Ever considered adding a geothermal heating system or some solar panels to your home? Maybe you live in a home that is nearing the century mark with original windows and zero insulation in the walls. Legislation introduced this year by Senator John Doll and Representative Jeremy Kalin would provide homeowners a new way to access financing for renewable energy and energy efficiency improvements.
Traditionally, homeowners desiring to make efficiency improvements had two options – pay cash or secure private financing through a home equity line of credit or second mortgage. PACE, which stands for Property Assessed Clean Energy Financing, provides a third option that has been gaining momentum around the country as not only a viable, but a critical, third funding mechanism.
PACE is designed to allow local governments to finance small-scale renewable energy systems and energy efficiency improvements for homeowners by paying for the improvements up-front with revenue bonds and then recouping the expenditure through a special assessment on the homeowner’s property taxes. While programs differ around the country, the federal guidelines allow for financing up to 10 percent of the home’s assessed value with a payoff time of up to 20 years. The program, which is entirely voluntary, provides benefits to both the property owner and the local government.
Individual property owners would contract directly with a qualified vendor. There is no up-front cost to the property owner, and if the property is sold before the end of the repayment period, generally the new owner would take over the remaining special tax payments as part of the annual property tax bill. The idea is that over the long-term, the annual energy savings will offset or exceed the annual financing costs, making the investment in the improvement worthwhile.
For a local government, PACE can assist in reaching targeted greenhouse gas emissions goals. In addition, PACE poses little to no liability or exposure to the local government’s general fund. It can recoup all of its costs as a pass-through to homeowners.
If the enabling legislation passes this year, the process for establishing the program is similar to establishing any other special tax or assessment district. Depending on the local government, this could take anywhere from 3 to 12 months or longer, once the local government decides to move forward.