‘Green’ loan programs spread at a rapid pace
Begun in California last year, the Property Assessed Clean Energy (PACE) program, which finances energy-saving retrofits for homes and buildings, has spread to cities and counties in 13 other states. Supporters have organized a campaign to spread the program nationwide, saying it offers a new financing option for residents to improve the energy efficiency of their homes and businesses.
Under a PACE program, participating cities and states establish financing districts in which commercial and residential property owners can use proceeds from PACE bonds issued by the districts to finance energy retrofits, such as efficiency measures and small renewable energy systems. The property owners repay their loans over 15 to 20 years through annual assessments on their property tax bills.
In early 2009, Boulder County, Colo., officials began the ClimateSmart Loan Program, which is modeled after California’s PACE program. Boulder County Commissioner Ben Pearlman says they collect 99.7 percent of their property taxes, so they saw little risk in offering the program. In September, Boulder County was one of 50 local governments that supported the New York-based Clinton Global Initiative’s campaign to spread PACE nationwide.
More than 600 Boulder County residents took out $10 million in loans in the county’s ClimateSmart Loan program, Pearlman says. The state is allowing the county to issue up to $40 million in bonds to fund the program. The county plans to issue its first round of commercial loans in a few months.
However, in June, Federal Housing Finance Agency Director James Lockhart issued a warning to several associations, including the Washington-based National Governors Association and the National Conference of State Legislatures, about the use of energy loan tax assessment programs (ELTAPs) like PACE. In the letter, Lockhart warns that ELTAP loans could impair the value of the mortgages and contribute to homeowners’ risk of losing their homes if they cannot meet the additional debt of the loan. “It would be prudent for those interested in energy improvements related to residential property to consult with federal and state financial regulators to determine the best approach to achieving desired results while avoiding loan programs that actually are adverse to homeowners,” Lockhart wrote.
A copy of the letter, as well as the PACE supporters’ response, is available at PACENOW.org. Among other points, the response states that PACE loans “have a uniquely positive impact on the value of a property by increasing property values and reducing the costs of property ownership, [and] PACE programs pose significantly less risk to the property owner or lender than virtually any other tax or assessment district.”