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DRAFT

U.S. DOE

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Is PACE the Right Choice?

A summary of the key advantages and disadvantages of PACE for property owners is presented below in Table 1.

Table 1 - PACE Advantages and Disadvantages

PACE Advantages

  • Allows for secure financing of comprehensive projects over a longer term than does traditional financing, making more projects cash flow positive (i.e., monthly energy savings are greater than monthly principal and interest payments).

  • Transfers the repayment obligation with ownership, potentially overcoming hesitancy to invest in longer payback measures* by spreading repayment over many years and removing the requirement that the debt be paid at sale or refinance.

  • Can lead to low interest rates because of the high security of loan repayments as a result of their attachment to the property tax bill.

  • Helps some property owners deduct payments from their income tax liability.

  • Allows municipalities to encourage energy efficiency and renewable energy without putting their general funds at risk.

  • Taps into large sources of private capital, such as the municipal bond markets.

PACE Disadvantages

  • Available only to property owners; renters cannot access the program directly.

  • Cannot finance portable items (e.g., screw-in light bulbs, standard refrigerators, etc.).

  • Can require dedicated local government staff time.

  • High legal and administrative expenses to set up.

  • Not appropriate for investments below $2,500 due to minimum origination and administrative costs.

  • Potential resistance by lenders/mortgage-holders whose claim to the property may be subordinated to the unpaid assessment amount should the property go into foreclosure.

  • *

    In this chapter, a “measure” stands for a single improvement that has been or can be made to a property to

reduce its energy usage. One or more measures to be implemented on a property to improve energy efficiency are referred to as a “project.”

For details on the above points, as well as advantages from the local government point of view, see Attachment A. Advantages and Disadvantages of PACE.

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Chapter 13

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