Let's Get The P.A.C.E. Program Back On Track

[Northern Berkshire Transition]

 

Let’s Get The

P.A.C.E.

Program Back On Track

 

The Property-Assessed Clean Energy (PACE) model is a financing structure that enables local governments to raise money through the issuance of bonds, state grants or other sources of capital to fund energy efficiency and renewable energy projects. From this fund loans for renewable energy installations are then made to property owners for 15-20 year terms at very low interest making the pay-back of the system more affordable. The property owners that benefit from the improvement repay the bond through property assessments, which are secured by a property lien and paid as an addition to the property tax bill.

The program cost is born only by those property owners who voluntarily choose to attach the cost of their energy improvements to their property tax bill. When the home is sold the new owner simply inherits both the remaining repayment obligation and the financed energy improvements.

 

BENEFITS OF PACE TO MASSACHUSETS  

Energy efficiency offers a "trifecta" of benefits to Massachusetts by putting our hard-hit construction and building industries back-to-work with green jobs, by mitigating our the carbon footprint of our communities and by delivering improved health and comfort to our homeowners. The PACE program is among the top ten measures sited by many groups nation-wide as one that can help build the economy without adding to the deficit. 

 

Benefits to Homeowners:

• Overcomes a key financial hurdle for making investments in energy efficiency and renewable energy;
• Financing payments are low and fixed for up to 20 years, with no upfront cost;
• No costs to property owners who do not participate;
• Special assessment/loan fees transfer to the new owner when the property is sold, or the obligation can be paid in full at transfer;
• Electricity and fuel bills are lower than they would be without the improvements, and the property owner is helping to reduce greenhouse gas emissions.

 

Benefits to Cities and Towns:

• Cities and towns can use PACE to become more self-reliant and energy efficient and contribute to meeting community sustainability, climate, and energy goals;
• Cities and towns can provide a valuable public service to the members of their community.

 

Benefits to Our Economy:

The implementation of PACE:

• Could inject millions of dollars directly into the local economies to make lasting energy and building infrastructure improvements;
• Would provide a steady and growing demand for energy efficiency installers, as well as installers of small scale renewable energy systems;
• Helps to establish a steady and predictable demand for energy efficiency and renewable energy products, helping suppliers and retailers expand their businesses.

 

ROAD BLOCK

PACE, adopted by over 22 states took a big step backwards when in 2010 Fannie Mae and Freddie Mac came out against the financing plan as it would put them in second place for repayment should there be a default on a home mortgage. This is because PACE loans are tied to the property as a tax lien and taxes owed to a city are recovered before the mortgage holder when in default. So Fannie Mae and Freddie Mac set up a policy where they would not loan to any property involved in a PACE program. As Fannie Mae and Freddie Mac buy/hold almost 80% of all US mortgages, this policy stopped all PACE programs in the country dead in their tracks.

 

SOLUTION

Our Vermont neighbors have recently passed new legislation that works around and solves the issues Fannie Mae and Freddie Mac have with PACE financing. Vermont even took their plan beyond the financing of renewable energy projects to include energy efficiency measures to homes. The link below will lead you more details of the PACE program and how it works in Vermont: http://www.veic.org/resourcelibrary/PACE.aspx

CALL TO ACTION

Take a moment to email your local representatives asking them to look at the solutions passed by Vermont and move forward on this most important economic development, job producing, energy producing and carbon reducing legislation.

State Representatives:

GAILANNE CARIDDI (1st Berkshire District)

E-Mail: [e-mail]

PAUL MARK (2nd District)

E-Mail: [e-mail]

CHRISTOPHER N. SPERANZO (3rd Berkshire District)

E-Mail: [e-mail]

WILLIAM “SMITTY” PIGNATELLI (4th Berkshire District)

Email: [e-mail]

State Senator:

Benjamin Brackett Downing (Berkshire, Hampshire & Franklin)

Email: [e-mail]

Northern Berkshire Transition (NBT) NBT’s mission is to inspire, encourage, connect with our community by creating and supporting initiatives that rebuild and strength our resilience to survive social, environmental and economic difficulties, and reduce CO2 emissions. http://northernberkshiretransition.ning.com/ & Facebook: Northern Berkshire Transition

 

 

[Northern Berkshire Transition]

Fate of PACE clean-energy programs about to become clearer
Jonathan Hiskes is a Grist staff writer.

