New Jersey PACE Legislation Effective May 2012

Downloadable Fact Sheet on PACE and CCEA: PACE&CCEA2012r5

PACE funding programs are expected to be introduced by many NJ municipalities starting in 2012. This low-­cost, no-­risk financing mechanism for conservation and clean energy improvements is expected to create jobs and have a major impact on reducing energy consumption and fossil fuel use over the near term future. Communities will need to administer, monitor and evaluate quality and performance, and PACE programs are an obvious vehicle for doing this.

Here are some of the things you might want to know about it:

  • First implemented in Berkeley, CA in 2008, PACE allows municipalities to finance energy conservation and clean energy upgrades, and recover the cost through special property-­‐tax assessments
  • The central benefit is that the financing is tied to the property, not to the owner, operator, or tenant.
  • PACE programs have been approved in 28 states, including most recently New Jersey. NJ’s legislation, “AN ACT concerning the financing of renewable energy and energy efficiency systems, amending P.L.1960, c.183, and supplementing R.S.40:56-­‐1 et seq.” was passed as amended in January of 2012, and came into effect May 17, 2012.
  • The Federal Housing Finance Agency (FHFA), which regulates mortgage lenders Fannie Mae and Freddie Mac, has opposed the residential elements of such legislation by refusing to approve mortgages on properties with PACE loans. It is expected that this will eventually be resolved. In the meantime, municipalities may introduce PACE for commercial properties.
  • Municipalities must have programs authorized by the Department of Community Affairs (DCA), and are then entitled to adopt by ordinance provisions creating a “clean energy special assessment” to be imposed on properties that elect to participate in the program.
  • The municipality may issue bonds to fund the program, or apply to a county improvement authority that issues bonds to do so; or utilize bank financing, reserves, grant funds, or a combination of sources. The proceeds from the special assessment may be used to repay the bond obligations or replenish a revolving fund.
  • The law leaves the details of a specific local program in the hands of local officials, although the DCA must approve the individual programs offered by municipalities.
  • A municipality has leeway to tailor its program to specific types of properties as it sees fit. Similarly, no specific limitations are placed on eligible renewable energy or energy efficiency improvements.
  • 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 Office of Clean Energy.

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