CHPC’s water affordability initiative works to increase access to water conservation resources for the nonprofit multifamily affordable rental housing owners and the lower-income tenants they serve in California. Below is the fifth in a series of reports on leaders, best practices, and emerging trends in water conservation for affordable housing.
Finding ways to pay for energy efficiency and water retrofits can be a challenge for owners of affordable rental housing who often lack the cash flow necessary to finance the upfront cost of a retrofit. On-Bill Repayment (OBR) and On-Bill Financing (OBF) offer the potential to unlock bill savings to partially finance standalone energy and water retrofits rather than waiting for a substantial rehabilitation.[1]
Earlier this year, CHPC released a case study documenting the use of OBR to finance energy savings. Our conclusion was that while OBR could become a useful tool in some circumstances, we believe an improved version of OBF will provide owners with better opportunities since there is typically no interest and repayment of OBF charges on a utility bill are generally not classified as a new lien on the property and therefore do not not trigger reviews by existing lienholders.
Recognizing the rising cost of water, BRIDGE Housing is taking action and testing various innovative solutions to pay for their water retrofits. This month, BRIDGE is launching a new water retrofit pilot at one of their properties, financed through East Bay Municipal Utility District’s (EBMUD) WaterSmart On-Bill Financing Program pilot.
“Our motivation was twofold—we had several properties that were in need of water upgrades for which prior solutions were not ideal, and we were really interested in testing an OBF model within our portfolio,” said Shanon Lampkins, Director of Portfolio at BRIDGE Housing. Field testing a concept like OBF can be a daunting task for affordable housing owners, which is why we are grateful that BRIDGE Housing is willing to share some of their initial lessons learned from their participation in an OBF program:
Key Features of the EBMUD WaterSmart OBF Program
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Lesson #1: Understand your building’s water usage
The first step in determining whether a property is a good candidate for an OBF program is to understand its water use by tracking information in benchmarking software. Collecting this information allows owners to monitor buildings, and track and target unusual spikes in usage on a month-by-month or annual basis. BRIDGE is a participant in the Better Buildings Challenge and a member of Stewards of Affordable Housing for the Future’s Big Reach Campaign and uses Yardi Energy Solutions to closely monitor both their energy and water usage. “Once we were able to determine a reasonable benchmark, we then started looking for those high-using properties,” said Lampkins. BRIDGE decided to use a simple formula of gallons of domestic water consumption per person per day to determine a reasonable benchmark, although they adjusted this metric for their senior buildings. For their first EBMUD pilot project, BRIDGE identified a 50-unit property in Emeryville where they will be replacing aerators and older high flow toilets with a 0.8 gallons per flush model. The Emeryville property was the last property in BRIDGE’s portfolio with 3.5 gallons per flush toilets, so the water savings along from toilets made it a good candidate for OBF. EBMUD assisted BRIDGE in performing a water audit of the property and determining the scope of work.
Lesson #2: Spend time up front developing estimates of water savings potential
According to Lampkins, putting in the work on the front end to identify properties with high savings potential is a crucial component of participation in an OBF program. “I highly recommend that owners who are interested in using OBF to finance retrofits spend some time developing a rough estimate of savings potential before investing substantial time in evaluating funding options,” said Lampkins. In the case of the EBMUD program, the relatively short payback period (five years) means that a property must have a substantial savings potential to make the project worth it. On a practical level, if the water savings projections are correct, BRIDGE in theory will not see any financial savings for five years as EBMUD sized their payment to match our project savings. Payback will occur in exactly five years using the EBMUD model, as they amortized their total cost over a five-year period.[2]
Lesson #3: Understand the program’s Equipment and installation specifications
Every nonprofit affordable housing organization has their own standards regarding equipment performance specifications and installation guidelines, and it is important to figure out whether those standards line up with the OBF program requirements. “There was some back-and-forth between our team and the utility to come to an understanding regarding our expectations for the installation,” said Lampkins. For example, while not part of the baseline EBMUD program offering, BRIDGE was able to work with EBMUD staff to install .8 flush toilets at the property. EBMUD staff was also flexible from the beginning in allowing BRIDGE to use their owner contractors to perform the retrofit work, although the contractors were also required to enter into a contract with EBMUD.
Lesson #4: Read the OBF contract closely and advocate for your organization
While excited about participating in the EBMUD On-Bill Finance Program, BRIDGE Housing was not initially thrilled with some of the terms of the PAYS program contract. “We identified a number of areas where the contract was either unclear to us or contained elements that didn’t align well with a typical affordable housing multifamily structure,” said Shanon Lampkins. For example, BRIDGE struggled initially with a lack of clarity regarding ongoing maintenance expectations for the equipment to be installed through the program. Luckily, EBMUD staff was open to working with BRIDGE to resolve their concerns with the contract. “Now that we are comfortable with the terms of this first project, we’re hoping to roll out the EBMUD WaterSmart On-Bill Program for more properties in our portfolio, said Lampkins.”
To learn more about BRIDGE’s participation in the EBMUD PAYS program, contact Shanon Lampkins at slampkins@bridgehousing.com. To find out more about the EBMUD PAYS program, contact Kristin Bowman at Kristin.Bowman@ebmud.org, (510) 717-8055 or Jolene Bertetto at Jolene.Bertetto@ebmud.com, (510) 287-0597.
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[1] On Bill financing (OBF) and On-Bill Repayment (OBR) are both financing mechanisms that allow customers repay clean energy investments over a specified timeframe through a charge on their monthly utility bill. The difference is between these tools is that under OBF, the utility provides the upfront capital while the capital in an OBR scenario is provided by a third party.
[2] Bridge noted that EBMUD generally has a goal of setting payments at somewhat less than projected savings. In this case, Bridge was comfortable with sizing the payment to match the expected savings because they viewed this as a low risk property.