Federal Housing Finance Agency will say Wednesday whether it will allow a 30-month pilot project for Property Assessed Clean Energy (PACE), Congressman Steve Israel (D-N.Y.) said after a meeting today with FHFA reps.

Israel said he proposed a demonstration project of 300,000 homes that would test out FHFA's concern that PACE creates additional risk for mortgage lenders.

"Right now you've got the regulatory community advancing a theory about PACE bonds," he said in an interview. "You have PACE advocates advancing their theory. Let's test out which theory is valid. At the end of the 30-month period we'll have hard data on which to base decisions."

That could provide some clarity over the fate of the popular finance tool that helps homeowners green their properties. PACE programs had been spreading quickly around the nation until Fannie Mae, Freddie Mac, and FHFA, their regulator, came out opposed to them.

Israel and three other Congress members met Tuesday with FHFA leaders and what sounds like a small army of Obama administration officials -- including representatives from the White House National Economic Council, FDIC, and Energy, Treasury, and Housing and Urban Development departments -- to try to hash out a solution. The administration has endorsed the PACE model with $150 million in stimulus funding and tried unsuccessfully to resolve the impasse with FHFA earlier this month.

FHFA already faces a California lawsuit and a House bill that would prevent it from blocking PACE programs. But Israel, like bill author Mike Thompson, would prefer to resolve the dispute without waiting on courts or Congress.

"We'll see how serious they are," Israel said of FHFA. "I think they clearly understood that Congress is not backing down on this and they simply have to work with us."

He said FHFA responded to his proposal by suggesting a much smaller 10,000-home pilot, Israel said -- a plan that didn't impress him.

"[That figure] does not suggest a real commitment to the program. There's no statistician in America who would suggest you could get a valid sample with 10,000 homes," he said.

FHFA Acting Director Edward DeMarco and General Counsel Alfred Pollard said they would make a counter proposal by Wednesday morning, he said. FHFA's spokesperson declined to comment.

Nobody has determined which cities and counties could join the pilot project, whatever its size, although a 300,000-property pilot would leave room for new programs. For perspective, the nation's largest existing program, in Sonoma County, Calif., enrolled about 900 participants in its first year (though it continues to grow).

Israel said the first priority would be to reinstate suspended programs, including San Francisco's, which was launched just before Fannie and Freddie warned lenders to stay away from PACE.

He was sympathetic to Fannie and Freddie's concerns -- among other things, they want to ensure PACE programs have consistent lending and retrofitting standards. He said programs have addressed these and a demonstration would only make the model safer.

"These can all be worked out if people would go from a reflexive 'no' to a thoughtful approach towards 'yes,'" he said. "The choice is litigation, legislation, or [FHFA] can try and solve the problem. The ball is in their court."

[Northern Berkshire Transition]

Energy Self-Reliant States

"All 36 states with either renewable energy goals or renewable energy mandates could meet them by relying on in-state renewable fuels. Sixty-four percent could be self-sufficient in electricity from in-state renewables; another 14 percent could generate 75% of their electricity from homegrown fuels. Indeed, the nation may be able to achieve a significant degree of energy independence by harnessing the most decentralized of all renewable resources: solar energy. More than 40 states plus the District of Columbia could generate 25% of their electricity just with rooftop PV. In fact, these data may be conservative. The report does not, for example, estimate the potential for ground photovoltaic arrays although it does estimate the amount of land needed in each state to be self-sufficient relying on solar even though common sense suggests that this should dwarf the rooftop potential..... It is at the local level that new technologies like smart grids, electric vehicles, distributed storage, and rooftop solar will have their major impact from Energy Self-Reliant States published by the Institute for Local Self-Reliance (http://www.ilsr.org/) October 2009, updated May 2010.

Solar Nation Newsletter" www.solar-nation.org

[Northern Berkshire Transition]

Financing Renewable Energy Projects

NREL recently released another fact sheet in its series on financing renewable energy projects — this issue provides information on property assessed clean energy (PACE) financing. The analysis project is being led by SEAC analyst Karlynn Cory.


