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. Texas has authorized local governments to establish such programs, as described below. (Not all local governments in Texas offer PACE financing; contact your local government to find out if it has established a PACE financing program.)
Texas enacted legislation in May 2009 that authorizes municipalities to establish contractual assessments (i.e. loans) for energy efficiency and renewable energy improvements to property. The law establishes the process for a municipality to establish a program, but many of the details of the program are determined locally.
As required by law, the municipality must first pass a resolution stating its intent to designate an area for the assessment, even if the area will cover the entire municipality. That same resolution must include proposed details of the program and a public hearing must be held to receive feedback from constituents. The resulting municipal plan must determine and specify the following:
- Eligible renewable-energy systems and energy-efficient technologies;
- A method for ranking requests from property owners for financing through contractual assessments if requests exceed the authorization amount;
- Specification of whether the property owner may purchase the equipment directly or contract for the installation;
- The maximum aggregate dollar amount of contractual assessments;
- A map of the boundaries within which contractual assessments will be offered;
- A draft contract specifying the terms to be agreed upon by the municipality and a property owner;
- A method for ensuring that property owners who request financing have the ability to fulfill financial obligations; and
- A plan for raising the capital required to pay for work performed. The law allows municipalities to fund these directly or use proceeds from bonds. Furthermore, the plan must include information on how the interest rate and repayment schedule is determined, and whether or not a reserve fund will be created (and how).
Once the municipal plan is implemented, property owners within the assessment area may opt-in to the program voluntarily. Subsequently, after they enter into a contractual assessment and receive funding for their energy improvements, a lien will be placed on their property and will remain until the assessment (loan), and interest is fully repaid.
As of December 2009, San Antonio and Austin are actively developing PACE programs.
