One of the noteworthy bills Gov. Ritter signed into law last Friday sets up the nation’s first statewide Property Assessed Clean Energy (PACE) district, called the Colorado New Energy Improvement District.  Sponsored by state Sen. Gail Schwartz, D-Snowmass Village, and Rep. Joe Miklosi, House Bill 1328, known as the New Energy Jobs Creation Act, looks like another win-win situation for clean energy advocates.

By Ann Rascalli

Through the Colorado New Energy Improvement District, homeowners will be able to borrow money for energy efficiency and renewable energy improvements to their property, and pay the debt back over a period of up to 20 years on their annual property tax bill. Only those homeowners who borrow from the fund will see the added assessment line on their tax bill. The legislation allows counties to participate in the statewide district, rather than setting up local districts to manage the program.

The PACE model, which originated in Berekeley, Calif., in early 2009, has become very popular in a short period of time. Berkeley’s program was over-subscribed almost immediately. Since then, more than a dozen states, including Colorado, have passed legislation enabling PACE financing.

TROUBLE BREWING?

Last month Fannie Mae and Freddie Mac raised concerns over one detail of the model: In the case of default, the lender of a PACE loan is paid before the holder of the mortgage. Such “senior” liens prohibit Fannie and Freddie from purchasing such loans. And with Fannie and Freddie guaranteeing half the nation’s mortgages, it is already derailing the PACE model.

Unlike other loans, PACE loans stay with the home.

Charles Redell of Sustainable Industries reports: some programs around the country are still accepting applications but are not currently approving new financing, according to Cliff Stanton, vice president of marketing for Renewable Funding which administers GreenFinanceSF, a PACE program in San Francisco. Fannie and Freddie’s actions could have a chilling affect on how the investment market views PACE financing, says Jules Bailey, principal of Portland-based Pareto Global and co-author of a report called “Energizing Cities: New Models for Driving Clean Energy Investment,” released in June by Seattle-based Climate Solutions. However, it is not the only, nor is it necessarily the best, mechanism for financing energy efficiency loans, he says.

WARM RECEPTION

That aside, supporters of the statewide PACE program are enthusiastic about it. “This gives counties the advantage of participating in a larger, more efficient finance program,” the Garfield New Energy Communities Initiative (GNECI)  said in a release.

“This will make it easier for counties in Colorado to set up clean energy financing,” said Shelley Kaup, chair of the GNECI Advisory Board, told the Valley Journal. “The Advisory Board would like to see Garfield County to be among the first counties to opt in, so Garfield County homeowners can participate in the statewide loan program.”

GNECI had already scheduled a June 21 hearing before the Garfield County commissioners, but the focus of the discussion will now be a little different, said Alice Laird, executive director of Clean Energy Economies for the Region (CLEER), one of the partners in GNECI.

“We have been actively supporting both efforts, the preferred approach is the statewide district,” Laird said. “Counties still have to opt in, and we will be urging the commissioners to be one of first counties to sign up to join the statewide district.”

She added that GNECI would continue to take the lead on a local marketing program if the county signs on.  The loan program is currently only available to residential property owners, but future efforts will involve extending the state program to the commercial sector.