Residential Property Assessed Clean Energy (PACE) Frequently Asked Questions - PUB2840

What is PACE?

Property Assessed Clean Energy (PACE) is a financing mechanism that allows property owners to fund energy efficiency improvements or renewable energy systems. PACE financing is a special assessment repaid on the annual property tax bill, and is a similar mechanism to that of other local public benefit assessments (Community Improvement Districts, Neighborhood Improvement Districts and Transportation Development Districts) that have been available for decades. This voluntary tax assessment is secured by a lien on the property and does not require upfront payment. In most cases, the assessment and the lien are transferred upon sale. Unlike other financing options, PACE offers secured, fixed rate financing for up to a 20-year term.

How does PACE work for homeowners?

The PACE financing model allows a residential property owner to overcome the barrier of not having access to up-front capital necessary to implement energy efficiency and renewable energy improvements. Property owners voluntarily choose to participate in a PACE program to repay their improvement costs over a set time period—typically 10 to 20 years—(through annual property assessments), which are secured by the property itself, and then paid back as a special assessment as an addition to the owners' annual property taxes.

What are some advantages of Residential PACE?

PACE provides an innovative financing opportunity to complete energy efficiency and renewable improvements because it eliminates the upfront costs of completing a project, allowing property owners to realize the positive impacts of their project almost immediately, often including a positive cash flow from reduced utility bills. PACE allows for secure financing of comprehensive projects over a longer term, spreads repayment over many years, and does not require the debt to be paid at sale or refinance. PACE may lead to lower interest rates because of the high security of repayments through the property tax bill. It may also help some property owners deduct payments from their income tax liability and allow municipalities to encourage energy efficiency and renewable energy without using general funds.

Is residential PACE for everyone? How does it compare to other financing options?

PACE is only available to property owners for clean energy options that are affixed to the property; PACE does not finance portable items (refrigerators, light bulbs, etc.) and may not be appropriate for investments below $2,500. PACE programs are not for everyone. It is an alternative to unsecured credit card debt, a traditional variable rate home equity loan or construction loan options. The interest rate is typically lower than the unsecured interest rate available through credit cards, but may not be lower than a home equity loan. However, PACE may be accessible when other forms of credit are cost-prohibitive or not available. As a secured option, PACE financing eligibility does not rely on a borrower’s credit score; they are based on attributes related to the property, consistent payment of taxes and bills, home equity and other factors. Homeowners should evaluate financing options that are available to them for home improvements.

When did Missouri adopt PACE?

PACE was authorized by state statute with the passage of HB 1692 in 2010 (Sections 67.2800 to 67.2835, RSMo). It authorizes local governments to create or join clean energy development boards (also referred to as PACE districts) to offer this financing opportunity to property owners. Rather than establishing their own authority, communities can opt to join an existing authority to make this option available to its property owners and residents.

How do communities join a PACE district?

Missouri counties, cities and incorporated towns and villages have the opportunity to join one of Missouri’s statewide clean energy districts and may do so by passing an ordinance formally adopting the PACE lending program. PACE is available in Missouri with PACE boards currently operating in more than 100 local jurisdictions and growing. See their websites for locations that have joined their districts (links below).

What PACE districts are operating in Missouri?

Missouri Clean Energy District - The Missouri Clean Energy District (MCED) offers funding statewide to participating communities. It has contracted with the Missouri Clean Energy Fund, LLC as its PACE Administrator. Eligible properties and projects include residential, commercial, industrial, agricultural, multi-family, not-for-profit and public facilities. Additional information about program eligibility, cost to participate, participating communities can be found at MCED’s website.

Show Me Clean Energy District - The Show Me PACE Clean Energy District offers funding statewide to participating communities. Show Me Pace has selected the Missouri Energy Initiative, a Missouri-based 501(c)3 nonpartisan nonprofit, as the administrator. Show Me PACE can provide financing starting from $50,000 for energy efficiency, renewable energy, and water conservation projects. Commercial, industrial, agriculture, multi-family residential, nonprofit and public (governmental) properties are eligible for this program. Additional information can be found at the Show Me PACE website.

