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PACE Bonds

The high costs associated with making energy-efficient upgrades to homes and buildings can be a big deterrent to commercial and residential property owners. Enter Property Assessed Clean Energy (PACE) programs. Designed to eliminate the upfront cost for energy improvements, PACE bonds allow property owners to pay for the improvements over 15 to 20 years through an increase in annual property taxes.

A recent innovation in finance that started in California in 2008, PACE programs are popping up nationwide and over the past year, 15 states have passed PACE legislation, including California, Colorado, Illinois, Louisiana, Maryland, Nevada, New Mexico, New York, Ohio, Oklahoma, Oregon, Texas, Vermont, Virginia, and Wisconsin. Just last week, San Francisco offered up $150 million in PACE loans for businesses looking for ways to finance energy efficiency, renewable energy, and water conservation projects.

PACE bonds can provide big benefits to both property owners and municipalities, including:

  • Positive cash flow and significant savings on energy retrofits—by repaying the investment over the long term, property owners can take advantage of energy savings that will exceed annual property tax costs
  • Job creation for states without a credit burden—PACE loans are attached to the property, so property owners who opt in to PACE loans are responsible for repayment
  • Increased overall property value—since the annual energy savings is greater than the annual tax costs, property owners enjoy increased property values, which also boosts their credit standing on their existing mortgage
  • Low investment risk—PACE bonds are secured by long-term tax liens, so bond holders and investors can rest easy that they’ve made a smart and stable investment

What’s great about PACE bonds is that they create a market for renewable energy and energy-efficient retrofits, and property owners can use them to fund numerous projects now and in the future. To read more about the detailed history of PACE bonds, view state-specific PACE programs, and see what other organizations are endorsing PACE, visit http://pacenow.org

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