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Is This the End of PACE?

Property Assessed Clean Energy (PACE), a topic on which I’ve posted for this blog, written about for HPAC Engineering magazine, and lectured, is a unique means of financing primarily energy-efficiency improvements, including renewable-energy projects, for residential and commercial properties. Scientific American magazine called it one of the top 20 ideas that can change the world. What makes PACE so unique is that the financing is tied to the value of a property and not to the creditworthiness or personal guarantee of the property owner. It can finance up to 100 percent of a qualifying project and is repaid as a special—non-ad valorem—tax assessment. It always has been state and local in nature, with states passing enabling legislation to allow local government adoption. PACE programs have been enabled in more than 30 states and the District of Columbia.

PACE has had obstacles since its genesis in 2008. Here in Florida, for example, where PACE also can be used to finance hurricane-hardening improvements, the banker’s lobby challenged it (unsuccessfully) all of the way to the state supreme court. The banking lobby since has moved its opposition to PACE to the national level, prompting legislation that could have a chilling, even fatal, effect on all state-enabled residential PACE programs. S.838—the PACE Act of 2017—would define PACE as a mortgage loan by making it subject to the Truth in Lending Act. If S.838 passes, it could require both sponsoring local government entities and participating contractors to become licensed as mortgage brokers and even change the way local governments levy, assess, and collect PACE assessments.

S.838 was introduced by Sen. Tom Cotton (R-Ark.) on April 5. Cotton has characterized PACE as a predatory green energy lending scam designed to trick seniors into high-interest-rate loans for technology that could be obsolete in a few years. Although there have been some abuses in residential PACE projects in the past, these have been—or are being—aggressively addressed on a state-by-state basis. As a generalization, Cotton’s assertions could not be further from the truth. High-efficiency HVAC and LED lighting certainly are not about to become obsolete.

As one would expect, HVAC retrofits are a major focus of PACE. Many HVAC contractors are actively participating in PACE projects in their states, affording homeowners (and business owners) the opportunity to upgrade to high-efficiency air conditioning without any net capital investment. I expect few of these contractors would be willing or able to jump through all the hoops required to become licensed mortgage brokers. I urge all of you to write your senators and representatives opposing this legislation.

 

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