PACE Legislation Moving Forward in New Jersey

The latest version of A2579 — amending legislation to the PACE statute approved in 2012, which has proved unworkable — has been passed out of the Assembly Appropriations Committee, and is now headed to the floor for a vote. An identical version is being shepherded through the NJ Senate by its passionate sponsor, Senator Bob Smith (D-Middlesex), with the full concurrence of its Republican Co-Sponsor, Senator Kip Bateman (R-Somerville).

Here is a portion of the “Statement” accompanying the release of the bill:

As amended, this bill authorizes municipalities to facilitate private financing of water conservation, storm shelter construction, and flood and hurricane resistance projects through the use of voluntary special assessments, thereby expanding the “clean energy special assessment,” established by P.L.2011, c.187 (C.40:56-1.4 et al.), and renaming it the “PACE special assessment,” to utilize a concise acronym for the term “property assessed clean energy.”

…  Under the bill, water conservation projects, flood resistant construction projects, hurricane resistant construction projects, storm shelter projects, and safe room projects are also eligible for a “PACE special assessment.” The bill allows most municipalities to establish and operate PACE programs without applying for approval by the Director of the Division of Local Government Services. [Except for municipalities under financial supervision by the State, for which the Director will set required conditions.]

… Under current law, to finance eligible projects, the governing body of the municipality may issue bonds pursuant to N.J.S.A.40:56-13.2,2 or may apply to a county improvement authority that issues bonds pursuant to paragraph (2) of subsection (j) of N.J.S.A.40:37A-55. Currently, use of private financing is not explicitly prohibited.

This bill permits certain exceptions to the “Local Bond Law” (N.J.S.40A:2-1 et seq.) for the financing of PACE programs. These exceptions concern the down payment requirement, and provisions addressing periods of usefulness, bond maturity, public sale, and local finance board review. The bill also clarifies that the governing body of the municipality may use private funds to finance eligible projects.

The bill allows a municipality, or a county improvement authority implementing a PACE program on behalf of a municipality, to designate private or non-profit entities to finance the purchase and installation of eligible PACE projects. Similar to programs administered by municipalities and county improvement authorities, the bill provides for private entities to be repaid through PACE special assessments. Because of the specialized and qualitative nature of the services to be provided through agreements between municipalities or county improvement authorities and private entities to administer PACE programs, the bill specifies that these agreements will not be subject to the “Local Public Contracts Law,” P.L.1971, c.198 (C.40A:11-1 et seq.).

The bill takes effect immediately upon enactment.

A copy of the bill may be downloaded here: 2579_R1.

Postscript: A story in the Bergen Record (“Assembly Panel Ok’s Bill to Help Property Owners Finance Flood & Hurricane Resistance Projects,” 12/15/2014)) gets the story mostly right, and adds the comments of several of the bill’s sponsors. It leaves the impression that PACE is already working in New Jersey to finance clean energy projects, while the new legislation addresses resiliency issues:

“The existing program has been helping home and business owners pay for the upfront costs of energy saving initiatives, which the owner then pays back through their property tax bill at a set rate over roughly 20 years,” said Mukherji (D-Hudson). “Given the record amount of damage New Jersey suffered in the wake of Hurricane Sandy, it makes sense to expand this program to help finance other smart initiatives that will save property owners money in the long run.”

In reality, of course, there are no existing programs in New Jersey, and many of the changes in the bill are intended to overcome the obstacles we have encountered over the past two-and-a-half years to the implementation of the program.

The story also contains several other slight but important misstatements of fact or intention, e.g., repeating that private or non-profit programs will need to apply for approval to the Division of Local Government Services (whereas in fact, under the revised language, no such application or approval is needed). But the intentions of the sponsors, Assembly Democrats Raj Mukherji (Hudson), Eliana Pinto Marin (Essex), and Tim Eustace (Bergen-Passaic) are clearly conveyed in their own words. And the story helpfully identifies the key new provisions of the bill, financing flood- and hurricane-resistance improvements, and allowing private administration and financing.

(Also published at CRCSolutions.org.)

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