Chairman John Carona’s Property Assessed Clean Energy (PACE) bill, Senate Bill 385 (SB 385), which was sponsored by Chairman Jim Keffer in the House, is headed to the Texas Governor’s desk!  Building upon successful legislation passed in 2009 to authorize “PACE districts” in Texas, SB 385 clears some of the hurdles that prevent commercial and industrial properties from taking advantage of new financing for water and energy conservation efforts.

PACE is an innovative, market-based approach that helps alleviate the steep, upfront costs property that owners generally incur for water and energy improvements by using loans that are seamlessly repaid through an additional charge on their property tax bills.  The loan is then attached to the property, rather than the owner, and can be transferred if the property is sold.  PACE loans can be issued by city or county financing districts or financial institutions, such as banks.  Property owners who participate will start saving money on their utility bills each month as a result of water conservation, energy efficiency and/or renewable energy improvements, while repaying the loan annually when they file their taxes.  In other words, they will see net gains despite increased property taxes.  The program is entirely voluntary.

In 2009, Governor Perry signed House Bill 1937 (HB 1937) by Mike Villarreal, which established PACE districts in Texas for the first time.  Although cities and counties across the state began the process of setting up PACE districts, the entire process was derailed when the Federal Housing Finance Agency (FHFA) created an obstacle for residential PACE programs.  FHFA expressed concerns about the senior lien—that is, if a homeowner with a PACE loan defaults, the repayment of the PACE obligation would take priority over settling the mortgage.  There were also some structural concerns which would have “required the Texas legislature to amend or replace the existing statute.”  This new bill, SB 385, addresses the structural problems and applies to commercial and industrial (rather than residential) property owners, thus removing the senior lien concern from the equation. Read More »