Mayor Kevin Johnson announced Tuesday that Sacramento has been selected as one of only two cities in the country to participate in a privately funded program for energy efficiency retrofits of commercial buildings.

English businessman and Virgin Records owner, Sir Richard Branson, and a consortium of businesses selected Sacramento and Miami for a private investment of $100 million for each city to retrofit city buildings with renewable energy, energy efficiency and water conservation improvements.

“This is a real game-changer for our city in terms of fulfilling out goal of reducing our environmental footprint,” Johnson said Tuesday.

The commercial Property Assessed Clean Energy (PACE) program is a short-term private sector loan to provide up front cash for retrofits. Owners of commercial and industrial buildings who meet criteria established for he PACE program are eligible to apply for a PACE loan.

Johnson said the goal is to create a market for improving energy efficiency in existing buildings and creating more green jobs.

Retrofits are improvements to an existing property that bring the structure or energy use up to a higher or more current standard than what was in place at the time the building was originally constructed.

The benefit of the PACE program to property owners is no or very low upfront costs for building improvements and a savings in reduced energy and utility costs.

Additionally, unlike other types of loans that attach to the property owner, these loans attach to the property, so if the owner sells the property before the loan is paid off, the new owner – who will inherit the benefit of the retrofits when he purchases the property – will also inherit the remainder of the PACE loan.

The program is strictly voluntary and property owners would only pay for the cost of the improvements plus application fees. The 20-year PACE loans would be repaid through annual assessments on owners’ property-tax bills.

Ygrene Energy Fund, Inc., will fund PACE through a variety of sources including lending institutions such as Barclays Capital and Clean Fund.

“This is a five-year partnership with Ygrene,” Johnson said, “with $100 million in private investment and the opportunity to create 1,500 jobs over five years.”

Ygrene Energy’s role in the program will be ensuring that cost savings exceed the cost of improvements as well as marketing and outreach to property owners.

One of the city’s goals – as part of the mayor’s Greenwise initiative, which was started last year – is to reduce greenhouse gas emissions community-wide to 1990 levels by 2020, Johnson said.

“This (program) will kickstart our green economy,” Johnson said. “We want to be on the map both nationally and internationally for what we are doing in the green economy, and this is certainly a big step.”

Once the PACE program is approved and a PACE assessment district is established, Johnson said, program funding will be available for planning retrofits.

Councilman Kevin McCarty initiated a similar idea for a residential retrofit program in 2009. The program was stalled at the federal level because of conflicts with guidelines for federally backed home loans.

Now that a commercial PACE program is under way, however, McCarty said he wants to propose the residential program again – this time on a smaller scale.

“There are over 35,000 homes here that could sign on to this kind of opportunity,” McCarty said. “I want us to make a way for that to happen.”

McCarty said that one in four homes in Sacramento is not on a federally backed loan and is eligible for a similar residential PACE program.

“A year ago when we started this,” McCarty said, “we said we want to Go Green Sacramento. This is a great opportunity to do that and make a big difference for our city.”

The City Council will adopt a resolution Tuesday to establish a commercial Property Assessed Clean Energy (PACE) district – this allows commercial property owners to have PACE loan payments collected as an assessment along with their property taxes.

An assessment "district" is not a geographical term in this case. It's a designation for accounting purposes – it groups certain assessments under one umbrella, as opposed to some other umbrella.

At the meeting, City Council members will also consider a five-year, $321,000 professional services agreement with Ygrene to administer and finance the city-sponsored commercial PACE program.

The agreement outlines the responsibilities of both Ygrene and the city of Sacramento including a minimum performance target for of $7.5 million – the amount of financing that Ygrene is expected to fund annually.

Melissa Corker is a Staff Reporter for the Sacramento Press. Follow her on Twitter @MelissaCorker