Implementation of Local PACE Programs May Hit a Snag
Implementation of Local PACE Programs Could Be Hitting a Snag
A new program to encourage homeowners and businesses to make energy efficiency improvements and invest in alternative energy technologies, originally slated to be rolled out in our region this summer, looks like it may be facing some potential hurdles. The program, commonly referred to as PACE (Property Assessed Clean Energy) was passed by the California State Legislature as Assembly Bill (AB) 811, in July 2008. The legislation allows local governments to offer fixed rate loans to eligible residential and commercial property owners to offset upfront installation costs of sustainable energy devices such as solar panels. The legislation also allows property owners to repay their loans over 20 years through their property tax bills. If the properties are sold, the loans can be transferred to new property owners, reducing concern that original property owners would be financially responsible for devices that they no longer own.
Many municipalities in the San Diego region are planning to launch PACE
programs. By joining CaliforniaFIRST, a statewide
coalition of municipalities who have opted to implement PACE programs, the
County of San Diego became the regional lead agency of CaliforniaFIRST. Municipalities who want to join the County’s plan
can submit proposals to participate in the pilot program. Cities who have submitted and approved
proposals to participate in the program include
Carlsbad, Chula Vista, Coronado, Del Mar, Encinitas, Escondido, La Mesa,
Lemon Grove, Oceanside, Poway, Santee, and Solana Beach. The expected rollout date of the program for
these municipalities is currently September 2010.
The City of San Diego has spearheaded its own program independent of the CaliforniaFIRST initiative. The City of San Diego Clean Generation Program differs slightly from the County’s program but has many similar elements. The rollout date for the City is currently being decided upon.
Recently, a potential roadblock to implementation of these
programs has emerged. Currently, money
borrowed via these financing vehicles is repaid through property taxes. As both San Diego’s programs are designed, in
the event of default, this money must be repaid before all other
debts—including mortgage payments. The Federal
Housing Finance Agency (FHFA) recently expressed concern about this feature
of the proposals. This agency believes
that PACE loans shouldn’t take priority over mortgage repayment. In late June, one PACE program in Boulder
Colorado, the ClimateSmart Loan Program, was put on hold because of this
controversy. The moratorium on an otherwise successful program triggered
Colorado Governor Bill Ritter to write a letter
to the FHFA asking for clarification on PACE loans. Until this issue is
resolved, pilot programs may face challenges regarding implementation.
For Equinox Center’s fuller description of the PACE program in San Diego County, click here. The Center for California Sustainable Energy is assisting in the implementation of both the County’s and the City of San Diego’s programs and can be contacted for more updated information.