Photovoltaics as a Measure in PACE Programs
NREL analyst Jason Coughlin also recently published the fact sheet "Photovoltaics (PV) as an Eligible Measure in Residential PACE Programs: Benefits and Challenges"

http://www.nrel.gov/docs/fy10osti/47097.pdf (PDF 425 KB).

Property Assessed Clean Energy (PACE) financing is one of several new financial models broadening access to clean energy by addressing the barrier of initial capital cost. The majority of the PACE programs in the market today include photovoltaics (PV) as an eligible measure. PV appeals to homeowners as a way to reduce utility bills, self-generate sustainable power, increase energy independence and demonstrate a commitment to the environment. If substantial state incentives for PV exist, PV projects can be economic under PACE, especially when partnered with good net metering policies. At the same time, PV is expensive relative to other eligible measures with a return on investment horizon that might exceed program targets. This fact sheet reviews the benefits and potential challenges of including PV in PACE programs.

[Emily DeMoor]

Jay, this sounds great!  But what if someone were to do the retrofitting to their home and then sell it before 15-20 years pass?

[Northern Berkshire Transition]

The tax assessment  for the energy improvements (essentially a 15-20 loan) simply remains with the property.

Emily DeMoor said:

Jay, this sounds great!  But what if someone were to do the retrofitting to their home and then sell it before 15-20 years pass?

[Northern Berkshire Transition]

Maine's PACE financing approach to work around FannieMae's objections to these loans.

While this solves some issues, by making the PACE loans subordinate to the mortgage loan, these loans could compromise their municipal bond rating. It all depends on the origination of the funds use for the PACE program and the liability the town/city may incure in the process.

Below are the details of the Maine proposal.

 

Property-Assessed Clean Energy (PACE) financing effectively allows property owners to borrow money to pay for energy improvements. The amount borrowed is typically repaid via a special assessment on the property over a period of years. Maine has authorized certain local governments to establish such programs, as described below. (Not all local governments in Maine will choose to offer PACE financing; contact your local government to find out if it has or intends to establish a PACE financing program.)

Maine signed PACE legislation into law in April 2010 authorizing municipalities to establish a loan program to provide financing for clean energy improvements to property owners via local ordinance. The legislation authorizes municipalities to enter into PACE agreements with property owners, provide financing, and collect PACE assessments to repay the loans. Municipalities will be able to use federal grants or other "funds available for this purpose" to establish PACE programs. The legislation stipulates that PACE assessments will be considered subordinate liens, secondary to mortgages. Only homes located within towns that have enacted a PACE ordinance are eligible for the PACE loans. Model ordinances, as well as other related documents, can be found on the Efficiency Maine website.

Efficiency Maine Trust* has developed rules for Maine's PACE programs, which are available on the PACE website. AFC Financial will administer the financial aspects of the program. Municipalities will be required to comply with the law and rules accordingly if they choose to pass a PACE ordinance and develop a PACE program for property owners.
The following eligibility requirements apply:

• Homeowners must have a debt-to-income ratio of 45% or less
• Property taxes and sewer charges must be up to date
• The property is not subject to a reverse mortgage
• The property may not have any outstanding notice of default, foreclosure, or delinquency on the mortgage
• The homeowner must have at least as much equity in the home as the amount of PACE loan

Eligible improvements include:

Efficiency technologies that meet or exceed US EPA and Energy Star standards, or other standards approved by Efficiency Maine Trust, or weatherization improvements that are approved by the Trust.

Renewable energy technologies or electric thermal storage systems that meet standards approved by the Trust.

In April 2010, state of Maine was selected to receive $30 million through the U.S. Department of Energy Better Buildings Program** program to help support implementation of its PACE programs statewide.

*Note: Efficiency Maine Trust was established by legislation in 2009 (LD 1485). This entity is responsible for coordinating the state's energy efficiency and renewable energy programs. Programs run by Efficiency Maine of the Maine Public Utilities Commission and the Energy and Carbon Savings Trust were transferred to Efficiency Maine Trust on July 1, 2010.

**The Better Buildings Program (originally called the Retrofit Ramp-up program) provided $486 million through competitive grants of the Department of Energy's Energy Conservation Block Grant program. The money was allocated via the American Recovery and Reinvestment Act (ARRA) of 2009.