PACE emerged in 2008 with a pilot program in California and quickly caught the attention of communities around the country.  In just two years, enabling legislation was passed in 23 and is being considered in nearly 20 more.  Early California programs in Sonoma County and Palm Desert were soon followed by ones in Boulder County, CO and in Babylon, NY.  Before programs were stopped by the Federal Housing Finance Agency (FHFA), Fannie Mae, and Freddie Mac, over 2,000 homes and commercial buildings had used PACE to finance efficiency and renewable energy projects.  Here, you can find information on:

PACE Program Basics – information on understanding PACE and its fundamentals.

PACE Senior Lien – the precedent for senior lien status and its importance.

Making PACE Safe – the steps taken to make PACE safe for all program participants.

How to Establish PACE in Your State – with sample letters to legislators and links to legislation in other states.

PACE Program Basics

PACE programs work at the local municipal level and program elements vary to meet the needs of individual communities and reflect differences in state laws.  Most PACE programs will share basic features:

• State and local governments establish, in law or public policy, a specific goal or objective: promoting energy efficiency as a means to promote jobs or better air quality, for example.
• A municipal government may establish a type of land or real property secured benefit district.
• Property owners within the district  (or the municipality if a district is not required) can voluntarily choose to participate; those who choose not to see no change to their taxes and assessments.
• An experienced contractor will assess the scope of desired improvements.  This may involve a thorough energy audit for efficiency measures and their projected savings and costs, or cost estimates for renewable projects weighed similarly against projected energy savings.
• The municipality will provide financing for the project, typically by selling bonds secured solely by payments made from participating property owners.
• Homeowners who receive a financing benefit from the municipality will agree to accept a property tax assessment or charge for up to 20 years, though shorter periods may be chosen or required by the municipality.

See the following links:

PACE Animated Video

PACE Overview and Regulatory Response 1-31-11

University of California, Berkeley PACE Website

PACE Local Government Guide (9-2009)

Simple Steps: How to Implement a PACE Program

PACE White Paper, May 2010

2009 Milken Institute PACE Finance Panel (Audio) (4-29-09)

PACE Explained in Simple Terms

PACE Summary Description for Legislators

Environment Magazine PACE Finance Article (Jan/Feb 2009)

Harvard Business Review – Energy Alternatives: A Market Solution for Achieving “Green” by Jack Hidary (Jan/Feb 2010)

Scientific American – World Changing Ideas: 20 Ways to Build a Cleaner, Healthier, Smarter World (11/03/09)

PACE Senior Lien

PACE relies on over a century of precedent that has established the right of state and local governments to define public purpose, provide public benefits that promote those purposes, and levy assessments that have a senior lien status to finance them.  Over 37,000 assessment districts levy assessments on over 5 million properties for parks, sidewalks, street lights, fire prevention, water and sewer systems and many others.  Some assessments, like those for seismic strengthening in California, septic tank replacement in Massachusetts, and sidewalks in Florida are not imposed broadly on residents, but are based on voluntary opt-in plans.  All municipal assessments are accepted by mortgage lenders and acknowledged in their standard mortgage underwriting documents.

PACE assessments differ from others in at least two ways:

• PACE saves money for property owners because programs are designed to create annual energy savings that exceed annual assessment charges.  Virtually all other benefit based assessments increase property owners’ expenses.
• PACE districts are voluntary.  Energy improvements will not be suitable or necessary for all buildings in a district and there is no need to assess all buildings to achieve system wide economies of scale.

See the following links:

PACE Constitutionality White Paper: Paul Hastings Report (5-28-10)

PACE Bloomberg Law Article (Jan 2010)

Jones Hall Memo: Consent Legal Analysis (5-14-09)

PACE Programs: Historical Precedent, Seniority and Benefits to Existing Lenders

PACE Program Information: Response to Regulatory Agency Questions

Barclays Capital Memo – PACE Seniority is Mandatory

PACE Lien Seniority in Foreclosure is Immaterial

Commercial/residential Real Estate Default History

Making PACE Safe

PACE advocates recognized the need to develop common guidelines and best practices for programs and began working with the US Department of Energy to establish standards that protect the interests of property owners, mortgage lenders, and other market participants.   In 2009, mortgage lenders, Fannie Mae, Freddie Mac, and the newly created FHFA raised concerns regarding PACE assessment’s senior lien status.  Guidelines were specifically established to address these concerns, including:

