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Financing method to cut energy waste expands statewide

Thomas Content

Milwaukee Journal Sentinel

A relatively new form of financing that has helped bring down the cost of cutting energy waste in Milwaukee buildings is going statewide.

Wisconsin Energy Conservation Corp., based in Madison, is rolling out the statewide program after several years of research into this area. WECC also was a partner in Milwaukee's program, which is helping buildings save energy under the Better Buildings Challenge.

The program brings down the cost of big energy-saving upgrades – such as replacing a building's chiller or boiler or converting to more efficient lighting – by paying for those over time through savings on utility bills.

The financing has been used at several locations in downtown Milwaukee, including the Mackie Building, the University Club and the N. Water St. project that will become the headquarters of Bader Rutter at the site of the former downtown Laacke & Joy's retail store.

Among the first projects expected to use the financing around the state is the renovation of the Retlaw Hotel, a $25 million project that seeks to create an "affordable luxury" hotel at the Fond du Lac hotel, which was built in the 1920s and closed its doors in 2015.

The renovation of the Retlaw would use the financing for a variety of energy- and water-related upgrades, valued at $2 million to $4.5 million, said Dennis Doucette, a partner in the redevelopment of the Retlaw. It would pay for heating, cooling and plumbing upgrades, energy-efficient lighting technologies and other changes, said Doucette, noting that details on the project are still pending.

The developers hope to start construction in March and complete it in October or November, Doucette said.

Beau Engman of Pace Equity, a Milwaukee company that finances energy-saving upgrades around the country, said he's looking forward to seeing the financing method expand in Wisconsin outside Milwaukee.

Twelve counties around the state, including Ozaukee, Washington, Racine, Jefferson, Fond du Lac and Sheboygan in eastern Wisconsin, have passed resolutions that enable developers and building owners to use this kind of financing, said Allen Buechel, Fond du Lac County executive and chairman of the board of PACE Wisconsin.

PACE stands for Property Assessed Clean Energy. The financing enables borrowers to pay the upfront costs for an energy-saving project, then pay it off over time through savings on the utility bills.

Amounts that are delinquent can be assessed on the property tax bill, hence the name "property assessed."

"You can make your monthly payments and it'll never end up on the tax bill," said Buechel, whose county was one of the first to enact a PACE Wisconsin ordinance. "If you don't pay, then what is delinquent will end up on the property tax bill."

The Retlaw Hotel is posed for a $20 million renovation and plans to open this fall.

The Retlaw Hotel in Fond du Lac in its early years

PACE Wisconsin was launched by Energy Finance Solutions, the financing services of Wisconsin Energy Conservation Corp., which runs energy efficiency programs around the country.

Upgrades eligible for the new financing include not only those that cut energy waste but those that add renewable energy or improve a building's efficiency in conserving water, according to WECC.

Creation of the program was supported by the Wisconsin Counties Association, the League of Wisconsin Municipalities and the state Office of Energy Innovation, as well as communities around the state that have adopted green energy pledges.

Advantages of PACE, supporters say, include bringing down the cost of capital to fund upgrades, which saves building owners money on operating expenses. In addition, it helps revitalize aging buildings and boosts their property values, and building owners can use it to achieve their sustainability energy and water conservation projects.

One reason that Fond du Lac County got involved was to help encourage the redevelopment of the Retlaw, which had closed and was in disrepair, said Buechel.

"We were concerned somebody would purchase that and use it for senior housing or something like that," said Buechel. "A downtown high-end hotel is an idea we really love."

Doucette said the developer's $25 million price tag includes $14 million in construction costs. The hotel is hoping to bring about 40,000 visitors to the area and to create at least 150 jobs.

State and federal tax credits including historic preservation funding are expected to help finance the renovation.

“The Retlaw is very typical of the ‘grand dames’ of 1920s,” said Doucette. “In its heyday it was the place to be, with dignitaries and celebrities. As time went on it began to fall into disrepair. It just wasn’t maintained.”

PACE Equity, which is based in Milwaukee, has been involved with more than $14 million in projects so far in the city and is working in about 15 cities around the country.

Engman said he's looking forward to expanding his lending around the state, starting with the Retlaw project.

PACE's newest project in Milwaukee is the former Laacke & Joy's building redevelopment. The 110,000-square-foot office building will be anchored by Bader Rutter. The $30 million project by Wangard Partners includes $2 million in energy- and water-related upgrades that are being financed with PACE.

“This is the first new construction office building that PACE has been involved with, and the funding enabled the building to be highly sustainable and makes strong economic sense,” said Engman.

The building’s sustainable features include a geothermal heating and cooling system as well as solar panels, LED lighting and double-pane windows.

Wisconsin's PACE program is well thought out and in a position to facilitate work on aging buildings around the state in the years to come, Engman said.

"It’s a great long-term development and we’re very excited," he said, "because it creates a great environment to do business.”