Peter Adamczyk, Vermont Energy Investment Corporation


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Peter Adamczyk, Vermont Energy Investment Corporation

  1. 1. Financing Green Improvements with Property Assessed Clean Energy (PACE) Peter Adamczyk | Energy Finance and Development Manager April 14, 2010
  2. 2. Why do we need PACE? • For 150+ energy finance programs, participation has been < 0.5% per year • Energy financing programs mostly serve those who least need them • Short-term consumer financing (less than 7 years) is not effective unless there are substantial subsidies • Positive cash flow is key  It reduces the risk perceived by lenders  It supports loans to those who would be judged unable to meet debt obligations without promised savings
  3. 3. How does PACE work? • Voluntary mechanism allowing individuals to opt in to a special assessment district created by their municipality • Eligible energy efficiency and / or renewable energy improvements are funded by taxable municipal bonds or other municipal debt • Repayment period up to 20 years—may not exceed projected life of improvements • Special assessment fees transfer to the new owner when the property is sold, or assessment obligation can be paid in full at time of transfer
  4. 4. Where PACE has been authorized NY: 2009 OR: 2009 VT: 2009 WI: 2009 MD: 2009 NV: 2009 OH: 2009 IL: 2009 CO: 2008 CA: 2008 VA: 2009 NC: 2009 NM: 2009 OK: 2009 TX: 2009 LA: 2009 18 states authorize PACE FL: Existing HI: Existing Authority* (16 states have Authority* passed legislation PACE financing authorized and two states permit it, based on Source: existing law)
  5. 5. Typical PACE program parameters • The cost of the project financed through PACE cannot exceed 10-15% of the assessed value of the property • The loan-to-value ratio of any outstanding mortgages, plus the amount of the PACE assessment, cannot exceed 80-100% of the assessed property value • Residential properties generally capped at $20,000 to $40,000 • Repayment period 15-20 years—may not exceed projected life of improvements
  6. 6. How PACE money flows Financing Source Town’s PACE Program Property Property Property Property Property Owner Owner Owner Owner Owner Opts In Opts In Opts In
  7. 7. Implementation issues • Lien position - first mortgage - subsequent mortgages/liens • Default procedures - non-payment or partial payment - loan loss reserves - Foreclosure –current vs. accelerated payoff • Transfer of PACE lien at sale - limited experience shows many liens are paid off - difficulty in establishing value of improvements
  8. 8. PACE lien position PACE assessments, like all special assessments, are typically subordinate to property taxes and senior to mortgages
  9. 9. Obstacles to growth of PACE • Demand for PACE bonds - Taxable bond market is very small - Natural fit for retirement accounts • Lack of standardization - Lien status - Loan-to-value - Savings to investment (SIR) ratio • Economies of scale - back office services - financing
  10. 10. Additional PACE resources • White House Policy Framework for PACE Financing Programs • PACENOW • Database of State Incentives for Renewables & Efficiency • Guide to Energy Efficiency & Renewable Energy Financing Districts for Local Governments
  11. 11. More information Peter Adamczyk Energy Finance and Development Manager Vermont Energy Investment Corporation 802-488-7631