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City of Norfolk, VirginiaCommercial Property Assessed Clean Energy (C-PACE) FinancingProgram GuideAdministered by the Virginia PACE AuthorityVersion 1.0November 2021Norfolk C-PACE Program GuideNovember 2021 Page 1

ContentsDisclaimers . 41.0 Executive Summary . 52.0 Program Administration . 63.0 Eligibility Requirements. 63.1 Eligible Properties. 63.2 Eligible Projects . 73.3 Eligible Improvements . 83.4 Borrowers . 93.5 Capital Providers . 103.6 Contractors . 104.0 Energy Analysis Requirements . 114.1 Energy and/or Water Efficiency Improvements to Existing Buildings . 114.2 Renewable Energy Systems . 124.3 Resiliency and Stormwater Management . 134.4 New Construction and Substantial Renovation/Adaptive Reuse Projects . 135.0 Program Fees . 155.1 Closing Fee. 155.2 Application Deposit . 165.3 Servicing Fee . 165.4 Other Program Expenses . 165.5 Sample Project. 175.6 Capital Provider Fee . 176.0 C-PACE Loan Application Process . 176.1 Determine Eligibility and Complete Pre-Application . 186.2 Select Capital Provider and Develop Project. 186.3 Submit Final Application with Supporting Documentation . 196.4 Close C-PACE Loan and Initiate Project Construction . 206.5 Project Completion. 207.0 C-PACE Loan Administration . 217.1 C-PACE Lien. 217.2 Repayment of the C-PACE Loan . 217.3 Delinquent C-PACE Payments and Enforcement Remedy . 217.4 Release of the C-PACE Lien. 22Norfolk C-PACE Program GuideNovember 2021 Page 2

7.5 Servicing of C-PACE Payments. 228.0 Lender Consent . 229.0 Change Orders . 22Appendix A: Glossary of Terms . 24Appendix B: Common C-PACE Eligible Improvements . 29Appendix C: Disclosure of Risk . 34Appendix D: C-PACE Program Agreement . 35Norfolk C-PACE Program GuideNovember 2021 Page 3

DisclaimersThis Program Guide (this "Guide") has been prepared for purpose of providing a more detailed description of therequirements, rules, procedures, and fees applicable to the Norfolk Commercial Property Assessed Clean Energy(C-PACE) Financing Program (the "Program"). This Guide and all provisions hereof are subject to the applicablechapter of the City Code of the City of Norfolk, Virginia (the "Chapter"), in all respects including, without limitation,the provisions of the Chapter governing the amendment of this Guide. In the case of any conflict between theprovisions of this Guide and the provisions of the Chapter, the provisions of the Chapter shall control.THIS GUIDE IS ONLY A REFERENCE DOCUMENT AND CREATES NO LEGAL RIGHTS IN FAVOR OF ANY BORROWER,CAPITAL PROVIDER, CONTRACTOR, OR ANY OTHER PERSON, NOR DOES IT IMPOSE ANY LEGAL DUTY OROBLIGATION ON THE CITY OF NORFOLK, VIRGINIA.All capitalized terms used in this Program Guide that are not specifically defined shall have the meanings set forthin Appendix A (Glossary of Terms) of this Program Guide. All Glossary terms are bolded when first referenced inthe Guide.Norfolk C-PACE Program GuideNovember 2021 Page 4

