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New Jersey

New Jersey

Incentives/Policies for Renewables & Efficiency

Printable Version
Local Option - Property Assessed Clean Energy Financing   

Last DSIRE Review: 09/30/2014
Program Overview:
State: New Jersey
Incentive Type: PACE Financing
Eligible Efficiency Technologies: Locally determined
Eligible Renewable/Other Technologies: Locally determined
Applicable Sectors: Locally determined
Terms:Locally determined
Authority 1:
Date Enacted:
Date Effective:
S.B. 1406
01/17/2012
05/16/2012 (120 days after enactment)
Authority 2:
N.J. Stat. § 40:56-1.4
Authority 3:
N.J. Stat. § 40:56-13.1 et seq.
Authority 4:
N.J. Stat. § 40:37A-55
Summary:

Note: 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 activity 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 PACENow for more information about PACE financing and a comprehensive list of all PACE programs across the country.

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

New Jersey enacted legislation (S.B. 1406) in January of 2012 authorizing municipalities to develop local renewable energy and energy efficiency financing programs for property owners, upon approval to do so by the Director of Local Government Services within the New Jersey Department of Community Affairs (DCA). The municipality may adopt by ordinance provisions creating a "clean energy special assessment" to be imposed on properties that elect to participate in the program and collected on a quarterly basis. The municipality may also issue bonds to fund the program, or apply to a county improvement authority that issues bonds to do so. The proceeds from the special assessment must be used to repay the bond obligations.

The law generally seems to place the details of a specific local program in the hands of local officials, although as noted above the DCA must approve the individual programs offered by municipalities. There are no specific property owner eligibility limits defined in the law, so presumably a municipality has leeway to limit or not limit the a local program to specific types of properties (e.g., residential, commercial) as it sees fit. Likewise, no specific limits are placed on eligible renewable energy or energy efficiency improvements. However, the law does note that for solar or other renewable energy improvements, the property owner may assign renewable energy credits (RECs) or solar renewable energy credits (SRECs) to the municipality or improvement authority to repay the loan. The DCA is directed to coordinate with the New Jersey Board of Public Utilities (BPU) to ensure that financing made available through the programs furthers the goals of the BPU Office of Clean Energy. The law takes effect 120 days after the enactment (January 17, 2012) but the DCA is permitted to take anticipatory action to implement the law in advance of this date. 

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Disclaimer: The information presented on the DSIRE web site provides an unofficial overview of financial incentives and other policies. It does not constitute professional tax advice or other professional financial guidance, and it should not be used as the only source of information when making purchasing decisions, investment decisions or tax decisions, or when executing other binding agreements. Please refer to the individual contact provided below each summary to verify that a specific financial incentive or other policy applies to your project.

While the DSIRE staff strives to provide the best information possible, the DSIRE staff, the N.C. Solar Center, N.C. State University and the Interstate Renewable Energy Council, Inc. make no representations or warranties, either express or implied, concerning the accuracy, completeness, reliability or suitability of the information. The DSIRE staff, the N.C. Solar Center, N.C. State University and the Interstate Renewable Energy Council, Inc. disclaim all liability of any kind arising out of your use or misuse of the information contained or referenced on DSIRE Web pages.

Copyright 2013 - 2014 North Carolina State University, under NREL Subcontract No. XEU-0-99515-01. Permission granted only for personal or educational use, or for use by or on behalf of the U.S. government. North Carolina State University prohibits the unauthorized display, reproduction, sale, and/or distribution of all or portions of the content of the Database of State Incentives for Renewables and Efficiency (DSIRE) without prior, written consent.