PACE options brainstorming
TO: Energy and Sustainability Commission
FROM: Wayne Feiden, FAICP, Director of Planning and Development
On behalf of Chris Mason, Adin Maynard, Catherine Ratte, and Scott Silver
RE: Property Assessed Clean Energy (PACE) brainstorming
DATE: September 12, 2010
A Northampton Property Assessed Clean Energy (PACE) program would fund clean energy
(conservation and renewable energy) for voluntarily participating property owners. Northampton
would fund improvements from bonds which would be paid back from property tax surcharges
(betterments or special assessments) on the participating property owners.
When a few members of the E&S Commission met, we brainstormed the following issues and
questions that must be addressed.
1. Super Liens: Cities’ interests are generally protected by a super lien that is superior to all
mortgages. The Federal Housing Finance Agency has stated that clean-energy super liens create
an unacceptable risk for mortgage holders. FHFA will therefore not permit federally charted
purchasers of secondary mortgages to be involved if there is a clean-energy super lien.
a. Will FHFA change their position?
b. Does Massachusetts law allow the lien to be subordinated behind or junior to a mortgage
or, if not, would the legislature amend PACE to allow this? (This is Maine’s approach.)
c. If the lien is subordinated, how do we quantify the increased risk to the City?
d. Would that risk best be met by a risk premium (a portion of the assessment going to
cover losses) or are there insurance offerings that would cover this risk?
e. Are their local banks who would loan without selling their mortgage on the secondary
market and knowing that if a unit was sold the buyer would need the same kind of relief?
2. City Council resolution: When does it make sense to go to City Council for support in
concept:
a. After we can answer basic questions and prepare a detailed presentation on the issues
b. Maybe January?
3. Public Process: A public process is the first step, after consulting with Mass Save, towards
creating a PACE program
a. Given how long the planning and public process is, does it make sense to move forward
on this while we work on the super lien issue?
b. What are the key issues we want to focus on?
c. We assume
4. Partnerships: What partnerships should we form to put this program together?
a. Serrafix—potentially for no-cost consulting assistance?
b. Mass Save- to coordinate PACE with existing MassSave programs and help with
outreach?
c. National Grid and/or Columbia Gas—envelope stuffers to reach out to people for a
Northampton PACE program.
d. Other?
5. Program Structure: What would we want to offer in a PACE program.
a. What improvements would have a positive cost-benefit during the term of a special
assessment?
b. The program will cover residential, commercial and institutional properties. Is there a
difference between offerings for each type of user?
c. How do we coordinate with MassSave so:
i. PACE is not funding what property owners are getting from MassSave
ii. So there can be a single point of entry into an energy audit
iii. So an energy audit is detailed enough to cover both MassSave and deeper PACE
energy retrofits
d. What should city charges (paid for with special assessment) be:
i. Start up costs
ii. Staff and/or consultant time
iii. Modeling/audit costs
iv. Risk premium or insurance to cover risk premium
e. Should to focus be strictly energy conservation (typically the best bang for the buck) or
also renewable energy
f. Would borrowing best be from a General Obligation bond (backed by the full faith and
credit of the city which creates a risk to the city to be covered by the risk premium but
has a low interest rate) or a Revenue bond (back by the special assessment but still
creating a smaller but real risk to the city’s future bond rating and at a higher interest
rate)?