VTDigger: PACE program for home energy efficiency back on track

Jul 27, 2011 No Comments by

Reposted here from VTDigger.

Vermont will be the first state in the nation to move forward with the federal Property Assessed Clean Energy (PACE) program, which will allow homeowners to borrow money from municipalities to make renewable energy or energy efficiency improvements to their homes.

 

Homeowners would pay back the loans through an assessment on their property tax bills.

 

The Federal Housing Finance Agency effectively put the program on hold last year due to concerns about repayment in the event of a loan default. At that point, 26 states had approved some form of the program. Last week, legislation was introduced in the U.S. House of Representatives to force the Federal Housing Finance Agency to withdraw warnings about the program.

 

Residents who default must pay property taxes first, then pay any overdue assessments, then mortgages. Because the PACE program increases assessments, the agency had concerns about homeowners’ abilities to pay mortgages if they had to first make PACE payments.

 

Vermont’s energy bill this year moved PACE assessments behind mortgages in payment priorities, and federal authorities approved this change. So far, Vermont is the only state to put PACE back on track.

 

The funding for the program would be secured through a bank or group of banks, and the loans would be administered by municipalities. In order qualify for the program, communities must vote to create a PACE district.

 

Peter Adamczyk, energy finance and development manager for the Vermont Energy Investment Corp., said he expects the state to issue a request for proposal for the funding before town meeting day. Adamczyk said he is optimistic about the program’s adoption once the state has found interested lenders.

 

PACE programs are already being approved across Vermont. According to Adamczyk, 13 towns have already approved PACE districts. He says he expects that number to rise in the leadup to the Jan. 1 start date for the programs.

 

Municipalities are intermediaries in the PACE process. The funding will come from a third party and then go to the property owners. The town is involved in the repayment system, Adamczyk said, because it has a property tax assessment and billing system in place for each of the properties within its borders.

 

Because the repayment periods for the assessments are up to 20 years, PACE programs ultimately generate positive cash flow for property owners, Adamczyk said. With a long repayment period, payments can be low enough that energy savings generated by the improvements are likely to be higher than the annual payments.

 

The programs will be protected by two separate sources; homeowners will pay 2 percent of the value of their loan up front. The money will go into a reserve account to repay the funding source in the event of a default. A loan loss reserve will be funded by regional greenhouse gas initiative funds for 5 percent of the value of all loans.

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