Note: The Federal Housing Financing Agency (FHFA) issued a statement in July 2010 concerning the senior lien status associated with most PACE programs. In response to the FHFA statement, most local PACE programs have been suspended until further clarification is provided.
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. Wisconsin has authorized certain local governments to establish such programs, as described below. (Not all local governments in Wisconsin offer PACE financing; contact your local government to find out if it has established a PACE financing program.)
Wisconsin enacted legislation (A.B. 255) in May 2009 that amended local governments' existing authority to impose "special charges" for certain services. Originally, local governments were authorized to create programs that charge its citizens for "services," such as snow/ice removal, garbage collection, recycling, weed control, among others. A.B. 255 added energy efficiency improvements -- including renewable energy devices -- to the list. Furthermore, the legislation authorizes local governments to make a loan to property owners for energy efficiency and/or renewable energy improvements. In May 2010 S.B. 624 added water efficiency measures to the list of eligible improvements.
The original legislation limited such loans to residential premises, but the law was expanded by S.B. 624 to include commercial and industrial properties. The repayments are considered a "special charge" and may be collected in installments. Responsibility for the charge may be passed on to the next owner of the property if it is not completely repaid by the time of sale. Municipalities may enter into an agreements with the owner or lessee regarding loan payments to a third party for owner-arranged or lessee-arranged financing. Additionally, such a third party may collect the special charges allowed under the law.
Each local government that chooses to offer a PACE financing program must determine the eligible energy efficiency or renewable energy technologies, identify a funding source, develop the terms of the loan, and program specifics. For projects of $250,000 or more, all municipalities must require that contractors or projects engineers guarantee that the improvements will result in a savings-to-investment ratio of greater than 1.0. If the project fails to meet that standard, the contractor or engineer must pay the owner any shortfall in savings below that level. For projects less than $250,000, municipalities may require a third-party review of the projected savings before approving the project.
As of August 2011, local PACE programs had been launched by three local governments, as follows:
- Milwaukee - Milwaukee Shines Solar Loan Program (this has since been suspended)
- River Falls Municipal utilities - Save Some Green Renewable Energy Finance Program
- Racine - Retrofit Racine Energy Efficiency Program (this has since been suspended)