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
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.
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.
Chapter 13 —