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Financing Green Improvements with Property Assessed
Clean Energy (PACE)
Peter Adamczyk | Energy Finance and Development ManagerApril 14, 2010
• For 150+ energy finance programs, participation has been < 0.5% per year
• Energy financing programs mostly serve those who least need them
• Short-term consumer financing (less than 7 years) is not effective unless there are substantial subsidies
• Positive cash flow is key
It reduces the risk perceived by lenders
It supports loans to those who would be judged unable to meet debt obligations without promised savings
Why do we need PACE?
• Voluntary mechanism allowing individuals to opt in to a special assessment district created by their municipality
• Eligible energy efficiency and / or renewable energy improvements are funded by taxable municipal bonds or other municipal debt
• Repayment period up to 20 years—may not exceed projected life of improvements
• Special assessment fees transfer to the new owner when the property is sold, or assessment obligation can be paid in full at time of transfer
How does PACE work?
PACE financing authorized
Source: www.dsireusa.org
CA: 2008
NM: 2009
CO: 2008
WI: 2009VT: 2009
18 states authorize PACE (16 states have
passed legislation and two states
permit it, based on existing law)
MD: 2009
VA: 2009
OK: 2009
TX: 2009 LA: 2009
IL: 2009 OH: 2009NV: 2009
OR: 2009 NY: 2009
NC: 2009
FL: Existing Authority*HI: Existing
Authority*
Where PACE has been authorized
• The cost of the project financed through PACE cannot
exceed 10-15% of the assessed value of the property
• The loan-to-value ratio of any outstanding mortgages,
plus the amount of the PACE assessment, cannot
exceed 80-100% of the assessed property value
• Residential properties generally capped at $20,000 to
$40,000
• Repayment period 15-20 years—may not exceed projected life of improvements
Typical PACE program parameters
Financing Source
Town’sPACE Program
PropertyOwner
Property Owner
Property Owner
Property Owner
Property Owner
How PACE money flows
Opts In Opts In Opts In
• Lien position- first mortgage- subsequent mortgages/liens
• Default procedures- non-payment or partial payment- loan loss reserves- Foreclosure –current vs. accelerated payoff
• Transfer of PACE lien at sale- limited experience shows many liens are paid off- difficulty in establishing value of improvements
Implementation issues
PACE lien position
PACE assessments, like
all special
assessments, are
typically subordinate to
property taxes and
senior to mortgages
• Demand for PACE bonds- Taxable bond market is very small- Natural fit for retirement accounts
• Lack of standardization- Lien status- Loan-to-value- Savings to investment (SIR) ratio
• Economies of scale- back office services- financing
Obstacles to growth of PACE
• White House Policy Framework for PACE
Financing Programswww.whitehouse.gov/assets/documents/PACE_Principles.pdf
• PACENOWwww.pacenow.org
• Database of State Incentives for Renewables &
Efficiencywww.dsireusa.org/documents/summarymaps/PACE_Financing_Map.ppt
• Guide to Energy Efficiency & Renewable Energy
Financing Districts for Local Governmentshttp://rael.berkeley.edu/financing/resources
Additional PACE resources
Peter Adamczyk
Energy Finance and Development Manager
Vermont Energy Investment Corporation
802-488-7631
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