PACE Program (Property Assessed Clean Energy) Financing fought by Fannie Maeby Hugh Holub on Aug. 08, 2010, under economy, environment water and energy
While Arizona has been busy trying to run illegal aliens out of the state, other states have had more useful priorities.
In California, for example, that state is seeking to create a Property Assessed Clean Energy (PACE) program.
Here is how PACE works:
Property assessed clean energy (PACE) programs enable local governments to finance renewable energy and energy efficiency projects on private property, including residential, commercial and industrial properties. The programs eliminate the chief barrier to clean energy installations: the large upfront cost.
Generally, PACE is rooted in traditional land-secured municipal finance. A local government creates an improvement district; a bond, secured by real property within the district, is issued; and the bond proceeds are used to fund renewable energy and energy efficiency projects. Property owners then repay the debt service on the bond in fixed payments as part of their property tax bill.
There are two major characteristics, however, that make PACE unique. First, property owner participation is 100% voluntary. Only those property owners who choose to participate in the PACE program pay additional costs. Second, the bond proceeds are used to pay for prequalified clean energy improvements on participating properties. Improvements that a property owner may often choose from include renewable energy technology like solar panels, energy efficiency projects like a high efficiency furnace, and in some states water conservation measures.
In other words, a city, town or county could create a Renewable Energy District covering its entire jurisdiction. Then folks who want to install solar systems on their homes or businesses can sign up and get their system, paying it off with an addition to their property tax bill. It is a voluntary assessment.
The major advantage is it deals with the high cost of these systems and creates a new avenue for financing.
Since the renewable energy improvements are an improvement to the property, they stay with the home or business if it sold, and the buyer continues to pay the assessment.
The home or business gets the benefit of reduced energy bills, which savings easily could exceed the cost of energy over the life on the financing.
The PACE program would really launch a massive conversion to renewable energy all over the country, as well as create a whole lot of jobs.
You’d think the federal government would be doing everything possible to get states to pass legislations to authorize PACE improvement districts and allow them to be created.
You would be wrong.
Fannie Mae and Freddie Mac, the two semi government mortgage backers (that taxpayers have spent billions to bail them out) have torpedoed the creation of PACE districts in California, prompting the state to sue the federal agencies.
Remember, these are the two outfits that helped tank our economy.
There’s a local link to this story. Jim Chilton, who owns a ranch over by Arivaca, is a principle in Chilton & Associates, a major municipal bond firm in California. Jim and his company were heavily involved in the California effort to establish a PACE programs in that state.
Fannie Mae and Freddie Mac gunned the California program down in July.
If Arizona is going to pick a fight with the feds, wouldn’t be a whole lot better if we were fussing with the feds to allow the expansion of renewable energy alternatives in our state than SB 1070?
California sues Fannie, Freddie over clean energy.
Wednesday, 14 Jul 2010Text Story by:
By myFOXla.com Web Staff
Sacramento – State Attorney General Jerry Brown sued the federal government Wednesday, asking a judge to stop government-sponsored mortgage buyers from blocking a program that lets homeowners pay for energy-efficient improvements through increased property taxes.
Brown’s lawsuit argues that Fannie Mae and Freddie Mac’s opposition is forcing California counties to back off plans to provide the incentives. He sued the buyers and their regulatory agency, the Federal Housing Finance Agency, in Oakland U.S. District Court.
The voluntary Property Assessed Clean Energy program would encourage homeowners to install solar panels, better insulate their homes and take other steps to improve energy efficiency, Brown said. Homeowners pay for the improvements through their property tax assessments over a decade or more.
Fannie Mae and Freddie Mac say the programs could give counties top priority to be repaid if homeowners default on their mortgages. As a result, they said they could not buy or guarantee mortgages on properties that participate.
The Federal Housing Finance Agency affirmed that legal interpretation July 6.
“Mortgage holders should not be forced to absorb new credit risks after they have already purchased or guaranteed a mortgage,” Acting Director Edward J. DeMarco said Wednesday.
DeMarco said his agency will fight Brown’s lawsuit in order to protect taxpayers, lenders and both mortgage programs. He said in a statement that California’s program would put homeowners at financial risk.
Freddie Mac spokesman Brad German and Fannie Mae spokeswoman Janice Smith declined to comment.
Brown said in a written statement that the federal programs are “throwing up impermeable barriers to bank lending that creates jobs, stimulates the economy and boosts clean energy.”
He announced the lawsuit in San Diego. San Diego County and about half of California’s 58 counties were offering or preparing to offer the incentives, but they stopped after the federal programs warned in May that they could violate federal rules.
Brown argues in his lawsuit that the government incorrectly interprets the program as providing loans. He contends in his lawsuit that they are classified under California law as tax assessments, which would require new owners to take over the payments if a home is sold before the improvements are paid off.
Other states have or are considering allowing similar programs. But as a result of the federal interpretation, some lenders started requiring homeowners to repay the full amount of their improvements before they could sell or refinance their homes.
The uncertainty led counties to halt the programs while Brown, Gov. Arnold Schwarzenegger and the state’s congressional delegation lobbied the Federal Housing Finance Agency to permit the incentives.
California’s program promotes energy independence, Schwarzenegger said in a statement backing the lawsuit. Doing away with the program “would be preposterous,” he said.
Congress created Fannie Mae and Freddie Mac to buy mortgages from lenders and package them into bonds that are resold to investors. They own or guarantee about half of all mortgages, or nearly 31 million home loans worth about $5.5 trillion.
The suit asks a federal judge to rule that California law should govern the program and order Fannie Mae and Freddie Mac to let the program go forward under that interpretation.
The federal government’s stance could cost California more than $100 million in federal stimulus money, Brown said.
The state has devoted millions of dollars in federal stimulus and federal energy efficiency grant money to the programs, Brown said. State lawmakers approved legislation by Democratic Sen. Fran Pavley creating a $50 million fund to encourage the energy efficiency program, and Schwarzenegger signed the bill into law in April.
The program was just getting under way but was proving popular before it was halted, Brown said.
Sonoma County had financed more than 800 solar and other projects worth more than $30 million. Placer County was seeing about $2 million a month in applications before the program abruptly stopped, stalling 33 applications worth about $800,000. San Diego’s program was supposed to start this summer, but Brown said it has been suspended indefinitely, leaving more than 100 people trained in energy retrofits without jobs.
U.S. Department of Energy spokeswoman Niketa Kumar could not immediately say how many other states started similar programs.
More on the PACE program: