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A 1,200-square-foot Montgomery Village bungalow is supposed to be cozy, but Greg and Kambria Holder's version was anything but.

The house was so drafty during winter cold snaps that they had taken to wearing hats inside, keeping a stack of blankets beside the couch, and getting dressed in front of the furnace.

Running both the gas insert stove and wall-mounted furnace made the place reasonably comfortable, but it never lasted.

"Between the two, the home would warm up, but it just doesn't hold its heat," said Greg Holder. "If you hung out by a wall you could just feel (the cold) coming through."

And that's after spending thousands of dollars on new double-pane windows after purchasing the 1950s era home in 2006.

Then the county made them an offer they couldn't refuse. Instead of draining their savings to pay for better insulation, the Sonoma County Energy Independence Program allowed the Holders to borrow the $3,900 they needed for the project.

The innovative program is being credited with stimulating the sluggish construction industry, creating new jobs, and making the county a nationwide leader in the fight against global warming.

"This program is a game changer," said John Sutter, general manager of Applied Building Science of Santa Rosa, which recently insulated the Holders' home. "It's good for the county and good for the consumer."

Since its inception earlier this year, the energy loan program has blown past its goals. Instead of the $7.5 million in energy saving projects the county expected to fund in 2009, the program has received more than $40 million worth of applications, according to Rod Dole, Sonoma County's Auditor-Controller-Treasurer-Tax Collector.

"This project is growing literally $1 million per week," Dole said. "We're just working as hard as we can to keep up with it."

Of that $40.5 million in applications, $23.9 million was approved by mid-December and $16 million had already been paid out on projects ranging from insulation to energy efficient furnaces to solar panels.

The infusion of cash has sparked a moribund construction industry battered by the housing downturn, creating jobs and even catching the eye of federal officials hoping to copy the program's unexpected success.

"We know that Sonoma County is leading the nation," Dole said. "We've had calls from the White House, we've had calls from the Department of Energy. They want to know how Sonoma County pulled it off. They want to use Sonoma County as a standard nationwide for other programs."

Sonoma County didn't invent the idea of government loaning money to people for energy efficiency projects. The City of Palm Desert pushed for the state law allowing such programs that passed in 2008. But Sonoma County, with its 180,000 eligible parcels, was able to take to program to another level.

The county treasurer's office helps cities, schools and special districts invest their cash in safe investments like U.S. treasuries, Dole explained. At the moment, that figure stands at $1.9 billion. County leaders opted to take 2 percent of those funds — $45 million — and invest them closer to home.

The program allows people to borrow money from the county for energy-efficiency improvements and pay it back in installments on their tax bills. The county places a lien on the property to ensure payment.

Currently, the program charges 7 percent interest, with 3 percent going to earn a return and the remaining 4 percent offsetting program expenses.

That means that taxpayers are not paying for the energy improvements. In fact, the interest rate taxpayers are earning is greater than other investments, Dole said.

"There is no loser in this program. If there is any flaw at this point, it's that I can't offer the program at a lower interest rate," he said.

That could change. Rep. Mike Thompson, D-St. Helena, has supported federal legislation that would allow tax-exempt municipal bonds to underwrite the program, allowing the interest rate to drop to as low as 5 percent, Dole said.

That lower interest rate could really boost interest in the program, Dole said.

Not that there's any lack of demand at the moment.

"For a consumers living in a house that's freezing, that 7 percent is priceless," Sutter said.

The potential market is massive. Sonoma County homeowners will need to spend an estimated $1.5 billion over the next five years to button up their homes enough to meet the county's carbon reduction goals, according to the county's Community Climate Action Plan.

The goal is to reduce overall greenhouse gas emissions in the county to 25 percent below 1990 levels by 2015. Since buildings generate an estimated 40 percent of the emissions, improving their efficiency is seen as vital to meeting its goal.

Assuming 80 percent participation, the plan estimates that 150,000 homes and 20,000 commercial buildings would be retrofitted, reducing overall building emissions by 30 percent.

That's a tall order, admits David Brennan, the county's regional climate protection coordinator. It would take retrofitting 82 homes a day, seven days a week for the next five years to reach 150,000 homes.

Given the relatively few contractors certified to perform the kinds of performance testing required to ensure projects achieve their energy efficiency goals, Brennan says it's "questionable" whether that goal can be achieved.

But the county's Energy Independence Program is making strides toward stimulating the housing industry's capability to do the work.

"We're trying to build the capacity of the building retrofit business to become a significant part of the construction industry," Brennan said.

Builders like Pinnacle Homes, which since 1993 has built dozens of high-end houses in exclusive neighborhoods like Santa Rosa's Skyfarm, have also gotten into the home retrofit market, using their expertise to rebuild homes with an eye toward energy efficiency.

Along the way, they're hiring workers, which creates a ripple that helps boost the economy, said Robert Eyler, director of the Center for Regional Economic Analysis at Sonoma State University.

"This program is exactly what we need to see in a sustained recovery," Eyler said.

It's already been a boon to Sutter. The program today accounts for about half his business, he said. He reaps a personal reward in performing work that helps stave off global warming, and is pretty sure the market for his services will only grow.

"This is the central issue for civilization for the next 50 years," he said.

You can reach Staff Writer Kevin McCallum at 521-5207 or kevin.mccallum@pressdemocrat.com.