1.0 Executive SummaryThe City of Norfolk, Virginia (also referred to as the “City”) and the Virginia PACE Authority (VPA) are pleased tooffer the City of Norfolk, Virginia Commercial Property Assessed Clean Energy (C-PACE) Financing Program.BackgroundThrough the C-PACE Act (§15.2-958.3 of the Code of Virginia), Virginia local governments are authorized to createC-PACE programs to facilitate, through C-PACE Financing, the installation of energy efficiency, renewable energy,water efficiency, resiliency, and stormwater management improvements to Eligible Properties. The City Councilof Norfolk added a new chapter (Chapter 45.8) to the Norfolk Code of Ordinances to establish the C-PACEFinancing Program (Program) for which VPA is the Program Administrator. VPA is a nonprofit corporation whosemission is to provide C-PACE program administrative services for local governments in the Commonwealth ofVirginia. VPA ensures that Projects are eligible for C-PACE Financing under the C-PACE Act, the local ordinance,and this Program Guide and submits each C-PACE Project (Project) to the City for final approval.C-PACE is an innovative financing solution for property owners looking to install energy and water conservation,renewable energy, and resiliency measures in new and existing buildings. The Program enables property ownersof commercial and multifamily properties to obtain low-cost, long-term financing for sustainability Projects thatcan generate positive cash flow upon completion. The term for a C-PACE Loan may not exceed the weightedaverage of the expected useful life of the Eligible Improvements or thirty (30) years, whichever is less. This longrepayment period can result in cost savings that exceed the total cost of the C-PACE Loan. Benefits may includeimproved business cash flow due to lower energy and water costs, a reduction in costs related to businessinterruption and storm/flood damage, less required owner equity, an increase in the value of the improved EligibleProperty, and achievement of sustainability goals.A C-PACE Loan is secured through a voluntary special assessment, repayment of which is collected by the CapitalProvider or VPA. Like property taxes, C-PACE Loans automatically transfer to the next property owner if the EligibleProperty is sold during the term of the C-PACE Loan. The remaining balance of the C-PACE Loan is repaid by thesubsequent property owners, who continue to receive the benefits of the Eligible Improvements. This ProgramGuide provides detailed information about the eligibility requirements for participating in the Program.The C-PACE Loan process requires that the prospective Borrower develop a qualifying energy efficiency, waterconservation, renewable energy, and/or resiliency Project with a Registered Contractor of his or her choice andarrange Project financing with a qualified Capital Provider. The prospective Borrower and/or Capital Provider thenapplies online through the Project Center to qualify the Project for a C-PACE Loan according to the criteria in thisGuide. If the Project is approved, the City, Borrower, and Capital Provider enter into a three-party mutualagreement known as the C-PACE Program Agreement that memorializes the obligations of the parties. TheBorrower and Capital Provider will also execute a separate C-PACE Loan Agreement that defines the terms andconditions of the C-PACE Loan.The Program relies on private financial institutions to provide capital to fund C-PACE Loans. The Program is opento any Capital Provider interested in participating. Interested financial institutions should contact VPA to becomequalified Capital Providers.Norfolk C-PACE Program GuideNovember 2021 Page 5

2.0 Program AdministrationThe day-to-day administration of the Program is run by VPA. This includes tasks such as marketing the Program;onboarding contractors and service providers that are certified as Registered Contractors; reviewing andapproving C-PACE Loan applications; and servicing the loans, as requested. VPA offers a single point of access forBorrowers, Registered Contractors, and Capital Providers to qualify Projects for C-PACE Loans.For general information or to discuss a potential Project:Website: www.virginiapace.comEmail: [email protected]: 757-603-3555 orEmail: [email protected] questions about the status of an application or the application process:Tel: 757-603-3555 orEmail: PACE [email protected] questions about loan servicing:Tel: 757-603-3555 orEmail: [email protected] Eligibility Requirements3.1 Eligible PropertiesEligible Property TypesC-PACE Financing is available to properties located within the City except for single family or multifamilyresidential properties with fewer than five (5) dwelling units or any residential condominium as defined in VirginiaCode § 55.1-2000. Properties that are otherwise exempt from real estate taxation are eligible to participate, asthis Program is voluntary. The Program does not authorize the placement of C-PACE Liens on a property ownedby a local, state, or federal government.Eligible Property LocationTo be eligible, the property to be improved must be assessable real property located within the territorial limitsof the City and must have a property tax or assessment identification number. Assessable real property includesboth currently improved (with a building or structure) or unimproved real property.Multiple ParcelsProperties with multiple tax map or parcel identification numbers are eligible if all of the lots, blocks, tracts, andparcels of land are located in the City limits. However, VPA reserves the right to deny applications for propertieswith multiple parcel identification numbers if any of the parcels is ineligible to participate in the Program.Norfolk C-PACE Program GuideNovember 2021 Page 6

