What is Property Assessed Clean Energy (PACE)?
Assessment Financing is a public improvement finance mechanism that has been around for more than 100 years to fund public works projects. Property Assessed Clean Energy (PACE) was introduced in California in 2007 as a form of assessment financing to fund improvements to qualifying properties, namely projects that reduce energy and water usage, and which are deemed in the “public good” (like assessments for school bonds, fire districts, etc.)
How PACE Works: from Program Creation to Funding
- Step 1: State approves PACE legislation (33 so far)
- Step 2: Counties or cities “opt-in” to one or more PACE programs based upon state program parameters
- Step 3: CleanFund underwrites PACE programs to ensure best practices
- Step 4: CleanFund sources transactions:
Directly through relationships with property owners
Indirectly through channel partners (engineers, contractors, loan brokers, solar installers)
- Step 5: CleanFund underwrites individual transactions, gets program approval and funds the transaction
- Step 6: The county collector adds a line-item to the property’s tax bill, and collects the new PACE payments as part of ordinary remittances
What is an Assessment Contract?
An assessment contract sets forth the property owner’s obligation to repay the PACE financing over time along with their normal property tax payments and clarifies the various terms of the PACE financing. The contract is between the property owner and the municipality in which the property is located. In California, a Joint Powers Authority (“JPA”) often executes the contract on behalf of the municipality. CleanFund purchases a PACE bond that is backed by an assignment of the assessment contract (in California and certain other states).
How do I pay my PACE Assessment?
This assessment is levied each tax year and included on the building owner’s property tax bill. The payments are due at the same time as ordinary property tax payments. This may vary depending on state and jurisdiction. Contact the CleanFund team for more information regarding the specific payment schedule in your jurisdiction.
Can I make a partial payment of my property tax bill?
No, in most jurisdictions, you cannot partially pay your property taxes (i.e., choosing to exclude certain line items). In the state of CA, a partial payment of property taxes or PACE assessment triggers a delinquency of the full amount of taxes and assessments due during that billing period.
Can I pay off my assessment early?
Yes. Typically, a prepayment premium must be paid in connection with a prepayment, which is set forth in the assessment contract.
Can PACE financing be used to reimburse previous work?
Yes, PACE can be used to finance improvements that are already installed and in operation should there be written acknowledgement of PACE as a financing option. As a safeguard, CleanFund’s Initial Application includes a clause on intention to reimburse prior to the start of construction, which preserves the Owner’s right to be remunerated for work that has already been completed. This might include engineering studies, energy audits, and other soft costs.
Does PACE financing provide for 100% of construction costs?
Yes, CleanFund can provide financing for up to 100% of costs associated with the improvements, including soft costs, such as engineering, site work, and energy audits.