, but they do see the value of these clean energy improvement Yes. Pace as a way for them to to do that improvement, but not necessarily have to recoup that on their shorter term horizon when they have to sell the property because they transfer that naturally over with the property. So that's where the lines long term benefits with short term interest. Yep. Do think that's a fair way
[Chris D'Elia, President, Vermont Bankers Association]: I to think that's very fair. Do you agree?
[Senator Thomas Chittenden (Vice Chair)]: Yes. Second question, so I don't know if you have the answer to this. You were in the room earlier. I've already asked it twice. It's not a big deal. It's not a sticking point. I'm just trying to understand where this came from. It's on page six and I'll read it. It's lines eight, nine and ten. It just says the combined amount of the assessment, the PACE assessment plus any outstanding mortgage obligations for the property shall not exceed 90% of the assessed value of this property. Know where that 90% came from? It just seems a little high. The the loan to value ratios for this That's from the residential bill, by the way. Is it in
[Chris D'Elia, President, Vermont Bankers Association]: the My guess is it is a little area from the residential. For commercial project, 90% is not gonna Too high? It's too high. Yeah.
[Speaker 0]: Okay. See if you can find us a better number.
[Aaron Farris, Deputy Commissioner of Banking, Vermont Department of Financial Regulation (DFR)]: But the language doesn't require a thing to end up with that.
[Speaker 0]: No, that's just the case.
[Chris D'Elia, President, Vermont Bankers Association]: I mean, again, I think that gets back to the consent. We're not gonna allow that borrower to be over leveraged. Yeah. Right. And that's a guideline that the PACE administrators would have to look at.
[Senator Thomas Chittenden (Vice Chair)]: Contemplated scenario, so this is assuming there's a mortgage, but imagine if this was an asset that was owned fully outright, do you still think that would be a different threshold or would any type of bank, this third party, would you have pause or concern if 90% of the asset was leveraged into a PACE loan absent another mortgage? Again, not a sticking point. I'm just trying to understand this number and where
[Chris D'Elia, President, Vermont Bankers Association]: it might happen. I I would be could it be too high? Sure. You know, but but in commercial loans, like when we do them with Vita in partnership, we're asking the borrower to put 10% of their skin in the game so you could arrive at a 90% loan to value. But the question that I'd ask is, what value are you looking at? Because assessed value is very different than actual value in the marketplace. Yep. Look at what you do with property tax bills. My assessed value up until our town reassessed was $230,000 on my house, which is probably in today's market, a $500,000 house only because of the way the market's gone. My new assessed value was probably gonna come in at $4.04 50. So are you looking at $2.25 or are you looking at 500,000? That's the bigger question on value.
[Senator Thomas Chittenden (Vice Chair)]: Lastly, on that same piece, there, my understanding of my city council base is that for commercial properties, can assess two different ways, income based or market value. Yeah. So I don't know if this language necessarily speaks to that and how I don't think
[Aaron Farris, Deputy Commissioner of Banking, Vermont Department of Financial Regulation (DFR)]: that is addressed. I don't think that is
[Speaker 0]: I think you're looking at income. Right?
[Chris D'Elia, President, Vermont Bankers Association]: We're we're looking at the ability of the borrower to repay the loan. Yes.
[Speaker 0]: Yeah. And market value only comes in if they can't repay the they go default, you're gonna get your money Right.
[Chris D'Elia, President, Vermont Bankers Association]: I mean, the market value on machinery and equipment is different than it's gonna be on real estate, etcetera, etcetera. So, you know, looking at market value, would think gives a borrower an opportunity to borrow more because of the market value that's out there versus the assessed value, which is going to be, I would think, in most accounts lower than the market value. So it speak to the benefit of the borrowers under pace, I think, to look at market values. I just think of it
[Aaron Farris, Deputy Commissioner of Banking, Vermont Department of Financial Regulation (DFR)]: as you're you're leveraging the purchase of a depreciating asset with a a depreciating asset, being the property.
[Speaker 0]: Oh.
[Aaron Farris, Deputy Commissioner of Banking, Vermont Department of Financial Regulation (DFR)]: Yeah. That's what I think of it as. Interesting. Yeah.
[Senator Thomas Chittenden (Vice Chair)]: Alright. I'm just interested in maybe a lower percentage against market value. Seems to make sense to me. 90% of assessed value. Less.
[Chris D'Elia, President, Vermont Bankers Association]: Yeah, that's right.
[Speaker 0]: The bank is gonna make that.
[Senator Thomas Chittenden (Vice Chair)]: Yeah, with the lender consent.
[Senator Ruth Hardy (Member)]: The lender's gonna look at
[Speaker 0]: present market value and present. Absolutely.
[Chris D'Elia, President, Vermont Bankers Association]: Because we have no objections with the concept of the energy efficiency improvements. That's great, and great that they can reap the benefits as long as it's not putting at risk what we burden the lent to the borrowing.
[Speaker 0]: Okay, any other questions for Chris? This now is clear.
[Chris D'Elia, President, Vermont Bankers Association]: Thank you. You. Appreciate it.
