Michigan Saves describes loan-loss reserve, programs and financing capacity to House subcommittee

Representatives on the House Appropriations Subcommittee on Licensing and Regulatory Affairs and Insurance and Financial Services heard from Michigan Saves officials about the nonprofit’s financing programs, loan-loss reserve and the organization’s capacity to expand energy-efficiency and renewable-energy lending in Michigan.

Todd Parker, chief operating officer of Michigan Saves, told the committee the nonprofit was incorporated in 2009 with seed funding from the Michigan Public Service Commission and described Michigan Saves as “the nation’s first nonprofit green bank.” He said the organization’s loan-loss reserve is the credit enhancement that lets lenders offer lower rates, longer terms and alternative underwriting for homeowners and businesses.

The presentation matters because Michigan Saves provides financing options that can reduce household energy bills and facilitate commercial energy upgrades; legislators asked about program scale, state appropriations and how the programs serve low- and moderate-income households.

Parker described several core programs: a home energy loan program (an unsecured personal loan for energy-efficiency and renewable-energy improvements), a lead-poisoning prevention fund operated in partnership with the Department of Health and Human Services to cost-share lead abatement, a septic replacement loan program funded with an EGLE grant to address failing septic systems, and commercial programs including equipment financing and a tax-credit bridge loan to help nonprofit and tax-exempt organizations monetize Inflation Reduction Act credits. He said Michigan Saves also administers on-bill financing pilots with municipal utilities.

Parker told the committee Michigan Saves has leveraged about $675,000,000 of private capital and supported nearly 52,000 projects statewide since inception. He said the organization estimates roughly 60% of loan capital flows to low- and moderate-income customers and the financing has supported an estimated 13,500 jobs based on standard energy-efficiency economic multipliers.

On funding and capacity, Parker said the loan-loss reserve was roughly $13,000,000 at the time of the presentation, with about $7,000,000 currently encumbered supporting outstanding loans. He said the state appropriated $5,000,000 to Michigan Saves in the most recent fiscal year and $5,500,000 the year before to bolster the loan-loss reserve. Parker described Michigan Saves’ current capacity as able to support approximately $100 million to $120 million in loan volume annually; he said a loan-loss reserve on the order of $5 million to $6 million would support a year of that activity at current leverage and lender participation.

Representatives asked how homeowners and contractors access Michigan Saves financing. Parker said Michigan Saves works through a statewide network of more than 1,200 authorized contractors and through partner lenders (including multiple credit unions); contractors commonly present Michigan Saves financing options to customers. He also said the organization does a limited alternative-underwriting pilot for credit-invisible customers and conducts turnkey grant-financing programs when municipalities provide grant funds.

Committee members asked for additional, district-level data. Parker offered to provide financed amounts and cost-per-watt details for residential solar projects in specific districts and said Michigan Saves could provide statewide data on financed amounts, program participants and contractor participation.

During questions, committee members discussed program reach in low-income districts, the mix of electric versus gas measures financed, and the mechanics of the tax-credit bridge loan for tax-exempt entities. Parker reiterated that some programs are grant-funded for a limited term (for example, the lead abatement and septic funds) while Michigan Saves’ core operations are sustained through fee revenue and recycled loan repayments.

The committee did not vote on legislation related to Michigan Saves at the meeting; Michigan Saves staff concluded their remarks and responded to follow-up requests for data and district-level project details.