By Tina Perinotto

23 September 2010 – Melbourne City Council may just have found the holy grail of how to fund retrofits in older buildings.

In a breakthrough move Victoria has passed Australia’s first legislation to enable a municipal council to recoup targeted retrofit funding through its rates collection.

The loans will enable retrofits for buildings in the City of Melbourne’s 1200 Buildings program, which aims to achieve energy and water savings and cut carbon emissions.

According to Lord Mayor Robert Doyle the program will also be a huge economic boost for the city and the state.

“We estimate that the 1200 Buildings Program will generate up to $2 billion in new investment and around 8000 extra green jobs over the life of the program,” he said.

Under an amendment to the City of Melbourne Act the council will help building owners obtain finance from financial institutions to enable retrofits.

A council spokeswoman said the model was loosely based on a US scheme known as the PACE model which is applied to residential property, and is believed to be unique for commercial buildings around the world.

“Development of this model was underway in Melbourne before the launch of PACE or Property Assessed Clean Energy financing in the USA. (See a Wikipedia entry on this here.

“This model is similar, but it does not rely on municipal bonds. Also this model is for commercial retrofitting only. It will not apply to residential retrofitting,” the spokeswoman said.

Lord Mayor Robert Doyle said the legislation broke new ground.

“The City of Melbourne developed the financial mechanism with banks to build incentive for environmental retrofits and overcome the difficulty that many buildings owners have accessing capital to finance their environmental projects,” Mr Doyle said.

Melbourne Lord Mayor Robert Doyle (right) with Dave Collins, owner of 490 Spencer Street, Melbourne, which is a signatory to the 1200 Buildings program

“By providing the legislative amendment to bring this financial mechanism to life the Victorian Government has broken new ground towards reducing the environmental impact of cities and building the green jobs sector.
“The City of Melbourne and State Government are proud of this ground-breaking partnership.”

Victorian Planning Minister Justin Madden said the Brumby Labor Government had also granted $500,000 to the City of Melbourne to further assist in the development of its business model and program of services.

“Together we can ease the financial burden and work with the common interests of building owners and tenants in improving the environmental quality of commercial buildings for future generations,” he said.

The 1200 Buildings Program aimed to make two thirds of the city’s existing buildings meet ambitious green targets, significantly reduce Victoria’s carbon footprint and at the same time bring in large scale investment and jobs into the city, he said.

“Cities generate more than 70 per cent of the world’s carbon emissions. Environmentally retrofitting buildings is widely recognised as one of the most cost effective ways of cutting greenhouse gas emissions,” Mr Madden said.

“This legislation was introduced to accelerate the pace of change in the commercial building sector and equip Victoria to take the lead in establishing and building its green jobs sector. It addresses a major obstacle to the uptake of sustainable practices which is access to funding to undertake work.”

A report from Deloitte, City of Melbourne – 1200 Buildings – analysis of potential economic benefits (see the report here deloitte ) completed in June last year said the expected economic benefit could be up to $2.3 billion “in real terms” based on base building alone and not including other work that might be included during the course of retrofit work or future “embedded electricity generation at a building level”.

The report estimates about 800 jobs will be created each year on average over the 11 year life of the project.

“A successful 1200 Buildings could provide  businesses in the City of Melbourne with a reduction in energy costs of around one quarter of current levels (holding energy intensity of building usage constant). This reduced energy expenditure would enable funds to be used in more productive activities elsewhere in the economy.”

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