[Speaker 0]: Thank
[Megan Sullivan, Vice President of Government Affairs, Vermont Chamber of Commerce]: you. Appreciate that. Okay.
[Speaker 0]: And since we don't have a chance of any of these other news, there was a time where we didn't post time. So maybe we'll go back to that. Okay. What what I've had is not So, we are going on to page six forty nine. This is captive insurance. I missed this. I got stuck in the pro tems. So I haven't even heard of the walk through. I don't know if you're ready to promote it. I would like to get like a section by section if we could get that so that everybody's going to kind of go through it and think about it. It this one Aptive insurance always takes a while to get your head around. But
[Senator Thomas Chittenden (Vice Chair)]: Oh, you know the rear way out right now? It's came from the house. They probably already have a section
[Speaker 0]: by section. I'm sure Maria is very good about doing sections. So we're not gonna talk about that today? Yeah. Okay. So that would be my preference. I've asked Senator Chittenden if he's looking to present it. Since I wasn't here for the presentation, I have always done once Ruth did it, I wasn't here.
[Senator Thomas Chittenden (Vice Chair)]: Happy to.
[Speaker 0]: Press me side by side. It's right. You can it.
[Senator Ruth Hardy (Member)]: You can have it.
[Speaker 0]: Now we know why the chair always presents this by default. Okay. +1 38. Who would we like to hear from on that one? You can't load it out till we get it, but we can be well reached. Sounds like who who's willing to take this on probably with nobody's patch is a
[Senator Ruth Hardy (Member)]: big question, and we'll see what The agency. Yeah. I think we still have to figure that out.
[Megan Sullivan, Vice President of Government Affairs, Vermont Chamber of Commerce]: I mean, we heard from
[Senator Ruth Hardy (Member)]: I'm trying to figure out who was the most help.
[Megan Sullivan, Vice President of Government Affairs, Vermont Chamber of Commerce]: I mean, Chris was very helpful.
[Senator Ruth Hardy (Member)]: Yeah. We heard from the was it New Hampshire that does the C PACE program? We heard from another state that does this. Yeah, they do. That national firm, like, I'm just imagining.
[Chris D'Elia, President, Vermont Bankers Association]: You guys said that.
[Senator Ruth Hardy (Member)]: Okay, there was Is a
[Speaker 0]: a national firm that does these loans?
[Senator Ruth Hardy (Member)]: There is a national firm, yes, that invests in CPACE loans or provides C PACE loans through other states. And he sort of gave a national perspective on it. And residential versus commercial, his firm only does commercial. We should get His name is listed in Is it Kurt Hallum
[Chris D'Elia, President, Vermont Bankers Association]: from
[Speaker 0]: Points? Maybe. Let's see. Mean problem,
[Chris D'Elia, President, Vermont Bankers Association]: though. Yeah.
[Megan Sullivan, Vice President of Government Affairs, Vermont Chamber of Commerce]: Yeah. He had a I mean,
[Senator Ruth Hardy (Member)]: he did a good job of sort of explaining the national landscape on these things. They seem to be Happy hear. Much more stable and better than the residential programs.
[Speaker 0]: I haven't a process question yet.
[Megan Sullivan, Vice President of Government Affairs, Vermont Chamber of Commerce]: You guys haven't voted on it yet, right?
[Speaker 0]: No. So I'm just wondering why are we doing it when it's still over there and they're still working on it? So we're prepared for when it does When it comes. Got subtle assuming from the house.
[Chris D'Elia, President, Vermont Bankers Association]: It took us a little while to get our head around it.
[Megan Sullivan, Vice President of Government Affairs, Vermont Chamber of Commerce]: Yeah. Hopefully we make it. I mean,
[Senator Ruth Hardy (Member)]: it was like Scott said like four times before
[Speaker 0]: I
[Senator Ruth Hardy (Member)]: was like, oh, that's how it works.
[Speaker 0]: It's not controversial. So far it doesn't seem
[Chris D'Elia, President, Vermont Bankers Association]: to My
[Senator Thomas Chittenden (Vice Chair)]: thought process, if you remember how the schedule's about to go, there's crossover deadline for all the policy committees and then we get the next week with finance. What I remember, you know this better than I, that we post crossover floor sessions go really long, so we basically lose Wednesday and Thursday to testimony and we still have, so we have later fights that week, so this was a way to try to
[Speaker 0]: get
[Senator Thomas Chittenden (Vice Chair)]: some
[Speaker 0]: So Scott, was super funky. Thank you. Everyone remember to make that up? And if they there's gonna be some school bills moving. I don't know if they're gonna have financing in them. Yeah. But I know we don't make our best decisions at 10:30 or midnight, so I'd like to be able to clear the ones that aren't controversial and are, thank you, I'm almost curious, they're out. This is a fairly slow year and I just keep saying something Ed Finance will show up eventually and, you know, there will be some really heavy things at some point we're gonna have to deal with. The other thing on the agenda today is the SALT bill, and, Sandra Hardy, you found something we missed?