Set the PACE St. Louis - Set the PACE offers funding to home and building owners in the city to finance energy efficiency, renewable energy and water efficiency upgrades. Set the PACE St. Louis is administered by Energy Equity Funding, LLC, on behalf of the St. Louis Clean Energy Development Board with project financing from PNC Bank. Residential, commercial, industrial and multi-family properties are eligible for this program. Additional information can be found at the Set the PACE St. Louis website.

What kinds of property improvements can be made using PACE?

The Missouri PACE legislation allows PACE to be used for energy efficiency improvements and renewable energy improvements.

Energy efficiency improvements include any acquisition, installation or modification on or of publicly- or privately-owned property that is designed to reduce the energy consumption of such property, including, but not limited to:

• Insulation in walls, roofs, attics, floors, foundations and heating and cooling distribution systems.
• Storm windows and doors, multi-glazed windows and doors, heat-absorbing or heat-reflective windows and doors, and other window and door improvements designed to reduce energy consumption.
• Automatic energy control systems.
• Heating, ventilating or air conditioning distribution system modifications and replacements.
• Caulking and weatherstripping.
• Replacement or modification of lighting fixtures to increase energy efficiency of the lighting system without increasing the overall illumination of the building unless the increase in illumination is necessary to conform to applicable state or local building codes.
• Energy recovery systems.
• Daylighting systems.

Renewable energy improvements include any acquisition and installation of a fixture, product, system, device or combination thereof on publicly- or privately-owned property that produces energy from renewable resources, including, but not limited to:

• Photovoltaic systems.
• Solar thermal systems.
• Wind systems.
• Biomass systems.
• Geothermal systems.

Is Residential PACE available in Missouri?

Yes. One of Missouri's operating PACE districts, the Missouri Clean Energy District (MCED), is contracting with Renovate America to offer its HERO program in Missouri. Residential PACE launched in September 2016 in the Kansas City metropolitan area, and is now available in Southwest Missouri and the St. Louis metropolitan area. See HERO’s website for locations in Missouri.

Residents interested in knowing if their local government is a member of MCED should visit the MCED website. For those interested in learning how to bring a local government into the district, visit their website.

Residential PACE is also offered by Set the PACE St. Louis through the YgreneWorks program. The program expanded to include residential properties in June 2017 and is currently only available to those within St. Louis city limits.

Residents interested in checking their eligibility for the program and to submit an application can visit YgreneWorks website.

What is the HERO program for Residential PACE?

HERO, which stands for Home Energy Renovation Opportunity, is the largest residential PACE program in the United States and has operated in the state of California for a number of years, helping more than 75,000 homeowners lower utility bills by replacing HVAC systems, upgrading windows and doors, adding insulation, going solar and more. Homeowners interested in applying for HERO financing, determining what improvements are eligible or who would like to learn more, should visit HERO’s FAQ page.

What consumer protections are in place for residential PACE?

The HERO program has developed consumer protection policies that all participating contractors must follow. Only registered, verified and approved contractors can participate in Renovate’s HERO program. Contractors participating in the program have the ability to serve homeowners utilizing the HERO program. Consumer protections and policies are crucial to delivering the results necessary to generate the energy savings and a high quality consumer experience. Consumers should understand how PACE financing works along with homeowner obligations, all program fees, the interest rate, the amount of the PACE assessment and how it is to be repaid, how to transfer the assessment if the home is sold and how long the homeowner has to cancel the purchase after a contract is signed. Please see the HERO Program FAQs and links provided below for more information.

What happens if I sell my residence? Will I still be responsible for payments?

No, a PACE assessment is a debt of property, meaning the debt is tied to the property, as opposed to the property owner(s), so in most situations the repayment obligation transfers with property ownership (depending on agreements made pre-transfer of property ownership).

What should I know about PACE assessments and mortgage financing?

Consumers should understand the failure to pay the assessment could trigger foreclosure and property loss, how PACE assessments and the lien position may impact options to sell or refinance their property, and some mortgage lenders may be unwilling to refinance a property subject to a PACE assessment due to the position of the assessment.

Where can I learn more about PACE?

There are a few things consumers should consider about PACE assessments and mortgage financing before committing to the program:

Missouri Division of Energy
U.S. Department of Energy
PACE Nation
HERO Program
Missouri Clean Energy District
Show Me PACE Clean Energy District
St. Louis PACE