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Program raises energy-improvement funds for middle-income property owners

Representative Town Meeting Members to consider PACE special assessment district

BRATTLEBORO—Town Meeting Members will vote on whether to designate the town of Brattleboro as a Property Assessed Clean Energy (PACE) special assessment district on March 23. The district would help property owners pay for eligible efficiency and renewable energy projects.

PACE is a funding structure that allows residential property owners to opt into the special town-wide tax assessment district. Participating property owners use the PACE funding to pay for energy upgrades to their homes. The owners then repay the loan over up to 20 years.

According to members of the town energy committee’s PACE-subcommittee, the program will have no financial effect on property owners not participating in PACE.

The PACE subcommittee will present on the program at a public information session on Thursday, March 21, at 7 p.m., at the Marlboro College Graduate Center at 28 Vernon St.

The program is limited to owner-occupied four-family homes or smaller.

Establishing a voluntary PACE assessment district will neither cost the town any money nor increase taxes, said Bob Rueter, subcommittee chair.

As Rueter explained, the PACE lien is a tax-loan hybrid. One can think of PACE as a loan, but one operating within the legal structure of a tax, as it stays with the property.

Should a homeowner with a PACE lien fall delinquent on payments, the town would take the responsibility of holding a tax sale, Rueter said.

Payments and bills are slated to be administered by Efficiency Vermont, and not the town, he said.

The Selectboard approved placing the PACE question on the Representative Town Meeting warning earlier this year.

The board voted to join the Quick Start program in 2011. Quick Start served as a time for Efficiency Vermont, the organization heading up PACE in Vermont, to gauge towns’ interest, answer questions, and fine-tune the program’s details.

PACE has appeared before the board several times, starting in 2010. March 23 is the proposed assessment district’s first appearance before Town Meeting Members.

According to Rueter, the board finally “budged” after Town Attorney Robert Fisher said the town would not incur financial or legal burdens in establishing a PACE district.

“There’s no cost to the town. I really want people to get that,” Rueter said.

PACE nationwide

According to the nonprofit organization Alliance to Save Energy, based in Washington, D.C., 26 states have PACE legislation, including the six New England states and large states such as New York, Nevada, California, Colorado, and Texas.

Thirty-four Vermont towns had approved PACE districts by 2012, including Halifax, Marlboro, Putney, and Westminster in Windham County, according to a Vermont Investment Energy Corporation wiki.

The Vermont legislature passed Act 45, the Vermont Energy Act, authorizing “Clean Energy Assessment Districts” in 2009. The legislature refined the act in 2011.

In its original incarnation, PACE appeared as a tax lien on properties. Under conventional law, said Rueter, tax liens are paid before mortgages. Banks and other investors balked at this, he said.

As the program picked up momentum, banks’ concerns prompted the Federal Housing Administration (FHA) to slow things down. The FHA decided not to process mortgages with PACE-related tax liens.

In 2011, said Rueter, Vermont modified its law to work around the FHA’s decision. In Vermont, PACE liens are paid after all existing liens and before new liens except mortgages.

He added that the state has changed the funding structure for PACE. Efficiency Vermont has established a fund that will distribute money to individual homeowners.

Towns will maintain an administrative relationship to the PACE program and must vote to establish the special assessment district.

According to Rueter, the average weatherization project is about $7,000. Homeowners can include multiple project costs in the PACE loan, including the energy audit, the estimated $350 application fee that covers a credit check and title search, or the 2 percent required for the loan loss reserve fund to cover the investors’ risk.

“There’s very little in the way of pitfalls,” said Rueter.

According to Reuter, the PACE program has distinct “cool” advantages:

• The whole project can be financed, including the energy audit and 2 percent loan loss reserve.

• The project can be cash-flow-positive over the repayment period. According to Rueter, many homeowners could pay less for fuel and the PACE loan together than they did for their heating fuel before weatherization.

• Unlike a mortgage that must be paid off at time of sale, the PACE lien stays with the property. If the homeowners sell, the debt stays with the new owner, who now reaps the rewards of having a more-energy-efficient house and lower heating bills.

Rueter adds that the PACE lien is negotiable. For example, the new owner could request that the cost of the PACE lien comes out of the house price.

The outcomes of every PACE project will differ, said Rueter.

“Houses are all very different,” he said.

Some weatherization projects will pay off in five years, and some in 10. Project payback typically is seven to eight years, said Rueter. Timelines on PACE loans can be extended as far as 20 years.

The interest rate will be about 2 percent above prime, said Rueter.

For some homeowners, refinancing or taking out a traditional loan will serve them better. For other homeowners, however, the upfront costs — $4,000 in closing costs for refinancing — are a barrier, said Rueter.

Rueter said PACE liens are geared toward moderate income homeowners who lack the funds to pay outright for a weatherization project, yet earn too much to qualify for state assistance.

Vermont has set a goal to weatherize 80,000 homes by 2020, and reduce heating fuel use by 25 percent, said Rueter.

“We are nowhere near that goal,” he said.

‘Better for the local economy’

Brattleboro Climate Protection, a nonprofit working to develop local solutions to climate change, has worked on PACE for two years, said Paul Cameron, executive director.

Establishing a PACE district in Brattleboro can help improve the town’s housing stock while saving homeowners and landlords money, said Cameron.

According to Cameron, more energy-efficient housing translates into more money staying within the local economy. Saving money on energy costs means less money leaving the area to oil companies. Local energy upgrade projects are often completed by local construction workers as well, he said.

“There’s not many programs that have all those benefits,” Cameron said.

Cameron stressed PACE comes risk-free for the town and with minimal time requirements for staff beyond setting up the program.

“It’s a win-win for the town,” said Cameron.

PACE could help the town meet its goal in the statewide home energy challenge, according to Cameron.

Efficiency Vermont, in partnership with Vermont Energy and Climate Action Network (VECAN), “and other organizations, this year launched a one-year effort to increase the number of homes completing comprehensive energy efficiency improvements in Vermont.”

The thrust of the challenge is to help the state meet its 2020 goal as soon as possible.

Town energy committees and other local partners are competing for statewide recognition. Towns that have the highest percentage of year-round residences weatherized within their region will win $10,000. This award can be applied to a municipal energy efficiency project. Towns achieving the highest percentage of formal pledges from homeowners to improve energy efficiency will receive $500 toward a community energy celebration or fair.

According to Cameron, 76 towns have signed up for the challenge, 10 of which are in Windham County. To reach the 3 percent goal, Brattleboro will have to weatherize 178 residences.

“We’d be doing amazingly well if we were to achieve that [number],” he said.

Cameron said that Brattleboro has weatherized 7.12 residences, or just 4 percent of its target number.

Vermont has no PACE loans yet, Rueter said. Efficiency Vermont is working out the details.

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Originally published in The Commons issue #195 (Wednesday, March 20, 2013).

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