NLC Briefs Congressional Staff on the PACE Program

February 21, 2011

by Carolyn Berndt 

NLC, together with the National Association of Counties (NACo) and the PACENOW coalition, recently held a briefing for Congressional offices on the importance of the Property Assessed Clean Energy (PACE) program to homeowners and local governments.

In addition to the briefing, NLC and NACo sent a letter to all members of Congress to urge their support for the program and to reaffirm the traditional authority of local governments to utilize the tax code for public benefit.

Bipartisan legislation is expected to be introduced soon in both the House and Senate that will ensure that the underwriting standards of Fannie Mae and Freddie Mac will promote the use of PACE programs to finance the installation of renewable energy and energy efficiency improvements. Additionally, Rep. Mike Thompson (D-Calif.) has filed an amendment to the House proposed Continuing Resolution for FY 2011 with the same intent.

With introduction of legislation pending, the State of California, Sonoma and Placer Counties (Calif.), the Sierra Club and the City of Palm Desert, Calif., continue to pursue court action that seeks to overturn the Federal Housing Finance Agency's (FHFA) directives that have effectively halted mortgage financing for homes participating in the PACE program. The U.S. District Court for the Northern District of California is currently considering whether to require FHFA to initiate public notice and comment procedures.

Under the PACE program, local governments provide funds to participating homeowners to install energy efficiency upgrades, which are paid back over time in the form of a special assessment on the property tax. Payments are typically secured by a lien on the property that gives local governments priority of repayment if the home goes into foreclosure. Twenty-four states plus the District of Columbia have already passed legislation enabling cities and counties to pursue PACE programs.

When implemented in a community, the PACE program removes many of the barriers of energy efficiency and renewable energy retrofits that otherwise exist for residential homeowners and businesses, particularly the high upfront cost of making such an investment and the long-term ability to reap the benefits of cost savings.

Last year, the PACE program was dealt a setback when the FHFA, which oversees the nation's largest mortgage finance companies Fannie Mae and Freddie Mac, issued a statement objecting to local governments holding the first lien on PACE homes, calling it a significant risk to the mortgage financier.