3.2 Eligible ProjectsC-PACE Loans are available for both improvements to existing buildings and new construction projects. To beeligible, a Project must meet the following criteria: Project Term: C-PACE Loan terms must not exceed the shorter of the average of the Expected Useful Life(EUL) of all the Eligible Improvements or thirty (30) years. Property value determination: The Property value must be determined for both taxable and tax-exemptproperties using either the assessed value or the appraised value. In cases where the aggregate FinancedAmount on a Project exceeds 25 million, an independent appraisal will be required. See FinancedAmount thresholds, below. Capital Providers may also require an appraisal as part of their due diligenceprocess. Real property: Project improvements must be permanently affixed to the real property and remainpermanently affixed to the real property during the Term. Financed Amount thresholds: The minimum Financed Amount allowed by the Program is 50,000. Themaximum Financed Amount allowed by the Program is 25 million or thirty percent (30%) of the stabilizedvalue of the property, whichever is greater. The Program recommends that the total combined FinancedAmount, plus all real property secured liens, not exceed 95% of the assessed or market value, whicheveris greater. There is no limit on how many loans can be financed under the program or the total value ofall C-PACE Loans issued under the Program. Eligible Financed Amount: A C-PACE Loan must be equal to or less than the amount of the eligible ProjectCosts. Eligible Project Costs: All costs necessary to complete the Project including without limitation, all directinstallation/construction contract costs (materials, labor and overhead); Ancillary Costs; and Soft Costs.Costs to acquire an Eligible Property are not considered eligible Project Costs.oAncillary Costs: Construction costs that are necessary to install an Eligible Improvement. Examplesinclude: roof structural improvements necessary to support a roof mounted solar PV array or buildingelectrical upgrades necessary to support an energy efficient HVAC system. Please note that the Project documentation must clearly demonstrate that the Ancillary Costsare necessary for installation of the Eligible Improvements.o Soft Costs: Indirect costs that are not considered direct construction costs but are necessary tocomplete the Project. Examples include: Project management; Closing Fees (program administration fees); title reports and credit checks;financial services (e.g., Capital Provider fee, Project Developer fee)legal services (e.g., Borrower legal, Capital Provider legal);recording charges and escrow disbursement fees;architectural and engineering plans;consulting reports (e.g., Energy Analysis, commissioning reports, measurement and verification,feasibility studies, financial projections, surveys);due diligence reports (e.g., appraisal, environmental, physical condition assessments);Norfolk C-PACE Program GuideNovember 2021 Page 7

energy savings or performance guaranty or insurance;building accreditation;permitting fees;interest reserves;capitalized interest; andany other closing costs or fees required to complete the Project.The Borrower may request consideration of additional indirect costs not listed above.If an indirect cost cannot be allocated directly to the installation of an Eligible Improvement(e.g., Mechanical/Engineering/Plumbing (M/E/P) plans that include plans for installation ofnew lighting fixtures), then the eligible Soft Cost would be calculated in the same proportionas the proportion of Project Costs to the total construction budget.Example:M/E/P plans: 50,000Eligible Improvement: LED lighting (materials, labor and overhead): 100,000Total construction budget: 500,000Percentage of Project to total construction budget: 20%Eligible Soft Costs: 10,000 (20%) Project savings: Energy efficiency and water efficiency Projects must demonstrate energy and/or watersavings, respectively, over the baseline condition of the Property. Renewable energy Projects mustdemonstrate production of renewable energy. Requirements for calculating Project savings for resiliencyand stormwater management Projects are discussed under Section 4.3 Resiliency and StormwaterManagement; Lender Consent: To receive a C-PACE Loan, each Borrower must obtain a written subordinationagreement executed by the holder of each mortgage or deed of trust lien on the Property prior to FinalApplication approval by VPA. See Section 8.0 Lender Consent.3.3 Eligible ImprovementsEligible Improvements that qualify for C-PACE Financing include improvements for energy and water efficiency,renewable energy, stormwater management, and resiliency.Energy and water efficiency: Any measure that results in reduction of consumption of energy and/or water overa baseline established through Energy Analysis.Renewable energy: Any system that generates energy to supply: the on-site demand of the Eligible Property;export of electricity to a utility provider;sale of the electricity through the use of a Power Purchase Agreement (or similar approved agreementformat);a combination of the above three options; andproduction of clean heat or power by use of a renewable energy resource.Types of renewable energy systems may include: solar photovoltaic power;Norfolk C-PACE Program GuideNovember 2021 Page 8