• Limitations on PACE financing to no more than 10% of the value of the property,
• Requirements that properties have a comfortable margin of positive equity to qualify for PACE financing,
• Non-acceleration of future assessments in the event of a default or foreclosure, which limits lenders’ loss exposure only to a year or two of assessments in arrears,
• Funding only for measures that project a positive savings to investment ratio, and
• Financing only available to property owners with a record of timely payment of property taxes and assessments.
• Disclosure of loan and debt risks and consequences to prospective property owners.
• Standards to ensure contractors have necessary training, skills, and experience.

None of these measures were accepted by the Federal Regulators, Fannie Mae, or Freddie Mac.  Despite lower tax delinquencies and no record of defaults in Sonoma County among nearly 1,200 PACE participants, the FHFA refused to even consider a limited pilot program to assess PACE safeguards.

See the following links:

DOE PACE Guidelines (5-7-10)

PACE Concerns & White House Solutions

How to Establish PACE in Your State

PACE usually requires state and local legislation, which should address a number of key issues, including:

Statement of public purpose – PACE will allow your state and local community to achieve objectives that are in the public good.  These can include energy security, economic development goals of job creation and property value, or reducing air pollution.

Benefit district or other mechanism for establishing a voluntary (opt-in) assessment or charge in return for a financing benefit, which may vary from state to state and among different types of municipalities.

Funding source – PACE programs can support non-recourse municipal bonds of the sponsoring municipality or other governmental entity.

Program basics – which may include maximum borrowing amounts, acceptable loan-to-value ratios, and other guidelines to ensure programs are safe for all participants.

See the following links:

PACE Webinar on State Strategies for Passing Legislation

Template for PACE Letter to State Legislator

PACE Letter Template to Legislator Which Addresses Lender/Consumer Concerns

Template for State Legislation Coalition Petition

The 10 Must Haves for PACE State Enabling Legislation

Links to States and Municipalities with PACE Enabling Legislation

PACE Legislation Table (2-10-10)

DDatabase of State Incentives for Renewables & Efficiency

California: PACE State Enabling Legislation (AB 811); (AB 474); (SB 279)

City of Berkeley PACE Program City of San Francisco “GreenFinanceSF” (4-8-10);: “GreenFinanceSF Project List” (2-25-10)

Palm Desert PACE Program

San Diego County PACE Program

Sonoma County PACE Program

Western Riverside County – Energy Efficiency and Water Conservation Program

Colorado: PACE State Enabling Legislation (HB 08-1350)

Boulder County PACE Program

Florida: Proposed PACE State Enabling Legislation (Precourt/Hasner Press Release)

Illinois: PACE State Enabling Legislation (SB 583)

Louisiana: PACE State Enabling Legislation (SB 224)

Maryland

Annapolis PACE Program

Montgomery County PACE Program

Michigan: (HB5640)

Missouri: PACE State Enabling Legislation (SHB 1692)

Nevada: PACE State Enabling Legislation (SB 358)

New Hampshire: PACE State Enabling Legislation (HB 1554)

New Mexico: PACE State Enabling Legislation (HB 572)

NYS PACE LAW (S66004)

Town of Babylon: Long Island Green Homes

Bedford, NY: PACE State Legislative Exemption Specific to Town of Bedford

City of Binghamton PACE Program (5867-A); (A08890)

North Carolina (Note: Law needs to be amended as it requires revolving loan) (HB 1389)

Ohio: (HB 1)

Oklahoma: (SB 668)

Oregon: PACE State Enabling Legislation (HB 2181); (HB 2626)

Texas: PACE State Enabling Legislation (HB 1391); (HB 1937)

Vermont: PACE State Enabling Legislation (H 446)

Virginia: PACE State Enabling Legislation (SB 1212)

Wisconsin: AB 255

States with PACE Enabling Legislation in Process

Arizona: PACE State Enabling Legislation (HB 2335)

Connecticut: (Raised Bill 5465 – Section 5)