The Property Assessed Clean Energy (PACE) program is a bond issuing program where annual assessments on a property’s tax bill pay for investments into renewable energy, or energy efficiency, for that property. This makes the financing of a photovoltaic electrical system more affordable for the current property owners, and allows that financing to be passed to the next owner if the property is sold before the bond is paid off. The small incremental costs are more desirable to some, than a large upfront cost. It is successful in low to moderate income neighborhoods where the upfront cost of a PV system would be out of reach for the homeowner.

As of this writing their 23 states that have bond legislation allowing this mechanism, and another 3 states (CT, AZ, and FL) are in process of getting passed.

Fannie & Freddie Mae, semi-privatized-government backed institutions that underwrite large blocks of mortgages oppose PACE programs saying the bond / property assessment is a 1st position lien on the property, which clouds the property’s title, making buying and selling these properties more risky - especially if the assessment goes unpaid.

In plain English, Fannie & Freddie Mac like to be the first ones paid off when a house is sold that they have financed. Their interpretation of the PACE program is that their loan (the large mortgage used to purchase the property) will only get paid off after the bond / assessment is paid off.

Proponents of the PACE program say the agencies have it all wrong and the PACE program assessments are no different than an assessment by a town or city for new sewer lines or to build a new school.

It is this author’s opinion the primary concern is a blow-back from the huge number of mortgage delinquencies and defaults of the last three years. In those cases of foreclosure, lenders in second position usually get only 10% of the loan value, and many times nothing at all. In the case of multi-family buildings (more than 3 units), which are usually classified as commercial properties, the negotiation of leases that start and end at different times of the year, may create challenges for the landlord, or the lender if the property changes hands during the bond-period.

On the surface it seems a simple difference in the interpretation of the program’s position and extent, however there may be underlying issues that are not being aired publicly. For example, could there still be that age-old fear that widespread adoption of PV and solar thermal will undermine the influence of large power and utility companies within the political process?

Up-to-date info on the PACE program and efforts that may be undertaken during the new session of Congress can be found here: http://pacenow.org/blog/

Related Advice:

• Property Assessed Clean Energy (PACE): What Are its Chances in the U.S.?



• Property Assessed Clean Energy: What is the PACE Program and How Does it Work?