Energy Center Releases White Paper on PACE in Texas

The Center for Global Energy, International Arbitration and Environmental Law at the University of Texas School of Law has published a white paper that uses a bill now winding through the Texas legislature as a springboard to explore recent trends in property assessed clean energy (PACE).

PACE is a mechanism that allows property owners to voluntarily subject their properties to tax assessments. The assessments are similar to those historically used to pay for public projects like sidewalks or streetlights but instead finance conservation improvements on privately owned property.

In the late 2000s, PACE appealed to captivated environmental policymakers as a means of promoting the adoption of energy efficiency and on-site renewable energy improvements. Actions by federal mortgage regulators stunted the use of PACE for single-family homes, however, and until relatively recently chilled the growth of PACE programs.

Lately, however, state and local governments have reoriented PACE around commercial real estate and attracted new supporters and capital sources.

Texas passed PACE enabling legislation in 2009, but it never led to the development of an operational PACE program. This legislative session, a bill that is steadily moving through the capitol would correct certain drafting flaws in the original enabling legislation while building upon evolving PACE best practices. In particular, the bill would:

  • Refocus PACE around commercial, industrial and multi-family properties;
  • Allow counties and coalitions of local governments to launch PACE programs;
  • Allow the PACE financing of water conservation improvements
  • Permit PACE borrowers to obtain financing from third-party lenders;
  • Require existing lenders to consent to PACE liens

For more information, please contact the white paper’s author, Jeremy Brown, at jeremybrown@law.utexas.edu or 512-232-1408.