GEM Program

Government Energy Mitigation (GEM) Program

  

Government facilities in 2019 are facing a unique opportunity to save money for their local government, reduce carbon emissions, implement cutting edge technology, and provide leadership for local government entities on budget savings through local electricity generation and energy efficiency.


Virtually every government building would  benefit from local energy generation and energy efficiency programs. The purpose of the GEM Program is to provide a path to financing energy generation and energy efficiency projects that will remain budget neutral and generate immediate cash-flow positive results for local governments. 


A GEM project can be specially financed through a Tax Exempt Lease Purchase, sometimes known as a municipal lease, which is a unique lease structure commonly used by state and local governments. This type of lease purchase is an effective alternative to traditional debt financing (bonds, loans, etc.) because it allows a public organization to pay for energy upgrades by using money that is already set aside in its annual utility budget. When properly structured, this type of financing makes it possible for public sector agencies to draw on dollars to be saved in future utility bills to pay for new, energy-efficient equipment and related services today. In a tax exempt municipal lease, the government entity can include a "non-appropriation of funds" clause in the agreement. This clause serves as the basis for a municipal lease not violating the public debt limitations that typically require voter approval for a municipality to enter into a long-term debt obligation.


A tax-exempt lease-purchase agreement presumes that the public sector organization will own the assets after the lease term expires. Further, the interest rates are typically lower than those on a taxable commercial lease-purchase agreement because the interest paid is exempt from federal income tax for public sector organizations. Although the financing terms for lease-purchase agreements may extend as long as 15 to 20 years, they are usually limited by the useful life of the equipment.


The tax-exempt lease-purchase is intended to meet the special needs of state and local governments, non-profit organizations, and schools. It is offered at a much lower interest rate and longer terms compared to other lease options. These agreements usually do not constitute a long-term “debt” obligation because of non-appropriation language written into the agreement effectively permitting the lease payment to be funded through the current operating budget.

The payment can be tailored to suit the needs of each government agency. Annual, semi-annual, quarterly and monthly payment intervals are available with terms extending to the useful life of the equipment. Deferrals, down payments and advance payments can also be arranged. Terms reflective of the useful life of the equipment have a lower interest expense as compared to long-term bond issues. Lessees can choose payment schedules most suited to their needs, including length of contract, payment interval and advance or arrears payments. Up to 100% of the equipment cost can be financed as well as training and ongoing maintenance.


Types of improvements:

A lease purchase is available to local governments for many type of improvements, but the most cost effective improvements are ones that are associated with an energy savings or local generation component. Technologies can range from a simple grid-tied solar system that reduces demand during daytime hours, all the way to a truly integrated micro-grid providing long term dependable power in the event of emergencies and power outages. 


Typical improvements financed under a municipal lease are:

· Rooftop and carport solar arrays

· Battery backup and generators

· Energy saving measures including lighting and building envelope solutions.

· Energy efficient, or “cool” roofs

· Heat exchange systems

· Fully integrated micro-grids including local generation, battery backup, control systems and local distribution centers.



Key Benefits to municipalities:


· Budget neutral 

   o A tax exempt lease purchase of energy efficiency and local energy generation will finance projects that create immediate cash flow positive results.

· Energy savings

   o The simplest projects with often the greatest returns result from investments in on-site energy efficiency.

· Resiliency

   o A local government can strengthen their resiliency against weather related and power outage events by investing in local power generation, storage and off-grid solutions. 

· Carbon emissions

   o By reducing energy consumption and producing local clean power, local governments can reduce carbon emissions.

· Cyber security

   o A local government can enhance cyber-security through micro-grid and self contained energy projects. 

· Infrastructure improvements

   o Replacing outdated technology and equipment with lower maintenance cost and higher efficiency units. 

Government Energy Mitigation Tax Exempt Municipal Lease

Government Energy Mitigation Tax Exempt Municipal Lease

Video

Check out this great video