Thursday, May 1, 2014

PACE - It Seems Like More of a Shelbyville Idea

North Bay Village is considering joining the PACE program which stands for Property Assessed Clean Energy Program.  It is designed to make the long term financing of energy efficient improvements on buildings simpler to get for the consumer and easier to collect for the contractor.  It does this by the somewhat unconventional means of adding the debt to the buildings property taxes as a special assessment, which ensures that the contractor will have primary repayment status in the event of default and allows owners who may not have credit access to finance expensive improvements with a 3 - 4 year break even point.   

The program in Miami-Dade already includes Cutler Bay, Miami, South Miami, Pinecrest, Palmetto Bay, and Miami Shores.  The question now is should North Bay Village join these other cities?  My belief is Yes.  The program is far from perfect and has some strong downsides but overall, we have to start improving our energy infrastructure in this country and urgently in Florida.  We can't wait for FPL.  

There are downsides:
  • The program is not good for individual mortgage holders.  This is because the Federal Housing Finance Administration which buys 70% of the residential mortgages in the United States won't finance a house with a PACE lien, so the advantage of passing the cost along goes away.  
  • There is risk to the village.  If the property owner stops paying taxes, the village still has the obligation to pay the contractor while tax bond sales are made.  The village assumes part of the risk.
  • The rates are good but not great, somewhere between 4 and 7 % interest, which is high. 
 If we go ahead, I don't think it will be a popular or even important program.  Our federal, state, county and municipal governments need to do much more, the average homeowner would be better off using private loans and energy credits, the village needs to concentrate on hardening our infrastructure, but having said all that, we are not getting the perfect solutions by waiting so we should take what we can now.  PACE is not a bad first step.

Kevin Vericker
May 1, 2014

Extra points if you get the Simpsons reference in the title. 

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