PACE 2.0 – Strategic Fixes Needed to Important Energy Financing Program
Updated: March 2011
For the past couple of years, VNRC has been working hard to build support for the clean energy financing tool called PACE – Property Assessed Clean Energy. In 2009, the Vermont Legislature passed enabling legislation that allowed municipalities to create ‘clean energy asssessment districts’ (a.k.a. PACE programs).
Dozens of Vermont communities have expressed an interest in moving PACE programs forward locally. That’s because PACE could provide a key mechanism for making up-front capital available to homeowners for investments in significant weatherization projects or home-scaled renewables.
There is an effort afoot in the 2011 Legislature to address the concerns of Fannie Mae and Freddie Mac and help interested communities move the promising program forward. Affectionately being called ‘PACE 2.0,’ the bill – H.155 – has several components intended to overcome those federal obstacles and move the program forward successfully across the Green Mountain State.
Find out much more below about the program and the strategic fixes proposed for PACE 2.0
To help make these changes a reality, please be sure to let your legislators know how important this program is to you, your community and Vermont’s energy future. Contact your Representative and your Senator today and let them know you support these strategic, needed fixes to Vermont’s PACE program.
For more information or to get involved, contact VNRC’s Johanna Miller at 802-223-2328 ext. 112 or firstname.lastname@example.org.
PACE 2.0 – Reworking Vermont’s Enabling Legislation to Work for Vermonters and a Clean Energy Future
Vermonters know that investing in energy efficiency and renewable energy improvements is good for the environment as well as financially beneficial over time. One major barrier to making these investments is a lack of sufficient upfront capital. For property owners who don’t have the cash to make these investments in major energy improvements, there are few options available that have the necessary combination of easy qualification, attractive interest rate, and a relatively long repayment term.
PACE is a voluntary mechanism allowing individuals wishing to make eligible energy efficiency and/or renewable energy improvements to opt in to a special assessment district created by their municipality. Improvements are funded by taxable municipal bonds or other municipal debt, repaid over up to 20 years. All improvement work must be performed by appropriately qualified and licensed contractors and must be approved by an energy efficiency utility. The PACE program also removes the uncertainty of recovering the cost of improvements if the property is sold because the financing, like the energy savings, stays with the property—not with the person.
Key Provisions of PACE
- Enables municipalities to create and secure debt for a PACE program if they choose, and to secure funding to pay for energy efficiency and renewable energy projects
- Participating municipalities can join together to obtain funding more cost effectively
- Participating property owners pay for the benefit over up to 20 years through a special assessment charged as a new line item on their property tax bills
- The maximum amount that can be financed is 15% of the assessed value of the property, capped at $30,000. The total amount financed by PACE plus any outstanding mortgages on the property cannot exceed 90% of the assessed value.
House Bill 155, sponsored by 22 members (listed below), will significantly improve PACE in Vermont:
· The lien supporting the PACE assessment will be subordinate to any existing property-secured liens – this will comply with Fannie Mae and Freddie Mac concerns.
· All participating property owners must contribute a one-time non-refundable payment equal to 2% of the assessment to a Reserve Fund. This account, managed by the state energy efficiency utility, is available to repay any assessments in arrears due at closing in a default.
· Existing funds designated for energy efficiency must be deposited into an escrow account maintained by the state treasurer (equal to 5% of the total assessments, total not to exceed $1 million) to provide further protection from losses due to defaults that are not covered by the Reserve Fund.
· The PACE lien will stay with the property at transfer, even in the event of foreclosure.
· Efficiency Vermont available to act as aggregator for towns.
House Bill 155 sponsors
Cheney of Norwich
Canfield of Fair Haven
Deen of Westminster
Edwards of Brattleboro
Emmons of Springfield
Frank of Underhill
Head of South Burlington
Hooper of Montpelier
Jerman of Essex
Keenan of St. Albans City
Kitzmiller of Montpelier
Klein of East Montpelier
Lenes of Shelburne
Lorber of Burlington
Marek of Newfane and Marlboro
Martin of Springfield
Masland of Thetford
Mrowicki of Putney
Myers of Essex
Poirier of Barre City
Pugh of South Burlington
Wright of Burlington
Benefits for Vermont Property Owners
- Overcomes a key financial hurdle for making investments in energy efficiency and renewable energy.
- Incremental special assessment payments are low and fixed for up to 20 years, with no upfront cost, and there are no costs to property owners who do not participate.
- Special assessment fees transfer to the new owner when the property is sold, or assessment 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 Vermont 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 Vermont’s Economy
The implementation of PACE:
- Could inject millions of dollars directly into the Vermont economy 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
- The implementation of PACE requires a public vote in each municipality that wishes to go forward.
- Efficiency Vermont and the Vermont League of Cities and Towns will provide support and model documents to assist in the implementation.
This summary is courtesy of the Vermont Energy Investment Corporation