Local Option – Clean Energy Development Boards

In 2010, the Federal Housing Finance Agency (FHFA), which has authority over mortgage underwriters Fannie Mae and Freddie Mac, directed these enterprises against purchasing mortgages of homes with a PACE lien due to its senior status above a mortgage. Most residential PACE activities subsided following this directive; however, some residential PACE programs are now operating with loan loss reserve funds, appropriate disclosures, or other protections meant to address FHFA’s concerns. Commercial PACE programs were not directly affected by FHFA’s actions, as Fannie Mae and Freddie Mac do not underwrite commercial mortgages. Visit PACENation for more information about PACE financing and a comprehensive list of all PACE programs across the country.

PACE Overview

Property-Assessed Clean Energy (PACE) financing effectively allows property owners to borrow money to pay for energy improvements. The amount borrowed is typically repaid via a special assessment on the property over a period of years. Missouri has authorized certain local governments to establish such programs, as described below. (Not all local jurisdictions in Missouri offer PACE financing. Contact your local government to find out if it has established a PACE financing program.)

Missouri Legislation

In July 2010 the Missouri legislature enacted the Property Assessed Clean Energy Act. The act allows municipalities (county, city, or incorporated town or village) to create Clean Energy Development Boards, which in turn are permitted to develop local PACE programs to finance energy efficiency improvements or renewable energy improvements. A clean energy development board may be created by an individual municipality or by multiple municipalities working together.

In January 2011 the Missouri Clean Energy District was created and is the primary mechanism for PACE financing for most of Missouri’s participating communities and counties; however, the Set the PACE St. Louis program implements PACE in St. Louis. A new PACE board called Show Me PACE was established in June 2015.

Eligible Projects

Many details of PACE implementation are left to the discretion of local governments. Local governments may develop programs that support both energy efficiency and renewable energy improvements. Energy efficiency improvements include but are not limited to HVAC measures, building and equipment insulation, energy recovery systems, energy controls, caulking and weather-stripping, efficient lighting, daylighting, and certain windows and doors. Renewable energy improvements include but are not limited to solar photovoltaics (PV), solar thermal, wind, biomass, and geothermal energy systems.

Improvements must have a positive economic benefit over the term of the financing contract and contracts are limited to 20 years in length. Programs may offer PACE financing support for eligible improvements on any privately- or publicly-owned property. In order to participate in a program, property owners will enter into a special assessment contract with a clean energy development board where the property owner agrees to pay a special assessment in exchange for financing of a qualified improvement. The special assessment constitutes a lien on the property in question and will be collected in the same manner and with the same priority as ad valorem property taxes.

Administration

Clean energy development boards are invested with a variety of powers. As follows the general PACE model, the board is permitted to enter into assessment contracts with property owners and levy and collect special assessments under an assessment contract. A clean energy development board is also permitted to issue bonds or borrow money from any other private or public source. A board may also specify application and qualification criteria necessary to administer a program, including minimum energy efficiency standards, energy audits, and post-installation verification requirements.

See the above website for more details on PACE financing in Missouri.