fiber optic solar;solar thermal;small wind microturbines;combined heat and power;geothermal heat pump;fuel cells;energy recovery; andmicrogrids. Note: Approval of other types of renewable energy Project types not listed in the Program Guide is at the solediscretion of VPA and City.Resiliency: A measure that reduces the impacts of water or wind-related natural or manmade events such asinstallation of wet and dry floodproofing, raising mechanical and electrical equipment, installation of EV chargingstations, and/or reinforcement and insulation of the building envelope to reduce impacts of excessive heat andwind.Stormwater management: A measure that reduces onsite stormwater runoff into the stormwater system such asreduction in the quantity of impervious surfaces or onsite filtering of stormwater. Note: Please refer to Appendix B: Common C-PACE Eligible Improvements for an expansive list of measures.3.4 BorrowersThe Program is voluntary and available to Borrowers with Eligible Properties located within the City. Only aBorrower who voluntarily participates in the Program and closes a C-PACE Loan will have a C-PACE Lien imposedagainst its Eligible Property. To participate in the Program, a prospective Borrower must: be the title holder of an Eligible Property (as reflected in the Land Records) or the holder of a qualifyinglong-term leasehold interest. The Borrower or the Borrower’s legally authorized representative must signthe Final Application;oIn the case of a transfer of ownership, any transfer to the Borrower must be complete and fullyreflected in the Land Records before an application for a new C-PACE Loan may be approved. provide evidence that the Borrower is not insolvent or in bankruptcy proceedings; submit evidence that the title of the Eligible Property is not in dispute prior to recording the C-PACE LienCertificate, as evidenced by a title report certifying the condition of the title, performed and signed by atitle examiner who has been certified by the Virginia Land Title Association or a title insurancecommitment from a title insurance company acceptable to the Capital Provider and the City; be current in the payment of all obligations secured by the Eligible Property, including loans secured bymortgages or deed of trust liens on the Eligible Property, property taxes, special assessments (includingC-PACE Liens), special taxes, other tax liens, and/or water or sewer charges. VPA and the Capital Providermay review public records, including the Land Records, to verify compliance with this requirement; be current on all federal, state, and local taxes; have no federal income tax lien, judgement lien, or other involuntary liens against the Eligible Property,including, but not limited to, construction or mechanics liens, judgments against the Borrower, or eminentdomain proceedings. VPA and the Capital Provider may review public records, including the real propertyrecords and court documents, to verify compliance with these requirements; andNorfolk C-PACE Program GuideNovember 2021 Page 9

have no notices of default or delinquency on property-based debt that have not been cured.If the Borrower has a leasehold interest (in a long-term lease), the fee simple owner would either need to: (1) bea party to the C-PACE Program Agreement; or (2) execute a consent to evidence the fee simple owner’s consentto the C-PACE Loan and C-PACE Lien on the Eligible Property during the Term, which will be recorded in the LandRecords.3.5 Capital ProvidersThe Program is open market, which means Borrowers have the flexibility to select their preferred Capital Providerfor a Project. A Capital Provider is a lender that finances a C-PACE Loan. The open market model gives Borrowersaccess to a range of private Capital Providers who offer competitive rates and financing terms and conditions. Noexclusivity will be provided to Capital Providers, and Borrowers will retain the right to choose the provider offinancing who best suits their business needs. As of the date of this Program Guide, the City has determined thatC-PACE Loans are to be financed only by private lenders or financial institutions.Private lenders and/or financial institutions interested in offering C-PACE Loans must meet certain qualificationsto participate in the Program. To become a Capital Provider, the lender/institution must complete and submit anRFQ, including a C-PACE Capital Provider Agreement. Upon approval by VPA, the applicant will be considered aqualified Capital Provider. Capital Providers are listed on VPA’s website.Borrowers may pre-select their preferred lender for the Project. However, prior to the closing of the applicable CPACE Loan, VPA must approve the private lender or financial institution as a qualified Capital Provider as outlinedabove.The duties of a Capital Provider include the following: making the C-PACE Loan; notifying the City and VPA of any changes to the C-PACE Payments, including recording any updatedAmortization Schedules in the Land Records; and notifying the City and VPA whenever an assignment of or an amendment to a C-PACE Loan takes place.3.6 ContractorsAll Projects financed through the Program must be installed by a Registered Contractor that has been approvedby VPA. The registration does not evaluate the contractor’s competence or the status of its licensure. If a Borrowerhires a company that is not a Registered Contractor, then the non-registered company must become a RegisteredContractor by completing the contractor registration form available online and receive approval from VPA priorto approval of a Final Application. If a general contractor is responsible for the work of all subcontractors, thenonly the general contractor would be required to become a Registered Contractor. The installation of EligibleImprovements completed prior to application for C-PACE Financing may be approved by VPA on a case-by-casebasis.To be eligible for a C-PACE Loan, work associated with the installation of an Eligible Improvement that requires alicense must be installed by a Registered Contractor that holds the appropriate license. Registered Contractorsare responsible for ensuring that all subcontractors hold the appropriate licenses. Furthermore, it is theNorfolk C-PACE Program GuideNovember 2021 Page 10

