FERRISBURGH — A state energy official will meet with the Ferrisburgh selectboard on Tuesday to explain the benefits of a program that could allow town property owners to finance energy-efficiency upgrades with long-term, town-backed loans.
Peter Adamczyk of the Vermont Energy Investment Corporation (VEIC), which among other things runs Efficiency Vermont, will discuss with selectmen whether Ferrisburgh should become a “Property Assessed Clean Energy,” or PACE, community.
It’s a model for funding energy efficiency that other Addison County towns could emulate.
Adamczyk said Ripton is already discussing PACE.
The first PACE program began operating in Berkeley, Calif., and one of the most successful can be found in Boulder, Colo., according to the One Block Off the Grid website (1bog.org).
“Basically, it’s a way to finance solar systems or energy efficiency retrofits, where the city offers you a loan, and you pay it back through your property tax bills over 15 to 20 years,” the website states. Information on the program is also available at www.pacefinancing.org.
Towns can create a pot of money to loan by selling bonds. Loans then become tax liens on upgraded properties. All towns in Vermont are eligible to sign on, thanks to a pot of federal money to fund the process, Adamczyk said.
Towns cannot become PACE communities except by a town-wide vote, because PACE creates tax-assessment districts. One topic on the table in Ferrisburgh on Tuesday will be whether selectmen will look further at such a vote, possibly in March.
Adamczyk said although there are a few wrinkles to be ironed out in Vermont and nationwide, the basic concept protects towns from loan losses.
“Banks lend money to people … Towns have a relationship with property,” Adamczyk said. “They have the authority to require payment from the owner of that property.”
Another question municipalities have asked — including in Burlington, which Adamczyk said approved the measure — is what administrative burden would be added.
Adamczyk said that either the VEIC or another group designated by the Legislature would probably serve as a central office to determine project and applicant eligibility, handle the paperwork, and collect and process monthly payments to bond banks. He called such an office an “aggregator.”
“Without the aggregator, I think every town in the state, including Burlington, would say this is too much work,” he said.
BENEFITS?
Ferrisburgh energy coordinator Bob McNary arranged the VEIC official’s meeting with selectmen. McNary said PACE programs have the potential to remove for many people the basic hurdles to installing new heating systems, insulating homes, or adding solar panels — high up-front or loan costs.
“In my opinion, the most important part of the PACE program is the amortization schedule. At up to 20 years to repay (a loan) it brings the monthly payment more in line with the monthly savings. Most folks’ budgets cannot justify a $200 monthly payment for a $60 to $70 monthly savings,” McNary said. “PACE addresses this show-stopper.”
The state and Ferrisburgh, he said, have an “aged housing stock” that would benefit from energy efficiency upgrades that might cost from $10,000 to $12,000. (Grants and tax credits can also lower those costs.)
“If you can insulate an old drafty farmhouse that costs $3,000 a year to heat, you could cut the heating bills in half. Those are real savings,” McNary said.
Adamczyk said PACE is not for everyone. Many property owners will find it preferable to pay for improvements out of pocket or take shorter-term conventional loans. But he said others could find it a boon — seniors with no mortgages and older homes, young families with tight budgets, and self-employed residents who sometimes don’t fit banks preferred lending profiles.
Adamczyk and McNary said PACE programs also provide larger benefits. McNary pointed to the environment.
“In today’s financial environment, when most of us are on a tight budget, it’s understandable that carbon and climate concerns are not a priority. But if people can save money through doing quality efficiency projects, then the environmental savings will follow,” he said.
Adamczyk added a list of other benefits, including improving the value and quality of Vermont’s housing stock and reducing dependency on foreign oil while boosting the local economy, including by creating “career-path” jobs evaluating and upgrading homes.
“Those are jobs that are good-paying and require skills,” he said.
REGULATORY HURDLES
Obstacles remain, however. Adamczyk said he and other advocates believe Vermont’s March 2009 legislation authorizing PACE districts is flawed.
At the depth of the recession, the law was compromised to protect banks at the expense of towns, he said: Essentially, state law now said if a bank forecloses on a property with a PACE tax assessment, that tax lien is simply eliminated, potentially leaving towns holding the bag.
“A mortgage holder can demand a town release the lien, that it evaporates,” he said.
PACE backers are pushing for an amendment to allow liens to run with the property and be assumed by the next owner, as would be the case in a typical sale. Adamczyk said the new owner would already benefit from the energy improvements.
“What we’re saying is in a foreclosure, treat the line just like (the deal) was a sale,” he said.
The state law also calls for a “loan loss reserve fund” to pay towns back for any losses from foreclosures, and recommends a small payment into that fund from all property owners who benefit. Adamczyk said a 2 percent kick-in — $200 on a $10,000 project, for example — should be mandatory.
He expects progress — Vermont is the only state of 24 with PACE laws that has those provisions.
“Vermont legislation is quite peculiar,” Adamczyk said. “The compromise that was arrived at looks a little loony today.”
The national problem stems from a July opinion issued by the Federal Housing Finance Agency (FHFA) that PACE tax assessments have to stand in line behind mortgage repayments in home foreclosures of properties with loans backed by the big federal agencies — almost all mortgages.
That opinion means municipalities’ investments are at risk anywhere, and brought residential PACE programs to a screeching halt, Adamczyk said.
But eight lawsuits, notably one by the California attorney general, have challenged the FHFA position, which Adamczyk believes flies in the face of decades of precedent that taxes have always come first in foreclosures.
“That’s a questionable stance,” he said. “They (the FHFA) don’t have the authority to make that statement.”
McNary is confident Ferrisburgh can proceed even given the uncertainties.
“I feel certain the few questions that remain will be successfully resolved,” he said.
McNary hopes for a good turnout on Tuesday at the selectboard meeting.
“The more upfront information we can get to people the smoother the program will operate when we decide to move forward, because it is a fairly complicated program,” McNary said.
Andy Kirkaldy may be reached at [email protected].