On December 14, 2010, PACE (Property Assessed Clean Energy) Bond legislation was signed into law by Governor Jennifer Granholm. The bill only covers commercial real property so it should not run afoul of the FHFA, Fannie Mae or Freddie Mac, the agencies most opposed to such financing. It’s widely believed Ann Arbor will be the first city to implement a program involving PACE Bonds since Ann Arbor and Washtenaw County officials were instrumental in its support and passage.
PACE Bonds are a municipal bond where the proceeds are lent to residential or commercial property owners to finance energy efficiency measures and renewable energy systems. The owners of these energy retrofits subsequently repay their loans over a 10 to 20 year term in accordance with an annual assessment on their property tax bill. PACE Bonds function in the same manner as other special assessments (sidewalks, sewer system, parks, etc.) and while the specific program and use has only been around for a few years, PACE is a type of land secured financing district which has a long and storied history in the U.S. to pay for improvements in the public interest.
PACE Bonds is an idea whose time has come. With credit markets still tight in early 2011, new ideas and funding mechanisms are necessary to get Michigan’s commercial real estate industry moving again. PACE Bonds could be the answer for all those real estate owners and investors who would invest in green technology but for the up front expense. Let’s trust that the green shoots of PACE Bonds takes hold not just here in Michigan, but across the country.
As a commercial real estate associate broker, attorney and LEED AP, I want to know:
- How the 1st PACE Bond program being drafted in Michigan for Ann Arbor building owners will be received and if it will become popular?
- What building systems or energy savings retrofits will be most popular to developers, building owners and real estate investors?
- How Michigan can become the leader in energy retrofits and sustainable buildings through wide acceptance and implementation of this new law?
Author: Robert E. Mattler, Green Agent Man, representing GreeningDetroit.com