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Implementing PACE 2.0 in Vermont

Addison County

Regional Planning Commission

October 27, 2011

Peter Adamczyk, Energy Finance and Development Manager

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• Nationally, participation in energy finance programs has been less than 0.5% per year, mostly because homeowners are reluctant to risk upfront cost

• Energy financing programs frequently serve those who least need them

• Short-term consumer financing (less than 7 years) is not effective unless there are substantial subsidies

Why do we need PACE?

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• Voluntary mechanism allowing property owners to opt in to a special assessment district created by their municipality

• Funds may be used for eligible energy efficiency and/or renewable energy improvements

• Repayment period up to 20 years

• Special assessment transfers to the new owner when the property is sold, or can be paid in full at time of transfer

How does PACE work?

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Financing Source

PACE District

Property Owner

Property Owner

Property Owner

Property Owner

Property Owner

How the money flows

Opts In Opts In Opts In

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• The cost of the project financed through PACE cannot exceed $30,000, or 15% of the assessed value of the property (AVP), whichever is less

• The loan-to-value ratio of any outstanding mortgages, plus the amount of the PACE assessment, cannot exceed 90% of the AVP

Vermont PACE parameters

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PACE financing authorized by the state*

Source: www.dsireusa.org / October 2011

CA: 2008

NM: 2009

CO: 2008

WI: 2009

ME: 2010

VA: 2009

OK: 2009

TX: 2009 LA: 2009

IL: 2009NV: 2009

OR: 2009NY: 2009

NC: 2009

FL: 2010

HI: Existing Authority

27 states + DC authorize

PACE

27 states + DC authorize

PACE

DC

MN: 2010

VT: 2009

MD: 2009

GA: 2010

DC: 2010

MO: 2010

NH: 2010

*The Federal Housing Finance Agency (FHFA) issued a statement in July 2010 concerning the senior lien status associated with most PACE programs. In response to the FHFA statement, most local PACE

programs have been suspended until further clarification is provided.  

Where PACE has been authorized

MI: 2010 (C&I Only)

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MA: 2010WY: 2011

OH: 2009

CT: 2011

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Federal Housing Finance Agency (FHFA)

issued a letter on July 6, 2010 regarding

PACE:

•instructed Fannie Mae and Freddie Mac to use more

restrictive mortgage underwriting standards for all

borrowers in jurisdictions with PACE programs

•property owners that participate in senior-lien

residential PACE programs will violate standard

mortgage provisions and could trigger a mortgage

default.

National PACE developments - FHFA

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Traditional lien position

Special assessments are

typically subordinate to

property taxes and senior

to mortgages

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VT PACE Lien position

In Vermont’s legislation,

PACE assessments are

subordinate to property

taxes and mortgages

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24 V.S.A. § 3255

Special assessments … shall constitute a lien on the property against which the assessment is made in the same manner and to the same extent as taxes assessed on the grand list of a municipality, and all procedures and remedies for the collection of taxes shall apply to special assessments.

(source: ww.leg.state.vt.us/statutes/fullsection.cfm?Title=24&Chapter=087&Section=03255)

Vermont’s PACE lien status

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• PACE lien will be subordinate to any existing property-secured liens currently in place

• Subordinate to a subsequent first mortgage (i.e., a refinance)

• No accelerated payments

• Residential only at this time

Vermont’s new PACE legislation

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• Creation of a reserve account is mandatory – 2% from participating property owners

• Creates a statewide loan loss reserve mechanism – 5% from RGGI funds, up to $1 million

• Efficiency Vermont available to act as PACE administrator for towns

• Effective Jan. 1, 2012

Vermont’s new PACE legislation, continued

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PACE implementation

Once permunicipality

Once per property

that opts in

Once perproperty

tax payment

Once perdebt

payment

Property OwnerSupport creation of district

•Identify measures•Apply for financing•Sign agreement

Pay special assessment

Municipality•Design program•Hold vote(s)

•Receive application•Attach lien to property•Disburse funds

Collect special assessment with property tax

Efficiency Vermont

•Design programwith municipality•Provide documents

Underwrite applicationCollect special assessments from town

Make interest payment

FinancingSource

Add town to intermunicipal agreement

Provide funding to all participants in cycle

Receive interest payment

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• Property owner notifies municipality of desire to opt in

• Municipality “underwrites” property – not owner

• Property owner has analysis performed to: quantify project costs and energy savings quantify estimated carbon impacts determine annual cash flow

• Energy Efficiency Utility reviews and approves analysis

• Written agreement and analysis filed with the land record

Process requirements

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• Vermont Energy Investment Corp (VEIC) obtained additional Direct Congressional Funding through support of Sen. Bernie Sanders for statewide ‘Quick Start’ implementation assistance

• Any Vermont municipality may join to determine whether they want to move forward with the creation of a PACE district

• VEIC will provide materials and services necessary for the successful implementation of this program.

PACE in Vermont – current implementation by towns

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Vermont PACE Districts

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Quick Start Communities

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• If your town has not already done so, join PACE Quick Start project – no cost or obligation

• Receive all the documentation and materials and READ THEM!

• Get PACE on your Selectboard’s agenda

• Get a PACE question on your town’s ballot for Town Meeting Day 2012

What can you do?

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• Can overcome a key financial hurdle for major energy efficiency and renewable energy investments

• Incremental special assessment payments are low and fixed for up to 20 years, with no upfront cost

• No costs to property owners who do not participate

• Electricity and fuel bills are lower than they would be without the improvements

Benefits for Vermont property owners

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• Could inject millions of dollars directly into the Vermont economy, to make lasting energy and building infrastructure improvements

• Provides a steady and growing demand for good-quality sustainable jobs that cannot be outsourced

• Decreased energy costs will increase disposable income of Vermonters, allowing money to be saved or spent on other essentials

Benefits to Vermont’s economy

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Peter Adamczyk

Energy Finance and Development Manager

Vermont Energy Investment Corporation

802-540-7631

padamczyk@veic.org

Vermont PACE information

http://pacevermont.wikispaces.com/

More information

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