green: DC PACE PROGRAM

Affordable Choices for a Brighter Future

DC PACE Program

What is PACE?

PACE stands for "Property Assessed Clean Energy", which is a program to finance energy retrofits in residential and commercial properties. Energy efficiency retrofits are installations or renovations to a building that reduce a property's energy consumption and greenhouse gas emissions, such as installing highly energy-efficient air conditioning and boiler systems, replacing windows, installing smart-meters that automatically turn lights and equipment off when not in use, and many other solutions.

This innovative financing program is being tried by many states and municipalities nationwide. Typically, property owners borrow money from their "municipal financing district" (whichever is applicable: the city, county, or state), and repay their energy retrofit loan over a 10 to 20 year period through their property tax bill.

The Mayor and the Council of the District of Columbia authorized PACE in April 2010, with up to $250 million worth of PACE bonds to get the program to scale. Currently, about 70% of the District's electricity consumption is by buildings, and 75% of its greenhouse gas emissions is from buildings. The government's intent is to greatly reduce the District's electricity use and reduce greenhouse gas emissions, as well as catalyze a green economy that will create business opportunities and jobs for District companies and residents.

The program is voluntary and property owners will not be charged a special assessment unless they have applied for and been approved for PACE financing.

How does the PACE program work?

The DC PACE program is in development and will not be operational until 2011. Generally speaking, however, the program will work as follows:

The District of Columbia has authorized the creation of a PACE program through legislation entitled the "Energy Efficiency Financing Act of 2009" [add link to PDF of legislation]. The legislation created a "Special Assessment District" so that all property owners are eligible to participate in the program.
This Fall 2010, the District of Columbia will select a private company to administer the program (or be the District's PACE program administrator).
Once the PACE program administrator is selected, the company will create the underwriting criteria, application rules and processes, and publicize when the PACE program is operational.
Once the program is up and running, the property owner will get a site evaluation for energy efficiency improvements with a qualified company they choose.
Once a quote is given, the property owner applies for financing with the PACE program administrator or a partnering bank. A small fee covers the cost of the municipal financing program administration and discourages frivolous applications.
Once the property owner's application is approved, either a private bank or the PACE program administrator will pay the installer for the system that the homeowner purchased. There is no upfront payment for the property owner, except possibly a deposit and the origination fees.
The District of Columbia will "buy-out" private loans for energy retrofits with public bonds, after which point, the District of Columbia will add the PACE special assessment to the borrower's tax bill.
The property owner pays back the PACE loan on his or her property tax bill over 10 to 20 years (depending on the type of energy efficiency renovation/installation), at a competitive rate of interest.
If the property is sold before the 10 to 20 year loan is paid off, the new property owner assumes the tax liability associated with the property, which should be attractive to the new owner, since they will also be receiving the cost savings associated with the energy retrofit.