Services for Local Government
Is your council looking to drive employment and create local jobs?
Sustainable Melbourne Fund works closely with councils to facilitate investment in buildings and related technology via Environmental Upgrade Agreement (EUA) programs.
We are a key partner in the City of Melbourne’s Net Zero Emissions strategy and we have provided strategic advice and support in most Australian states.
Sustainable Melbourne Fund designed and implemented the EUA program for the City of Melbourne, the first Australian municipality to offer EUAs. We are now the Third Party Administrator (TPA) for the EUA program, engaging actively with the finance and property sectors as a trusted intermediary for building owners.
Sustainable Melbourne Fund:
- Establishes EUA programs for municipal government.
- Acts as a trusted intermediary to implement the program on behalf of council.
- Provides ongoing monitoring and reporting.
What is an Environmental Upgrade Agreement?
An EUA is an agreement between a property owner, a bank and local government that facilitates a building upgrade to improve energy efficiency.
What type of properties can EUAs be used upon?
Property that is rateable under the Victorian Local Government Act 1989 which is used for predominantly non-residential purposes.
How do Environmental Upgrade Agreements (EUAs) work?
An Environmental Upgrade Agreement is similar to a normal loan; however, a council acts as the collection agent using their statutory powers to levy council rates.
What can be upgraded by an EUA?
EUAs can pay for upgrades that improve energy, water, and waste efficiency or increase renewable energy.
Why EUAs and not other forms of finance?
Environmental Upgrade Agreements can overcome the split-incentive to invest in projects that can deliver operational cost and environmental savings. Normal forms of finance like loans, cash, operating leases or even more innovative structures like Power Purchase Agreements (PPAs) fail to easily enable the costs and benefits of a project to be shared between the occupier and owner of a building. EUAs make this a simple task.
What are the benefits for my Council?
The majority of commercial property is leased. EUAs enable projects to occur within these properties more easily. Where investment was previously hard without EUAs; EUAs can unlock local investment into our communities. This then enhances economic development activity for your municipality, accelerates building retrofit activity and helps you achieve your environmental targets sooner.
Is it compulsory for Councils to implement EUAs if legislation is passed?
No. Each council decides independently if they choose to implement EUAs in their municipality.
What is Council’s role in the EUA process?
The council’s role is to levy the loan repayment using the council rates system and remit that payment to the lender. Council is only required to pay the lender once the monies have been received.
Will this affect rate capping restrictions?
No. The EUA charge, called an Environmental Upgrade Charge (EUC) is a voluntary charge entered in to by a ratepayer and council, that is issued separately to current council rates.
What is council’s liability?
The council is not liable for any unpaid Environmental Upgrade Charges. The council will only be liable to pay the bank once a repayment is collected by the council.
In the event that the building owner ceases a EUC repayment, it is the responsibility of the council to instigate their normal debt recovery procedures in accordance with council enforcement procedures and powers conferred under the local government Act. If the building owner becomes insolvent, unpaid EUCs will be considered equal to other rate charges and assume priority over other debt on the property.
What is the council’s responsibility in relation to the eligibility of the proposed environmental upgrade works?
The EUA legislation permits a wide range of projects with environmental and sustainability benefits to be financed. Council can choose to develop its own internal systems, processes and documentation to ensure the proposed works meet the legislative requirements, or, this work can be outsourced out to a party with prior experience in this area such as Sustainable Melbourne Fund to undertake these obligations. Both the building owner and the lender are responsible to ensure the loan is approved and used in accordance with the legislation.
Who will assess the capacity of the borrower to pay the EUCs?
Councils have no responsibility to check the building owner’s capacity to pay. This is the full responsibility of the lender; each lender has differing project and credit underwriting requirements.
What happens to the EUC if the property is sold?
The outstanding charges can remain with the building and be transferred to the new building owner. Alternatively, the new owner can request that the vendor sell the property unencumbered by the charges and reach a commercial agreement with the purchaser.
What happens if the property becomes vacant?
The building owner remains responsible for all loan repayments under the EUA to the council. Council is only required to pay the lender once the monies have been received.
May tenants complain to council about building owners passing on these new charges?
Tenants must provide written consent to the charges being passed on the building owner . The Local Government will have evidence of these consents prior to entering into any Environmental Upgrade Agreement. Any dispute between a landlord and tenant are matters to be dealt with through existing dispute resolution channels; a council need not become involved.
Contact Sustainable Melbourne Fund for more information on setting up EUAs in your municipality
(03) 9658 8740
So, why an EUA?
- Stimulate Economic Activity. Participating in the program, local councils are providing opportunities and benefits to its ratepayers to access attractive capital to improve their buildings. Upgrading buildings is a proven creator of local jobs and investment.
- Low Cost Abatement. Upgrading buildings delivers savings on utility bills, driving down the overall cost of energy for business while also reducing the impacts of climate change. However, at SMF we know the latter will not occur without an attractive investment. Environmental Upgrade Agreements (EUAs) are a mechanism for building owners to access attractive finance for retrofitting.
- Overcome structural and market barriers. EUA finance can overcome the split-incentive barrier by enabling the costs and benefits to be shared with the building occupiers.
- Reduce Financial Risks. EUAs unlock private investment in local communities. As a consequence, there is no financial risk to local councils budgets and does not require government handouts.
- Complementarity. EUAs can work with any grants/subsidies available for projects through local, state or federal government departments to enhance the business case for building retrofit. As such EUAs are a means of attracting government money into local communities.
Wholly owned by the City of Melbourne, Sustainable Melbourne Fund understands the process of local government and the need to encourage investments with economic and environmental benefits.
We are not a grant-giving body; we operate with a commercial focus on delivering sustainable outcomes.
Our research and years of experience indicate that building owners prefer dealing with an intermediary that understands the complexities of the property market and their business.
In delivering and investing in Australia’s first EUAs, we understand the role of financiers, business advisors, service provider/installers and councils. Accordingly, we have the resources and expertise to successfully manage an EUA program on behalf of Australian local governments.
Find out more about how this innovative funding mechanism can benefit your municipality. Contact Sustainable Melbourne Fund on (03) 9658 8740.