Southern Sky Energy is an authorized Originator for the Florida PACE Funding Agency (FPFA).
FPFA is an interlocal agreement created and established as a separate legal entity, public body and unit of government, pursuant to Section 163.01(7)(g), Florida Statutes, with all of the privileges, benefits, powers and terms provided for therein and by law.
For further information related the Florida PACE Funding Agency, please visit www.FloridaPACE.gov
What is Property Assessed Clean Energy (PACE)…?
PACE is a long term, fixed rate source of financing that allows homeowners to do energy conservation and hurricane hardening improvements to their property. Property owners can use PACE financing to cover 100% of the costs involved in installing eligible projects, including all related equipment, materials and labor. Eligible improvements include energy efficiency, water conservation, renewable energy generation, and resiliency upgrades. A few examples include: air conditioners, roofs, windows/doors, water heaters, solar panels, pool heaters, hurricane shutters, and generators.
There are two types of PACE programs, “Residential PACE” (sometimes referred to as “R-PACE”), which covers residential properties (1 to 4 family homes), and “Commercial PACE” (sometimes referred to “C-PACE”), which covers multifamily (5+ family homes), retail, hotels, industrial, and other types of commercial properties. Some states have enabled both types of PACE, while others have just enabled C-PACE.
Property owners pay back the financing for PACE improvements through a special (non-ad valorem) assessment that is added to their property tax bill each year. Property owners repay the special assessment for an agreed upon term (usually the useful life of the improvements) and the interest rates are fixed. There are no adjustments to interest rates and no balloon payments.
PACE assessments can be prepaid at any time and R-PACE does not have any prepayment fees. Because the assessment is attached to the property, rather than the owner of the property, if the property owner sells the property before the assessment is paid off, the balance of the assessment remains with the property. The assessment can transfer to the new owner without any need to approve the purchaser of the property.
PACE, therefore, makes it easy for property owners to make improvements to their home by eliminating upfront cash payments, providing competitive interest rates spread out over time, and allowing property owners to transfer repayment obligations to a new owner upon sale.
However, with respect to R-PACE, on December 22, 2014, the Federal Housing Finance Agency (“FHFA”) which oversees the eleven Federal Home Loan Banks (“FHLBanks”) and Fannie Mae and Freddie Mac issued a statement (which has been confirmed by subsequent statements and remarks) in which it made clear that Fannie Mae and Freddie Mac’s policies prohibit them from purchasing a residential mortgage where the property is subject to a first lien PACE assessment. FHFA has made it clear that Fannie Mae and Freddie Mac should neither purchase nor refinance mortgages which are encumbered by PACE assessments.
As a consequence of the FHFA position on PACE assessments, a homeowner may have difficulty selling its home or refinancing its mortgage if the home is subject to a PACE assessment. Specifically, some mortgage lenders or secondary mortgage market purchasers may either (1) refuse to refinance an existing mortgage, (2) refuse to finance the purchase of any property or (3) refuse to purchase mortgages in the secondary mortgage market with respect to a home subject to a PACE assessment. This may mean that if a homeowner desires to sell its home or refinance its mortgage after the homeowner obtains PACE financing, the homeowner may be required to prepay the PACE assessment before the homeowner can close such a transaction.
PACE first arose due to an unmet need for homeowners to get financing, as banks and other lenders did not make credit specifically available for energy conservation retrofits, renewable energy and other conservation & sustainability improvements.
Many studies show the economic and environmental benefits of improving commercial and residential properties to be energy efficient, resilient, and sustainable. See the U.S. Department of Energy’s Energy Efficiency Potential Studies Catalog for a sample of relevant studies.
Prior to PACE programs, credit was not available based on current banking practices to allow many homeowners, and small and medium-sized businesses, the credit to make energy efficient changes to their home or make improvements to hurricane harden their property.
The only financing opportunities were short-term loans, or financing with a credit card. A short-term loan usually resulted in debt payments that would exceed any savings realized by upgrading their property. The corresponding negative cash flow was a problem for both property owners and the lenders. Property owners could only start to realize the economic benefits of energy efficiency retrofits after the loan had been fully repaid. Under these circumstances, there were very little improvements being made to the existing homes and commercial buildings. PACE solves this issue by providing long term, fixed-rate credit, allowing the cost savings to equal to, or exceed, the debt payments.
In order to attract money lenders, PACE has been designed as an assessment on the real property. Since the assessment is a high lien position, money lenders are very willing to provide money to homeowners and businesses. The high lien position is justified due to PACE’s inability to accelerate a payback in the event of a payment default, and the right of a new purchaser of the property to require the financing to be prepaid upon sale.
There has been broad support for energy-saving technologies in Congress, state legislatures, and the media. PACE makes these technologies affordable and available to businesses and homeowners.