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The Development of Property Assessed Clean Energy Districts in Vermont
By Hannah Munger of Encore Redevelopment, April 2010
With the enactment of the Vermont Energy Act of 2009 (Act 45), the creation of Clean Energy Assessment Districts (CEAD) was authorized. The recognizable and popular title for such programs is Property Assessed Clean Energy (PACE). PACE is a voluntary program for property owners who are interested in making energy efficiency and/or renewable energy improvements to their property but do not have the upfront capital required for such endeavors. In essence, owners can finance their personal improvement projects by borrowing money from their respective municipality and subsequently paying back their municipality through an incremental expense (called a special assessment fee) on their property tax bill. There is no upfront cost for property owners and there is no penalty for property owners who choose to opt out of the program. Some important specifications and facts are outlined below:
- Funding is obtained by taxable municipal bonds or other municipal debt.
- The repayment period is a maximum of 20 years and it may not exceed the projected life of improvements.
- With respect to the actual amount of funding that is borrowed, the following provisions have been established:
- The cost of the project to be financed through PACE cannot exceed 15% of the assessed value of the property.
- The cost of the project to be financed by PACE, plus the loan-to-value ratio of any outstanding mortgages, cannot exceed 90% of the assessed property value.
- That amount cannot exceed $30,000 for residential properties up to 4 units.
- Municipalities may participate as an individual or form a consortium with other municipalities.
- Voters in the municipalities must approve the CEAD/PACE designation at an annual or special meeting.
- The actual manual labor must be completed by qualified and licensed contractors who have been approved by an energy efficiency utility, i.e. Efficiency Vermont.
- Should a property owner sell his/her property, the special assessment fees transfer to the new owner at time of purchase or assessment obligation can be paid in full.
- Similar programs exist in other states, including California, Colorado and New York.
In recent legislation, Vermont has mandated aggressive green building goals. PACE directly complements these goals, as property owners around the state will now have access to financing for green improvements. Consequently, the demand for energy efficiency products will increase, driving the market for suppliers and retailers and ultimately spurring the economy. For more information, the following resources are available at your disposal:
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