Property Assessed Clean Energy
PACE means Property Assessed Clean Energy, a local government/community initiative that creates permanent private sector jobs in America and makes our nation more energy secure by promoting energy efficiency and renewable energy projects in our homes and commercial buildings. PACE is voluntary and community based, not mandated by Washington. It provides long term funding from private capital markets at low cost and needs no government subsidies or taxes. PACE raises property values by making buildings less expensive to heat and cool and it enjoys broad bipartisan support nationwide at state and local levels.
Currently, 28 states, plus DC authorize PACE. PACE-enabling legislation has been adopted by 27 states ( Hawaii had existing authority).
The Map of States with PACE-enabling Legislation
What is PACE ?
PACE is a bipartisan local government initiative that allows property owners to finance energy efficiency and renewable energy projects for their homes and commercial buildings. Interested property owners opt‐in to receive financing for improvements that is repaid through an assessment on their property taxes for up to 20 years. PACE financing spreads the cost of energy improvements such as weather sealing, insulation, energy efficient boilers and cooling systems, new windows, and solar installations over the expected life of the measures and allows for the repayment obligation to transfer automatically to the next property owner if the property is sold. PACE is unique because it:
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Creates badly needed local jobs.
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Uses private capital, not taxes or government subsidies.
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Saves money for building owners and increases property values.
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Is voluntary – not a government mandate.
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Promotes energy security without driving up energy costs.
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Avoids the need to build costly new power plants.
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Reduces air pollution.
Why PACE ?
PACE solves two key barriers to increased adoption of energy efficiency and small scale renewable energy:
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high upfront costs.
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fear that project costs won’t be recovered prior to a future sale of the property.
Because basic energy efficiency measures can cut energy costs by up to 35%, annual energy savings will typically exceed the cost of PACE assessments; the upfront cost barrier actually turns into improved cash flow for owners. And, like all property based assessments, PACE assessments stay with a property upon sale, until they are fully repaid by future owners who continue to benefit from the improvement measures.
Unlike state or utility sponsored programs that seem distant and bureaucratic, PACE programs provide a way for local communities to sponsor programs that meet their individual needs.
How PACE Works
PACE uses the same kind of land‐secured financing districts that American cities and towns have used for over 100 years to pay for improvements in the public interest. Over 37,000 land secured districts already exist and are a safe and familiar tool of municipal finance for street paving, parks, open space, water and sewer systems, street lighting, and seismic strengthening, among others.
Benefits of PACE
PACE promotes energy efficiency in ways that are good for America, our municipalities, building owners and mortgage lenders.
Benefits to Our Nation
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Creates permanent private sector jobs - nationwide and across a range of skills.
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Uses private capital for funding - NO taxes or government subsidies.
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Saves owners money - lower operating costs make their buildings more valuable.
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Promotes energy security - without federal regulation or taxes that drive up energy costs.
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Avoids costly power plants - increasingly difficult to site.
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No budgetary impact - voluntary participants pay all fees and expenses.
Benefits to Municipalities
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Permanent local jobs - as many as 10 per $1 million in spending makes communities stronger.
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No debt or credit risk - bonds are secured solely by the assessment payments of op-in participants.
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Saves money for residents - PACE is the only assessment that creates positive cash flow.
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Voluntary participation - building owners who opt-in if they decide benefits warrant.
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Improves air quality - reduced exhaust emissions make communities healthier.
Benefits to Property Owners
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No upfront cost - PACE financing spreads costs over the life of improvements.
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Owners save money - programs are designed to ensure annual savings exceed assessments.
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Assessment transfers upon sale - new owner benefits from improvements that stay with the property.
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Safety - assured by best practices and guidelines established to protect all program participants.
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Broad applicability - residential and commercial properties can use PACE.
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Voluntary - only opt-in participants pay assessments (and benefit from improvements).
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Comfort - efficient buildings are healthier and more comfortable.
Benefits to Existing Lenders
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Lowers default risk - improved cash flow makes it easier for owners to pay mortgages.
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Improves Loan‐to‐Value Ratio - buildings that are less expensive to operate are worth more.
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Safety and soundness - best practices framework developed to meet all participants’ concerns.
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Lien risk minimized - non-acceleration of assessments in default limits senior lien PACE exposure to less than $200 per home, on average.