[Megan Sullivan, Vice President of Government Affairs, Vermont Chamber of Commerce]: Yeah, so there
[Senator Ruth Hardy (Member)]: is an amendment. It's posted under now Mike O'Grady's name,
[Speaker 0]: And It needs to be under your name, I think, on me, right now on behalf of the committee.
[Megan Sullivan, Vice President of Government Affairs, Vermont Chamber of Commerce]: Well, right now, the two people who
[Senator Ruth Hardy (Member)]: are on the amendment are Senator Watson and me. Okay. Because there's a section that is was not part of our work in here that Senator Watson found something that needed clarifying, and that is about the timeline for covering salt sheds and just Okay. Clarifying that and the report that's coming back from the agency of transportation on salt sheds. The second part is the report that's coming back to us on the fees. And it was since when I heard that Senator Watson was doing an amendment, I asked if we could also add in this and it just clarifies, as I said on the floor this morning, that it would be a report on both the commercial applicator fee and a potential municipal fee. And due May not be the same. Yeah, they'd probably be different and didn't want it to be I just wanted to make sure it was clear that Okay. They needed to report on both. So that's all it is. And just wanted to make sure you guys were in the loop.
[Speaker 0]: Is that still? It is under here.
[Senator Ruth Hardy (Member)]: It is I mean, I guess we Yeah. I've got it
[Chris D'Elia, President, Vermont Bankers Association]: No part. Are you looking for
[Senator Thomas Chittenden (Vice Chair)]: more deals on it or just want us to be
[Senator Ruth Hardy (Member)]: on mean, if you wanna be on it, you certainly can be on it. I mostly just didn't want anybody to stand up and be like, hey. The finance community didn't hear about this. We you know? I I it's a I don't know. It's a pretty minor amendment, but I so if you wanna be on it, you can. If you don't wanna be on it, that's totally fine. I just wanna be able
[Speaker 0]: to say the finance committee was okay with it. Well, I think we usually can either go to approve if it's brought to us, but you have yeah. Because you can do committee amendments, and then they said we couldn't do committee amendments. It had to be you, but you could do it on behalf of the committee. Okay. I'm trying to find the wording. For some reason it says, I've got something under your name.
[Senator Ruth Hardy (Member)]: I think if you refresh, it will come up as under Michael's name.
[Speaker 0]: It came up under your name, and then it told me I was trying to oh, no. Alex under Michael O'Grady. Yeah.
[Senator Ruth Hardy (Member)]: Alright. So it's just two sections. Yeah. And it's just clarifying both reports, basically, I think. Is that a motion? I would make a motion that the committee approve the amendment as drafted.
[Speaker 0]: Okay. And to to it. Oh, we don't have a clerk?
[Chris D'Elia, President, Vermont Bankers Association]: Are we recording
[Senator Thomas Chittenden (Vice Chair)]: it or
[Speaker 0]: is No, this a straw we'll record. Okay. It's above it. You're it. Look at you. You already stopped.
[Megan Sullivan, Vice President of Government Affairs, Vermont Chamber of Commerce]: You know what you're doing?
[Speaker 0]: You've highlighted it right. Senator Hardy's vote that we approve draft number 2.1 of S218 dated 02/1726 at 10:59AM. Bye, Michael. Alright? Is there any further discussion? If not, the clerk will call the vote.
[Senator Thomas Chittenden (Vice Chair)]: Senator Beck? Yes. Senator Brock? Yes. Senator Mattos? Alright. How did you do that? Senator Hardy?
[Senator Ruth Hardy (Member)]: Yes.
[Senator Thomas Chittenden (Vice Chair)]: Senator Chittenden?
[Senator Thomas Chittenden (Vice Chair)]: Yes. Senator Humphrey?
[Speaker 0]: Yes. Now do I have to
[Megan Sullivan, Vice President of Government Affairs, Vermont Chamber of Commerce]: bring this up? I'll just work.
[Speaker 0]: Yeah. Think you need to bring it up. I told them we had something because I Okay. Didn't know if we were gonna vote out captive insurance.
[Senator Ruth Hardy (Member)]: Would you mind printing it for the insurance?
[Speaker 0]: Thank you. And we will I wouldn't be surprised to have them come down with it, but I'm so glad to get to bring this bill up again tomorrow on the floor. I know.
[Megan Sullivan, Vice President of Government Affairs, Vermont Chamber of Commerce]: That was so fun today. It'd be exciting.
[Senator Thomas Chittenden (Vice Chair)]: This this was just favorable, not favorable with amendment because we already passed it out, so
[Chris D'Elia, President, Vermont Bankers Association]: it's just
[Senator Thomas Chittenden (Vice Chair)]: favorable on the amendment.
[Megan Sullivan, Vice President of Government Affairs, Vermont Chamber of Commerce]: Yeah. I think so. Yeah. Yeah.
[Speaker 0]: We just passed this amendment favorable. The clerk will figure it out. And if we don't, it's senator Hardy's motion with all of the rest of it.
[Senator Ruth Hardy (Member)]: Yeah, and I think Senator Watson is gonna do it on the floor and I'll
[Speaker 0]: just stand up and say financial debt. It's moved unanimously with Okay. One Cool, thank you all. Thank you all. And that is it.