PACE: The Economic Incentive for Environmental Protection

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In the fall of 2019, the National League of Cities and the National Association of Counties (NACo) collaborated with PACENation to produce a three-part webinar series aimed at outlining the benefits of PACE (Property Assessed Clean Energy) to local governments, educating local officials about PACE financing and explaining how the program can be used for commercial and residential buildings.

The series, which is available online, provides basics about PACE, including updates related to the program and state and local government resources, while highlighting how economic incentives can stimulate environmental health by encouraging best practices when building energy efficient infrastructure. The series provides an overview of the fundamental purpose of PACE, updates on recent issues, trends, and best practices associated with the program, and describes ongoing resources and support for cities, towns and villages to achieve environmental goals.

PACE is a financing mechanism that promotes renewable energy, energy efficiency, drinking water and resiliency improvements. The program primarily does this by allowing building owners to make renovations to their property and repay the money used to make those improvements as a line on their property tax assessment. PACE financing benefits local governments by creating local jobs while placing almost no economic burden on cities’ budgets.

The introductory installment of the webinar series explains how PACE removes barriers to financing energy efficiency and renewable energy projects, such as the high upfront cost, by allowing building owners to pay for property improvements through their property taxes. PACE provides financial incentives for cities, towns, and villages across the country to promote renewable energy, energy efficiency, water conservation, and resiliency improvements. Currently, 36 states and the District of Columbia have passed laws enabling local governments to develop PACE programs.

The second installment of the series focused on Commercial PACE, specifying how the program can be employed for multifamily homes with more than 4 or 5 units and other non-residential properties. In 2019, the states of Delaware, Illinois, Nevada, and Pennsylvania introduced new C-PACE financing programs, contributing to a market that saw $1.1 billion of capital funded by 21 different states invested predominantly in energy efficiency projects.

The final installment of the series highlighted Residential PACE, which allows for home improvement projects that offer financial benefits to housing market consumers through the same tax mechanism. That is, the tax imposed to pay for home improvements includes a fixed interest rate with a repayment term associated with the estimated length of time an improvement is considered an asset to the homeowner. Residential PACE programs are operating in California, Florida and Missouri, with several more states, such as Ohio, developing programs to launch this year.

The current implementation of PACE across the country represents transformative progress in energy efficiency and resiliency. NLC continues to support locally administered PACE programs that allow for improvements to private property and help local governments meet public policy objectives.

Want to learn more about PACE? NLC is serving as an honorary co-chair of the PACENation Summit, which is taking place March 30-April 1 in Columbus, OH.

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About the Author: Maxwell Bessard is an intern with the National League of Cities’ Federal Advocacy team. He is a senior at UC Berkeley.