responsibility of the Borrower to ensure that qualified, reputable contractors are chosen to perform the work onthe Project according to the requirements set forth in this Program Guide.The contractor registration form, including the terms and conditions of participation, can be found here on theVPA website (www.virginiapace.com).4.0 Energy Analysis RequirementsProspective Borrowers must obtain an Energy Analysis for the Project. The content of an Energy Analysis may varydepending on the type of Project. Generally speaking, the Energy Analysis for energy efficiency, water efficiency,and renewable energy Projects must: document the existing energy and/or water consumption of the Eligible Property or individual, relevantsystems;o In the case of new construction, a statutory energy code baseline should be used instead.include calculations of the expected energy and/or water savings and/or monetary savings of the Project;oThe Energy Analysis must demonstrate quantifiable expected savings over the baseline usage duringthe term of the C-PACE Loan. Note: The cost of the Energy Analysis may be included in the C-PACE Loan amount.A Qualified Energy Professional will use generally accepted engineering calculations or a building energy modelfrom modeling software approved by the U.S. Department of Energy (“DOE”) to determine savings attributable tothe proposed Eligible Improvements. VPA will review the Energy Analysis to verify the assumptions are reasonableand that it complies with the minimum requirements of the Program Guide.Borrowers are encouraged to obtain all applicable government, utility provider, and/or manufacturer rebateswhere available. Note: VPA will review, and has the authority to reject, an Energy Analysis if it does not meet the requirementsof this Program Guide.4.1 Energy and/or Water Efficiency Improvements to Existing BuildingsThe Energy Analysis for a proposed energy and/or water efficiency improvement in an existing building mustinclude the following: written description of the proposed Project including each individual Eligible Improvement that will befunded with the C-PACE Loan; expected annual energy savings (kWh, BTUs or therms) over energy baseline usage, water savings (gallonsor ccf) over water consumption baseline, annual per unit energy and/or water cost savings ( ), and/oroperational, maintenance, and insurance cost savings ( ); clear and logical documentation of assumptions for the calculations of savings; an estimate of the expected EUL of each Eligible Improvement and documentation supporting the EUL;Norfolk C-PACE Program GuideNovember 2021 Page 11

a calculation of the maximum eligible Term for the loan based on the weighted average of the EUL of theEligible Improvements; the total project capital cost required for each Eligible Improvement or for packages of EligibleImprovements if interactive effects between Eligible Improvement make itemized costs impractical; and a copy of the proposed relevant equipment specs, data sheets, etc. If renewable energy measures are under consideration, please refer to Section 4.2 Renewable Energy Systems.Baseline for Energy or Water Efficiency Projects:The existing conditions of a building shall be used to establish the baseline level of energy and water usage.Existing conditions may be determined based on nameplate efficiency ratings of currently installed equipment.Alternatively, the Qualified Energy Professional may use an energy performance model or another professionallyaccepted method of establishing the energy and water efficiency performance of the existing building.Energy Efficiency Improvement Energy Analysis Guide:The Program recommends, but does not require, that the Energy Analysis utilizes one of the followingstandards/guidelines: ASHRAE Energy Audit standards as defined by ANSI/ASHRAE/ACCA Standard 211-2018; Pacific Northwest National Laboratory, A Guide to Energy Audits, PNNL-20956; Investor Ready Energy Efficiency (“IREE”) Certification; ASHRAE Standard 100; or ASHRAE Standard 90.1 Appendix G.4.2 Renewable Energy SystemsAn Energy Analysis for renewable energy improvements must contain the following components: a description of the proposed renewable energy system including production capacity; a description of the site’s ambient conditions (e.g., shading analysis); the location of the renewable energy system; the energy system foundation (e.g., roof or ground mount); the utility consumption profile of the site, including the site’s historic energy use and cost; the expected annual energy production (kWh), electrical demand reduction (kW), annual per unit energyproduction savings ( ) and operational, maintenance, and insurance cost savings ( ); any assumptions affecting the cost savings, including:oweighted cost of energy saved and generated by the Project;ocost savings to be realized from time-of-use and demand charge reductions, as applicable;outility tariff to be applied to the site and/or system following installation;outility escalation rate assumptions;Norfolk C-PACE Program GuideNovember 2021 Page 12

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The City of Norfolk, Virginia (also referred to as the "City") and the Virginia PACE Authority (VPA) are pleased to offer the City of Norfolk, Virginia Commercial Property Assessed Clean Energy (C-PACE) Financing Program. Background Through the C-PACE Act (§15.2-958.3 of the Code of Virginia), Virginia local governments are authorized to .