Qualified Energy Conservation Bonds
Qualified Energy Conservation Bond Application
The remaining balance of the State’s portion of Qualified Energy Conversation Bonds volume cap is $4,306,920. It is available for any Utah county, town or city interested in applying for it. The Private Activity Bond Authority Board is accepting applications for review at the December 14, 2016, Board Meeting. Applications must be submitted by 5:00 p.m., on Monday, November 7, 2016. Click here for the 2016 QECB Application (2016 QECB Application – Word) (2016 QECB Application – PDF).
Application submission requirements are as follows:
- Two (2) paper copies (one original and one copy). Applications must be copied one-sided only. Please ensure the binder can adequately hold the application and exhibits with room to turn pages easily. Label the front and side of the binder with the project name.
- One (1) electronic copy of the application only sent by e-mail to Roxanne C. Graham, at firstname.lastname@example.org.
- All copies must be submitted to our office by the specified deadline.
- Appropriate application fee.
- Submit on or before the deadline for the meeting you wish your project to be reviewed by the Board. (Meeting Schedule)
- Please send all copies of the application and the application fee made payable to “Private Activity Bond Authority” to:
Roxanne C. Graham, Director
Private Activity Bond Authority Program
60 East South Temple
Salt Lake City, UT 84111
The Energy Improvement and Extension Act of 2008, part of the Emergency Economic Stabilization Act of 2008 made program provisions for Qualified Energy Conservation Bonds (QECB). The American Recovery and Reinvestment Act (ARRA) of 2009 amended this Act and increased the volume cap for QECBs issued after October 3, 2008, from $800 million to $3.2 billion. Qualified Energy Conservation Bonds (QECB) are a debt instrument that enables qualified state, tribal and local government issuers to borrow money to fund “qualified” energy conservation projects. (It is important to note that QECB are not grants). QECB are among the lowest-cost public financing tools because the U.S. Department of Treasury subsidizes the issuer’s borrowing costs. Like Build America Bonds, QECBs are taxable bonds. This means that investors must pay federal taxes on QECB interest they receive. When QECBs were first allocated, they were issued only as a 70% tax credit to the bondholders from the U.S. Treasury. Theoretically, the advantage of issuing the bonds in this matter is that they would be issued with a 0% interest rate. The borrower only pays back the principal of the bond and the bondholders would receive federal tax credits in lieu of the traditional bond interest. The tax credit could be taken quarterly to offset the tax liability of the bondholders. Due to the current lack of investor appetite for tax credit bonds, issuers may now choose between structuring QECBs as tax credit bonds or as direct subsidy bonds. If issued as direct subsidy bonds, the QECB issuer pays the investors a taxable coupon and receives a cash rebate from the U.S. Treasury to subsidize their net interest payments. Both tax credit and direct payment bonds subsidize borrowing costs. A QECB is a “qualified tax credit bond” if it is part of an issue that meets the requirements of bond proceed expenditures, information reporting, arbitrage, maturity limitations and prohibitions against financial conflicts of interest.
Volume Cap Allocation for Utah
The national $3.2 billion volume cap was allocated to States in proportion to their population with Utah receiving $28,389,000. By law, Utah must allocate a portion of its volume cap to any large local government (city or county with a population of at least 100,000) based on the local government’s population in ratio to the state’s population. Population figures were used from the July 1, 2007, U.S. Census Bureau. Additionally, an Indian Tribal Government is treated as a large local government, regardless of their total population, and will receive an allocation. Total State QECB Volume Cap Received – $28,389,000 2007 Total State Population – 2,668,925
|City or County||Allocation Amount||Percentage of State Population||2007 Population|
|Salt Lake City||$1,908,605||6.7230%||179,433|
|Salt Lake County||$6,392,683*||22.5182%||600,993|
|West Jordan City||$1,089,694||3.8384%||102,445|
|West Valley City||$1,301,676||4.5851%||122,374|
|Indian Tribal Government||$393,660||1.3867%||37,009|
|Total – Large Local Government||$24,540,624||86.4441%|
|State Allocation Amount||$3,848,376|
|Total Volume Cap Amount||$28,389,000|
|State Allocation Amount||$3,848,376|
|Allocation – Utah Co. – 10/7/10
Waived Cap – Provo City – 5/9/12
Allocation – Summit Co. – 04/13/15
Relinquish – Summit Co. – 10/14/15
|– $ 795,000 +$1,253,544
|Remaining Allocation Balance||$4,306,920|
* – Indicates a partial amount of volume cap has been issued. ** – Indicates entire amount of volume cap has been issued.
Use of Volume Cap
States, counties, and large municipalities can use the volume cap themselves for eligible costs or allocate it in any reasonable manner, as they determine, for qualified energy conservation costs. Eligible costs must relate to any qualified energy conservation purpose that is located within, or attributable to, both the jurisdiction of the issuer of the bonds and the jurisdiction of the entity authorized to allocate volume cap. Cities and counties receiving initial volume cap allocations are empowered with the following administrative responsibilities:
- Administer its own Qualified Energy Conservation Bond Program or participate in the state’s program.
