Efficiency First

‘Simple legislative fix’ introduced by Rep. Steve Israel would facilitate nationwide availability of tax-assessed energy improvement loans

In a policy briefing published this week by Roll Call, Rep. Steve Israel – who serves on the House Appropriations Subcommittee on Energy and Water Development – outlines a plan he has introduced in the legislature make Property Assessed Clean Energy (PACE)  financing available to all Americans.

The idea, in a nutshell, is to authorize the Department of Energy to provide a 100 percent guarantee on bonds that support local and regional PACE lending programs. “Some experts have argued that utility companies can do a better job financing energy efficiency at lower cost and faster pace,” Israel writes. “By bringing the municipal bond market into the equation, there will be an added force supporting public-private partnerships.”

For those who are not already up to speed on the concept of PACE financing, Israel provides a clear and concise explanation:

Municipalities use PACE bonds to create special tax districts in which property owners can choose to borrow the capital to finance energy-efficiency upgrades on their property. The municipality issues a bond for the capital costs of the retrofits and the participating property owners re-pay their loan through a small assessment on their property taxes. Those increases are offset and surpassed by immediate and dramatic savings in their utility bills — most projects can create an immediate 20 percent to 40 percent reduction in energy use. This financing model can be applied to both residential and commercial properties.

The repayment period is up to 20 years. No personal debt is assumed because the lien is placed on the property and transfers with the property ownership. Since property taxes are usually deductible, the borrower should be able to derive a tax benefit.

So far, PACE financing has only been available in limited areas where state or local governments have embraced the concept. By minimizing the risk to investors, Israel believes that the proposed bond guarantee would promote nationwide adoption of PACE financing “without an added burden on America’s taxpayers.”

Read the full briefing at www.rollcall.com/features/Policy-Briefing_Energy-2009/energy_environment/39556-1.html.