It sounds too good to be true: A way to pay for home energy improvements that requires no upfront payments from homeowners and no payments at all by local taxpayers. And though you’d fund your project with a loan, you wouldn’t be saddled with loan payments if you sold the house and moved out.
With a new state law in place to allowing such Property Assessed Clean Energy financing programs, city leaders already “are working to engage a consultant” to set up PACE in Atlanta, says Mandy Schmitt Mahoney, the city’s sustainability chief.
In most states where they’ve been implemented, PACE loans are paid back, as the name implies, through special assessments on real estate taxes for the properties that have gotten the improvements. In Georgia, clean energy advocates admit, local PACE programs may need to be tweaked to operate consistently with the state’s constitution. Still, they’re optimistic that PACE will be a big step forward for a state that has otherwise had a poor record on support for alternatives to conventional power.
“It will be unique tool for communities to encourage clean energy projects,” says Ben Taube, executive director of the Southeast Energy Efficiency Alliance.
PACE originated in none other than the greenie haven of Berkeley, Calif. But the idea is market-oriented at its core. As chief of staff to the mayor there, Cisco DeVries was puzzling in 2007 over ways to help homeowners pay for solar panels and other clean energy projects. It was part of a drive to reduce the Bay Area city’s greenhouse gas emissions by 80 percent.
The problem: Property owners often don’t invest in long-term energy improvements, because they’re unlikely to recoup the full value of the improvements when they sell the property. If an owner took out a conventional loan — say, to add solar panels or insulation — she’d have to continue payments even after she sold the property. Meanwhile, the new owner would enjoy lower energy bills.
So DeVries came up with a nifty solution: A city issues bonds. Homeowners apply for loans funded by those bonds. The loans must be used to invest in efficiency or clean energy projects. And each property owner pays back the loan over 15 or 20 years (with interest, of course) through a special assessment tacked onto his or her property tax bill.
Georgia’s constitution only allows development authorities to issue bonds for local government purposes. So, HB 1388 had to be written give development authorities, rather than cities or counties, the power to issue PACE bonds. The development authorities could then work with the cities to set up PACE programs.
Taube acknowledges that the setup creates the potential for complications. “Obviously,” he says, “there’s gotta be a coordination between the cities and the counties.”
It’s not clear, for example, that PACE participants in Georgia will be able to attach their payments to property taxes. But Taube and Jason Rooks, the environmental lobbyist who engineered the bill’s passage, insist that there are likely to be creative solutions.
“The collection mechanism (whether through the tax assessor’s office or the water department) is not really that big of deal because there are various avenues for a governmental entity to collect payment,” Rooks wrote in an email. “But … the property tax assessment model whereby the local government makes a loan with the power of collection of a property tax had constitutional/legal/political hurdles which we could not overcome this (legislative) session.”
Whatever the questions, Georgia’s PACE legislation incorporates a wide range of projects. While PACE in some other states is limited to energy efficiency or clean energy improvements, Georgia cities could include energy efficiency, water conservation and “energy from renewable resources” in their own PACE programs. And the programs may apply to both homes and commercial buildings.
“This is tool for local communities to pay for improvements through an infrastructure that they haven’t had before,” Taube says. Taube’s energy-efficiency advocacy group even received a $20 million federal stimulus grant last month, part of which can be used to help Atlanta, Decatur and a handful of other cities set up their PACE programs.
All that’s not to say that Georgia has suddenly become a clean energy Mecca. The state Public Service Commission still allows Georgia Power to a fraction of what utilities in other states pay for excess solar energy that’s sent back to power grid by property owners – a big disincentive for solar investment. And the amount of money for clean energy tax incentives was so piddly this year that it ran out in April.
Taube stresses, however, that there are still federal tax incentives for property owners to invest in clean energy and efficiency projects. And Mahoney hopes Atlanta will be well on its way toward developing its own PACE program by summer.
Among other projects, Atlanta environmental journalist Ken Edelstein publishes My Green ATL, an environmental news site.