FHFA Rulemaking Explained
The United States District Court in Oakland, CA has ruled that the FHFA must comply with the federal Administrative Procedures Act and conduct a Rulemaking Procedure by which the public can provide comment to the FHFA on the merits of residential PACE programs and provide guidance on a rule FHFA could establish that would allow residential PACE programs to proceed with protections for all stakeholders – local governments, homeowners, mortgage lenders, and Fannie Mae and Freddie Mac.
The agency received comments through Monday, March 26, 2012. There were approximately 252 comments submitted though the FHFA rulemaking portal.
For more information about FHFA click here
To download talking points in PDF click here
To download a template comment letter in .doc click here
Act Now! Take Action to Save Residential PACE Programs
Strong Bipartisan Support Continues for HR 2599
One thing Republicans and Democrats continue to agree on is the PACE Assessment Protection Act of 2011 – HR 2599. Introduced to strong bipartisan support in July, the Bill now has 40 sponsors, a nearly even mix of Republicans and Democrats. It’s more important now than ever to urge your House Representative to co-sponsor this bill and urge leadership to get on board.
Thanks for all who participated in our Webinar on July 14th. For those who weren’t able to make it you can use this link to see a recording of it…. just give it a few seconds to load and it will begin automatically:
The text of the Bill is here:
Please use the link below to send a letter to your member of the House of Representatives:
Or use this link to send a letter by entering your zip code:
Please use the link below for a sample Resolution that your municipality or organization can pass in support of the Bill
Please use the Take Action tab above for more information… and be sure to send copies of your letters to: PACENow@gmail.com
Federal Regulatory Overreach
Federal overreach, in a challenge to state and local government rights, has brought PACE to a standstill today despite its great promise. For over a century, municipalities have used property taxes and assessments to finance projects that achieve a broad range of public purposes established in laws enacted by our elected state and local representatives. Like all municipal assessments, PACE assessments in arrears have a senior lien to mortgage payments in the event of a default. Recognizing this, PACE advocates began a dialogue in 2008 with Fannie Mae, Freddie Mac, and their regulator, the Federal Housing Finance Agency (FHFA) to find ways to address their concerns. Broad safeguards were developed as program guidelines by a working group that included the U.S.Department of energy to ensure that PACE programs would be beneficial to building owners, municipalities, and mortgage lenders.
Notwithstanding these measures, on July 6, 2010, the FHFA issued a statement that directed Fannie Mae and Freddie Mac not to underwrite mortgages for properties with a PACE assessment. It further directed mortgage lenders to redline communities with PACE programs by tightening lending standards (which, ironically, has the effect of reducing property values in such communities, devaluing lenders’ collateral). FHFA based its action on two astonishing claims:
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PACE benefits, articulated and codified by state and local governments in 23 states, do not meet a valid public purpose.
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PACE program defaults, estimated to be no more than $200 per average home, raise concerns with regard to the safety and soundness of the mortgage industry.
The Fight to Restore PACE
A nationwide and completely bipartisan coalition of PACE advocates is fighting to support states’ rights and restore our country’s PACE programs. Municipalities with PACE programs in place or in development, members of Congress, state legislators, governors and attorneys general, organizations like the National League of Cities, the National Association of Counties, and the US Conference of Mayors, corporations and private citizens have all joined forces to save PACE. There are both legal and legislative efforts underway, with lawsuits filed in federal courts and legislation introduced in both houses of Congress.
Lawsuits – filed by the State of California, Sonoma County, Babylon, NY, and others ask that courts affirm the right of state and local governments to define public purpose and require that federal regulators and mortgage lenders treat PACE assessments no differently than other assessments when underwriting mortgages.
Legislation – entered in both houses of Congress would require that federal regulators and mortgage lenders treat PACE assessments like others and underwrite mortgages with PACE assessments.
In the coming weeks, a renewed effort to restore PACE will begin with opportunities to gain new support, particularly in Congress.
As mayor of Cutler Bay, Florida, we are pleased to be one of the first community’s to embrace the PACE program in our great state of Florida.Our municipal compact consisting of a number of Miami Cities see a bright future for the concept of PACE. The private market, with the cooperation of local governments can work together to improve our energy efficiency, reduce oil imports and create new jobs.
Ed MacDougall, Mayor
Cutler Bay, Florida