SECO LoanStar Loan

Use it or lose it

A couple weeks ago I received an email from the Texas State Comptroller promoting the SECO LoanStar Program. A 100% financing for municipalities, public schools and hospitals to retrofit to energy efficient LED Lighting, solar and energy efficient HVAC technologies. This program is $7.5 million 1% rate with a 2% APR that is designed for the energy savings to pay back the financing. The ROI for LED Lighting is approximately two years and for solar it is six years. There is a lot of resistance to financing but there are good loans and bad loans. My father was a farmer and he was so tight that he squeaked and he explained to me “When I want to buy a piece of equipment like a tractor or combine, I have to make a decision ‘do I work and save to buy that piece of equipment cash or will inflation keep it just out of my reach? If that is the case I will finance that piece of equipment and put it to work to make more money to pay the loan off faster. You have to think of yourself as being in the egg business and your money is your chickens, you don’t want to eat your chickens”. This loan program requires registration by November 15^th then there has to be an evaluation by SECO and then a 120 days for the retrofit proposal to be submitted for approval. These time lines need to be meet or this financing goes away. For eight months I have read articles about a crisis of the lack of street lighting in the colonias. Then there are hundreds of miles of highway lights that are not lit. The TXDOT put up the poles and lights but left it up to the municipalities to maintain them. This cheap financing makes solving these challenges affordable. Loans have to be paid back but when you consider the arbitrage this pays for itself, at 1% interest the rate of the LoanStar loan and with the return on Investment is about two years for LED lighting and six years for solar power but the average savings with just LED lighting is 50%. This additional savings adds significant leverage. The payment calculation to pay off the loan via the savings. So with a two year ROI, keeping the payment the same, the cost is recuperated in two years. There is a commercial program Public Assessed Clean Energy financing for the commercial sector with the interest rate charged is 4% to 6% with a 20 year term. Using the rule of 72, the law of compound interest rather than just paying for these improvements out of the city coffers, leverage with the SECO LoanStar Loan invested with a PACE provider at 6% interest and if I knew the monthly payment I could figure out using compound interest the return via dollar cost averaging with the savings the financing would not only pay for itself but double in less than six years. This is why these public entities need to register for the LoanStar loan program.