PACE Backers Eye Administrative Fix

By Published On: March 11, 2011

Property Assessed Clean Energy program proponents may pursue an administrative strategy to revive their innovative solar and energy efficiency financing strategy in the months ahead after last year's failed legislative effort. Getting President Obama to use his executive power to clear away federal policy hurdles for the financing strategy could be the quickest and easiest way to jump start the largely stalled program, according to PACE champion Jim Ferguson. The former Palm Desert city council member addressed PACE backers March 3-4. They met in Palm Desert-the first city to institute a PACE program under Ferguson's leadership-to strategize on how to expand the nascent financing effort, admitting their present course of litigation promises to be slow and that the outlook for federal legislation is uncertain. Property Assessed Clean Energy is a financing program in which home and business owners borrow funds for solar and energy efficiency upgrades and pay off the loans as part of their property tax assessments. Municipalities arrange or make the loans and administer the program. Just as the property assessment program was set for dramatic expansion after successful use by some communities in California and other states, the Federal Housing Finance Agency undercut it last summer. In response to concerns about the safety and soundness of the nation's banking system, the agency issued a policy statement that effectively blocked federally-backed mortgage loans for properties that have PACE program assessments. The federal housing agency said the property assessment loans-because they represent senior indebtedness ahead of actual mortgages in the event of defaults-could harm banks when foreclosures occur. Ferguson, noted that the default rate in existing programs has been less than 1 percent. He added that the immediate savings on energy bills for home and business owners usually are greater than the actual annual increases in property tax assessments. Nevertheless, legislation to undo the federal housing agency's pronouncement is unlikely in this Congress, according to David Gabrielson, PACE Now executive director. He observed that bills in both the Senate and House last year failed, even with extensive Democratic support in a Democratically-controlled Congress. The problem, according to Gabrielson, is that only two Republicans signed onto the legislation and now the Republican Party controls the House. This means, he said, any Property Assessed Clean Energy legislation in this Congress "has to be a Republican-supported bill" to succeed. It's not impossible, he added. For instance, Representatives Mike Thompson (D-CA) and Dan Lundgren (R-CA) are co-chairing a House working group to see if they can put together consensus-based PACE legislation that could pass. Meanwhile, litigation that California, Sonoma County, and others filed against the federal housing agency's policy is moving slowly, according to the plaintiffs' attorneys. A trial is not expected before April 2012. The upshot is that 24 states and municipalities throughout California remain on hold with property assessment financing programs put together just before the federal housing agency issued its policy. With no clear road ahead on litigation or legislation, Ferguson thinks the quickest way to advance solar property assessments is to lobby the White House for an executive order requiring the federal agency to modify its policy. Ferguson outlined a subtle approach in which Property Assessed Clean Energy activists would approach key California legislators and political operatives to get them to suggest that the White House-potentially through Vice President Joe Biden-commission a study on the pluses and minuses of existing PACE programs to date. PACE managers expressed confidence that once the White House studies the track record of existing programs, it will see the benefits and order federal housing agency officials to soften or entirely back off their stance. Effectively, Property Assessed Clean Energy officials noted, the energy savings that result from financing energy efficiency and solar installations make it easier for people to meet mortgage payments, lowering their risk of default.

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