- Create a public entity to issue the QECB Bonds.
- Allocate volume cap to any city or town within its jurisdiction.
- Waive any or its entire volume cap received back to the state.
- Track all allocations and reallocations.
- Provide notice of allocations or reallocations made to local eligible issuers to the office of the Private Activity Bond Authority Board.
- Provide notice of issuance and bond closings for all allocations or reallocations to the office of the Private Activity Bond Authority Board.
The following requirements must be met for any issuance of bonds to be classified as a Qualified Energy Conservation Bond:
- One hundred percent (100%) of the available project proceeds must be used for one or more qualified conservation purposes.
- The bond must be issued by a State or Local Government.
- The issuer must designate the bond as a Qualified Energy Conservation Bond.
Waivers of Volume Cap Allocations
Any city or county that receives a volume cap allocation may waive all or any portion of it back to the State. Upon such waiver, the State is authorized to reallocate the waived volume cap in any reasonable manner it determines to eligible entities. As per the Governor’s Executive Order No. 2010-01 (see page 5 of Utah State Bulletin), the Private Activity Bond Authority Board may request waivers of initial allocations from applicable cities or counties that choose not to make their own allocations. The Board will make subsequent allocations from any waived volume cap based on the following guidelines:
- Eligible issuing authorities state-wide may apply.
- All applications are subject to applicable fees as posted on this web site.
- Deadlines for filing applications are posted under “Meeting Schedule.”
- Decisions on submitted applications will be done by the Private Activity Bond Authority Review Board in their regularly scheduled Board Meetings.
Qualified Energy Conservation Bond Overview
A “qualified purpose” for QECBs is any of the following energy conservation initiatives:
- Capital expenditures for: 1) Reducing energy consumption in publicly owned buildings by at least 20%; 2) Implementing green community programs (including the use of loans, grants or other repayment mechanisms to implement such programs); 3) Rural development involving the production of electricity from renewable energy resources; or 4) Any qualified facility (regardless of the date it was placed in service). Also, please note the two paragraphs under this section regarding the percentage splits between governmental and nongovernmental entities usage of QECB volume cap allocation.
- Expenditures with respect to research facilities and research grants to support research in: 1) The development of cellulosic ethanol or other non-fossil fuels; 2) Technologies for the capture and sequestration of carbon dioxide produced through the use of fossil fuels; 3) Increasing the efficiency of existing technologies for producing non-fossil fuels; 4) Automobile battery technologies and other technologies to reduce fossil fuel consumption in transportation; or 5) Technologies to reduce energy use in buildings.
- Mass commuting facilities and related facilities that reduce consumption of energy, including expenditures to reduce pollution from vehicles used for mass commuting.
- Demonstration projects designed to promote the commercialization of: 1) Green building technology; 2) Conversion of agricultural waste for use in the production of fuel; 3) Advanced battery manufacturing technologies; 4) Technologies to reduce peak use of electricity; or 5) Technologies for the capture and sequestration of carbon dioxide emitted from combusting fossil fuels in order to produce electricity.
- Public education campaigns to promote energy efficiency.
Projects that potentially qualify for QECB financing need to consider the following qualifications:
1). Government projects, including capital projects in publicly owned buildings and facilities that reduce energy consumption by at least 20%.
- These governmental projects have been designed by the U.S. Treasury Department to receive a minimum of 70% of the designated allocations to each QECB allocatee.
- In addition to public facilities, the funding of “green community programs” may also qualify for use of QECB financing, as determined by the IRS.
2). Capital projects undertaken by nongovernmental entities and used to finance energy conservation projects on privately owned property.
- These private activity projects have been designated by the U.S. Treasury Department to receive a maximum of 30% of the designated allocations to each QECB allocatee.
- These projects may be owned by either for-profit development companies or by 501(c)(3) not-for-profit corporations.
- The decision to allocate any portion of a QECB allocation for any non-governmental private activity project is subject to the discretion of the respective QECB allocatee.
Davis-Bacon wages need to be met when using QECBS.
A comprehensive overview of the QECB Program is given in the Federal Administrative Rules. An Additional Federal Administration Guidance Notice sent out in 2012, addressed questions regarding qualified conservation purposes eligible for financing with QECB bonds. For questions regarding bond procedures, please contact Roxanne C. Graham, Director, Private Activity Bond Authority Program, (801) 538-8699 (W), (801) 580-3317 (C) or email@example.com. For questions regarding energy conservation project eligibility, please contact Teresa Pinkal, Energy Program Specialist, Utah Office of Energy Development, (801) 538-8662, or firstname.lastname@example.org.