PACE Bonds: Energy Improvement Financing

PACE (Property Assessed Clean Energy) bonds are an exciting new tool for communities to use in assisting commercial and residential property owners to make energy improvements to their property.  Harvard Business Review says PACE Bonds are one of the breakthrough ideas for 2010.

Instead of  costly, short-term loans for energy improvements, PACE bonds allow owners of residential and business property to spread out the cost of energy improvements. The City sells bonds and the proceeds are loaned out to pay for energy improvements.  The loan to the property owner becomes an assessment against the property and stays with the property until paid, thus incentivizing energy improvements, even where an owner may not have a long-term goal of holding the property.

Administrative costs of the program are added to the loans resulting in little cost to the city.  In fact, private third-parties usually administer the program.  As seen it other cities, PACE programs have helped many property owners make energy improvements where they might not have otherwise been made.

Red Wing has an aging housing stock, much of which is rental.  Owners of rental housing have little incentive to make significant energy improvements to their property as the tenants often pay the utilities.  With longer paybacks on PACE loans, energy improvements are made, the cost added to the rent, and tenants get the benefit of reduced energy bills.  This is an economic development issue in that less disposable income goes up the chimney.   This program could be of tremendous value to the Red Wing community.

How can you not like a program that increases property values, lowers utility bills, and creates jobs; at little government expense?  For me, this is government at its best.  Government as a tool, filling a need in a way the private market can’t.   The Red Wing City Council, HRA, and Sustainability Commission have all agreed to explore this program further.  Hopefully, we’ll soon be at an action stage.  The community can help move this program along by expressing your support to members of, and candidates for, the City Council.  It would be nice to read positive news about PACE instead of gloomy City budget news.

Go to to read more. To read “Guide to Energy Efficiency and Renewable Energy Financing Districts For Local Governments go here.  A copy of the statute can be found here.

The Institute for Local Self-Reliance just issued a report on lessons learned in Municipal  Energy Financing here.

Updated from original November, 2009 post. kdl


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Filed under Economic Development, Minnesota, P.A.C.E., Red Wing, Red Wing City Council, Red Wing Port Authority, Sustainability

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