As of August 2010, 24 states have passed or have existing laws that allow municipal energy financing programs and a handful of cities have established operational municipal energy financing programs. The concept, widely known as Property Assessed Clean Energy (PACE) financing, is sweeping the country as more and more states are enabling the policy and the federal government steps up efforts to offer program design guidelines and seed money through the energy efficiency and community development block grant program.
However, despite hundreds of cities reportedly being in early stages of investigating or designing PACE financing programs they are now all on hold. As of July 2010, the cities are waiting on a resolution of a dispute between state/local governments and the federal housing finance agency (FHFA, e.g. Freddie Mac and Fannie Mae) related to PACE lien seniority and the risk that PACE may have on federally backed mortgages. In August 2010, the good folks at Lawrence Berkeley National Laboratory published a PACE Status Update Report to illuminate the problems and potential solutions surrounding the FHFA’s opposition.
The creation of state enabling legislation has largely consisted of updating existing state laws and codes to amend the authority some or all of the state’s municipalities have to establish special assessment districts. The key components of the enabling legislation are as follows:
- Permit municipalities to create sustainable energy financing districts
- Define the permitted types of renewable energy and energy efficiency projects eligible in the districts,
- Create an opt-in element that allows the districts to consist of non-contiguous, self-selected property owners
- Grant the authority to municipalities to issue and sell bonds needed to provide homeowners the initial capital
Click on a red-shaded state or municipal/county place marker to get details. Shaded states have recently passed or already had existing legislation to enable municipal financing.
- Municipal Energy Financing: Lessons Learned – by John Farrell, Institute for Local Self-Reliance, May 2010
Although still young and evolving, the existing PACE programs identify stumbling blocks and offer valuable lessons about program design and implementation. This ILSR Policy Brief, based on an analysis of existing programs, identifies important issues that have surfaced and comments on possible strategies for addressing them.
- PACE Municipal Energy Financing: Designing State Policy – presentations given to the NGA Center for Best Practices by John Farrell, Institute for Local Self-Reliance, May 2010
- Growing Collection of PACE Financing Reports and Issue Briefs – Merrian Fuller and others at Lawrence Berkeley National Laboratory, ongoing 2010.
- Efficiency Cities Network
- PACE Now
- Vote Solar’s web site on Municipal Property Tax Financing
- Track Cities Developing Municipal Property Tax Financing Programs – from 1Bog
- Innovative Energy Efficiency Financing Approaches [pdf] – DOE Presentation, June 2009
- PACE Financing Information by State – DSIRE Database