It sounds too good to be true: A way to pay for home energy improvements that requires no upfront payments from homeowners and no payments at all by local taxpayers.
You’d fund your project with a loan, but you wouldn’t be saddled with loan payments if you sold the house and moved out. And you could even use the same method to finance energy improvements for your business’s commercial property.
City leaders in Atlanta, Decatur, Savannah and Tybee Island already have expressed interest in allowing homeowners to invest in clean energy projects through Property Assessed Clean Energy financing — better known as PACE. In most states where it’s been implement PACE loans are paid back, as the name implies, through special assessments on real estate taxes for the properties that have gotten the improvements.
In Georgia, clean energy advocates admit, local PACE programs may need to be tweaked to operate consistently with the state’s constitution. Still, they’re optimistic that PACE will be a big step forward for a state that has otherwise had a poor record on support for alternatives to conventional power.
“It will be unique tool for communities to encourage clean energy projects,” says Ben Taube, executive director of the Southeast Energy Efficiency Alliance. “There’s now something viable that didn’t even exist four days ago.”
Taube was referring to Gov. Sonny Perdue’s May 21 signing of House Bill 1388, which authorizes PACE programs here. He added that he’s already in conversations with the Atlanta Development Authority and the city’s sustainability chief, Mandy Mahoney, to try to figure out how to bring PACE to Atlanta.
PACE originated in none other than the greenie haven of Berkeley, Calif. But the idea is market-oriented at its core. As chief of staff to the mayor there, Cisco DeVries was puzzling in 2007 over ways to help homeowners pay for solar panels and other clean energy projects. It was part of a drive to reduce the Bay Area city’s greenhouse gas emissions by 80 percent.
The problem is that property owners often don’t invest in long-term energy improvements, simply because they’ll seldom recoup the full value of the improvements when they sell the property. And if an owner took out a conventional loan — say, to add solar panels or insulation — she’d have to continue payments even after she sold the property. Meanwhile, the new owner would reap the benefit of lower energy bills.
So DeVries came up with a nifty solution: A city or county issues bonds. Homeowners or commercial property owners apply for loans funded by those bonds. The loans must be used to invest in efficiency or clean energy projects. And each property owner pays back the loan over 15 or 20 years (with interest, of course) through a special assessment tacked onto his or her property tax bill.
Georgia’s constitution only allows development authorities to issue bonds for local government purposes. So, HB 1388 had to be written give development authorities, rather than cities or counties, the power to issue PACE bonds. The development authorities could then work with the cities to set up PACE programs.
Taube acknowledges that the setup creates the potential for complications. “Obviously,” he says, “there’s gotta be a coordination between the cities and the counties.”
It’s not clear, for example, that PACE participants in Georgia will be able to attach their payments to property taxes. But Taube and Jason Rooks, the environmental lobbyist who engineered the bill’s passage, insist that there are likely to be creative solutions.
“The collection mechanism (whether through the tax assessor’s office or the water department) is not really that big of deal because there are various avenues for a governmental entity to collect payment,” Rooks wrote in an email. “But … the property tax assessment model whereby the local gov’t makes a loan with the power of collection of a property tax had constitutional/legal/political hurdles which we could not overcome this (legislative) session.”
Whatever the questions, Georgia’s PACE legislation incorporates a relatively wide range of projects. While PACE in some other states is limited to energy efficiency or clean energy improvements, Georgia cities could include energy efficiency, water conservation and “energy from renewable resources” in their own PACE programs.
“This is tool for local communities to pay for improvements through an infrastructure that they haven’t had before,” Taube says. Taube’s energy-efficiency advocacy group even received a $20 million federal stimulus grant last month, part of which can be used to help Atlanta, Decatur and a handful of other cities set up their PACE programs.
All that’s not to say that Georgia has suddenly become a clean energy Mecca. Solar advocates and entrepreneurs note that the one of the most effective incentives for clean energy projects nationwide — a state income tax credit — is hopelessly underfunded in Georgia. The $2.5 million that the Legislature set aside for the entire rebate program in 2010 is a fraction of budgets for similar programs in such comparable states as North Carolina. The Georgia program ran out before the end of April, which means that — unlike in most other states — Georgians will have to go the rest of the year without state incentives to encourage clean energy.
Another problem is that Georgia Power pays a fraction of what utilities in other states pay for excess solar energy that’s sent back to power grid by property owners. That “feed-in tariff” is another key factor in justifying solar investments by property owners. So far, however, the state Public Service Commission has allowed the state’s largest utility to keep the rate as low as 4 cents a kilowatt hour.
Taube stresses, however, that there are still federal tax incentives for property owners to invest in clean energy and efficiency projects, and he says he’s already talking to development authorities around the state in an effort to get PACE programs in specific states set up quickly.
Mahoney, director of the Atlanta Office of Sustainability, says she’s still trying to sort through the steps that must be taken to make PACE in Atlanta. But she believes there’s a lot of support for the program her and expects to have an “implementation plan laid out” by the end of June.
NOTE: This article first appeared at MyGreenATL.com and has been dated to reflect the original publication date.
