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governments will need other targeted energy efficiency policies and incentives for rental properties in addition to the existing low-income weatherization programs.

Cannot finance portable items. PACE programs cannot finance portable items, such as ENERGY STAR qualified light bulbs, refrigerators and appliances, and other products because they can be easily removed when the current owner leaves. Local governments must find other ways to encourage the purchase and use of these valuable upgrades.

Requires dedicated staff time. Administering a PACE program requires time on the part of local government staff. The local governments with existing PACE programs generally have dedicated staff with the time and motivation to run a proper program, as well as support from their local mayors, council members, and other government officials.

High legal and administrative set-up expenses. Now that there are several live programs in California and Colorado, replicating PACE will be easier and likely less costly for grantees just getting started. Local governments may also choose to work together to pool their limited resources and create countywide or regional programs. Still, the concerted effort needed to pass statewide enabling legislation where it is lacking, gain local approval, as well as design and administer a commercial PACE program should not be underestimated.

Not appropriate for investments below $2,500. High origination and administrative costs make PACE programs inappropriate tools for financing investments below a certain cost threshold, typically $2,500.

Some resistance by lenders whose priority in foreclosure may be reduced. If a property should go into foreclosure, typically any assessments that are past due (including incremental PACE assessments, as opposed to the entire PACE-financed amount) would have to be paid off first, thus making existing lenders/mortgage-holders “second in line.” Lenders/mortgage-holders may be resistant to having their existing claim on the property (in foreclosure) become subordinate to PACE.

Advantages From the Local Government Point of View

From the point of view of local governments, commercial PACE programs offer the following advantages:

Direct support for constituents’ actions – PACE programs are a way for local governments to support climate- and environment-friendly building improvements with very little direct cost to governments beyond the high legal and administrative set-up expenses.

Job creation – This new activity stimulates the local economy and creates jobs as the solar energy and energy efficiency sectors grow.

Positive publicity – The local governments in California and Colorado that have been involved in Energy Financing Districts thus far have received positive attention from the media and local civic groups.

Safe and efficient security mechanism – The PACE financing mechanism is extremely secure due to the senior lien on the property, and delinquent special taxes and assessments are repaid before private liens in the case of foreclosure. Risk to the local government’s general fund is minimal.


Chapter 13


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