The American Institute of Architects (AIA) recently urged Congress to approve legislation that would guarantee local governments the right to establish clean energy programs through Property Assessed Clean Energy (PACE) bonds. In mid-July, Sen. Barbara Boxer (D-Calif.) introduced PACE legislation (S. 3642) in the Senate, and Rep. Mike Thompson introduced a comparable measure (H.R. 5766) in the House.
PACE bonds are municipal bonds in which the proceeds from the sale of the bonds are loaned to commercial and residential property owners for the purpose of financing energy retrofits. These loans are then re-paid over long periods of time -- much like a mortgage -- via an annual assessment on their property tax bills. Proponents view PACE bonds as an innovative tool to help property owners reduce energy consumption.
"PACE bonds are particularly important now, at a time when a lack of credit and financing for construction projects have devastated the design and construction industry," Paul Mendelsohn, AIA's vice president of government and community relations, stated in a letter to the chairpersons and ranking members of the House Financial Services and Senate Banking Committees. "As banks have restricted lending, building owners and developers have cancelled projects, taking work out of the hands of architects, builders, and others." He noted that employment in this sector has dropped by 25 percent since the recession began in 2007.
"PACE bonds provide a new funding source that puts people back to work improving our nation's energy independence," Mendelsohn wrote. "They also help shore up the depressed commercial and residential real estate markets."
The Federal Housing Finance Agency (FHFA) and the Office of the Comptroller of the Currency (OCC) recently issued statements blocking PACE pilot programs, challenging states' rights to levy tax assessments for a public purpose and asserting that the consumer and lender protections were not sufficient. Because of FHFA's oversight of Fannie Mae and Freddie Mac, and OCC's influence over banks, the statements brought existing PACE programs to a halt and froze the ability of communities to launch PACE programs already under development nationwide.
"PACE is a local government solution that is supported by a century of legal and historical precedent for special assessment districts, including more than 37,000 districts nationwide that have been used to finance sewers, sidewalks, and other projects that serve a public purpose," AIA stated. "In just the past two years, 22 states have passed laws enabling local governments to develop PACE programs."
Earlier this summer, the California Public Utilities Commission sent a letter to members of the state's congressional delegation, complaining about the stoppage of PACE financing (GBI, July 15, 2010, "Federal Appliance Rebates Yield $2.2B in Energy-Efficient Product Sales; California Utilities Commission Complains About PACE Financing").
Steve Rizer, Editor
Green Building Insider