Guide to Energy Efficiency & Renewable Energy Financing Districts For Local Governments
Property Assessed Clean Energy (PACE)
Property Assessed Clean Energy (PACE) programs are a financing tool used by local governments to loan funds to property owners for energy efficiency measures and energy improvements/retrofits such as renewable energy systems (e.g., solar panels and small wind turbines). The PACE loan repayment obligation attaches to the property via an added property tax assessment instead of to the individual who initially received the PACE financing. In most cases, the state legislature must allow its cities and counties (municipalities) to form a special tax/assessment district to finance energy improvements/retrofits on private property. In states that do not authorize PACE programs, municipal leaders interested in PACE financing should encourage their state government to pass PACE-enabling legislation. California’s PACE-enabling legislation is a good example of this type of legislation.
On July 21, 2008, Governor Arnold Schwarzenegger signed into law California Assembly Bill 811 (AB 811), Contractual Assessments: Energy Efficiency Improvements, which enables California cities and counties (municipalities) to pay for clean energy and/or energy efficiency projects with Property Assessed Clean Energy (PACE) financing arrangements, which are also known as Energy Financing Districts (EFDs). AB 811 authorizes California municipalities to designate areas within which qualifying property owners can enter into contractual assessments with the municipality to finance the installation of small renewable energy systems and/or energy efficiency improvements that are permanently fixed to the property owner's real property. The loans provided by California municipalities to qualifying property owners for renewable energy generation and energy efficiency improvements will be repaid as an item on the property owner's property tax bill. Pursuant to California’s PACE financing/EFD enabling legislation, the City of Berkeley launched a pilot program in November 2008 and within ten minutes of opening the application website, Berkeley property owners reserved the $1 million of initial funding. Funding for Berkeley’s PACE financing/EFD program comes from issuing “micro” bonds that are purchased by the city’s financial partner.
City of Berkeley PACE/EFD Guide
To provide guidance to municipalities that want to implement PACE financing/EFD programs and to states pursuing PACE financing/EFD enabling legislation, the City of Berkeley commissioned a report entitled "Guide to Energy Efficiency & Renewable Energy Financing Districts for Local Governments." The authors of the Report designed it for local government officials and decision-makers, state policymakers, and citizens groups that want a PACE financing/EFD program established in their region. The report contains:
- An introduction to PACE financing/EFD concepts (e.g., how PACE financing/EFDs work, barriers to action, and benefits and limitations of PACE financing/EFDs);
- Steps that municipalities can follow to develop a PACE financing/EFD program once the state has enacted enabling legislation;
- Details regarding financing elements (e.g., sources of capital, financing and collection mechanisms, underwriting criteria, and security interests);
- Case studies of the four most established PACE financing/EFD programs in the United States, which show the different approaches taken to address the challenges of designing, financing, and administering PACE financing/EFD programs;
- Specifics on how to determine the number of people that will participate in a PACE financing/EFD program;
- Guidance for amending state laws to provide for the creation of PACE financing/EFD enabling legislation that can facilitate the establishment of PACE financing/EFD programs by the state’s municipalities;
- Details for municipalities to consider when defining eligible projects; and,
- Information on how to get the most impact, measure success, and perform effective education and outreach.
This Report specifics how to design, finance, and manage a PACE financing/EFD program. For those Sustainability Officers in states that have not passed PACE financing/EFD enabling legislation, this Report provides suggestions on how to get state policymakers to enact such legislation. Additional PACE resources, including a PACE State Legislation Battle Toolkit can be found at http://www.pacenow.org.Any change to an existing facility, such as the adjustment, connection, or disconnection of equipment.Energy that comes from sources that are not depleted by use. Examples include energy from the sun, wind, and small (low-impact) hydropower, plus geothermal energy and wave and tidal systems.Either a product formulated from multiple materials (e.g., concrete) or a product made up of subcomponents (e.g., a workstation).Energy efficiency is the process of using less energy to produce the same or increased functions. Often used mistakenly as a synonym for ENERGY CONSERVATION. The ability or potential of a physical body to do work. The most common forms of energy are heat, light, mechanical (moving parts), and electrical.