Missouri Clean Energy Funding, LLC
Property Assessed Clean Energy Administration
Mid-Missouri Clean Energy Development Board
PROPERTY ASSESSED CLEAN ENERGY FUNDING PROGRAM Q & A
Q: What is PACE?
A: PACE is an acronym for Property Assessed Clean Energy. The Missouri General Assembly passed the PACE ACT in 2010 to establish PACE by authorizing a municipality or multiple municipalities to create Clean Energy Development Boards for the purpose of funding energy efficiency and renewable energy projects. The Mid-Missouri Clean Energy Development Board is such an entity.
Q: What is a PACE program?
A: The Mid-Missouri Clean Energy Development Board (the Board) has developed a PACE program to assist property owners desiring to reduce their energy costs through energy efficient improvements and/or installation of renewable energy sources. The Board has engaged a program administrator to carry out the Board’s policies and procedures, subject to its oversight.
Q: Is PACE a government program?
A: Yes & No. A Clean Energy Development Board is a political subdivision created for the purpose of overseeing the program. However, PACE uses private capital entirely to operate the program. From time-to-time, there are available federal and state programs that offer financial incentives to business and homeowners, but they are not directly connected with the program.
Q: How does the PACE program work?
A: Property owners apply for the program, describing the energy improvements and/or renewable energy project they wish to make. If the application is approved, the Board and the property owner enter into an assessment contract, through which the Board pays the up-front cost of the improvements. The Board places a lien on the property that the property owner repays through a special assessment on the property tax bill over a set number of years – up to 20 years. The PACE statute requires that the annual savings in energy cost equal or exceed the cost of the improvements.
Q: Who may participate in the PACE program?
A: Currently, any property owner whose real estate is located within any participating municipality located within the counties of Boone, Callaway, Cole, Cooper. Howard, and Moniteau, including unincorporated areas of any of those counties that have elected to join the Board, is eligible. Under special circumstances, arrangements may be mad allowing properties in other areas within Missouri to participate.
Q: It sounds great, but how much does it cost to participate in the PACE program?
A: The actual cost will be provided at the time the assessment contract is prepared. The costs include the costs of the improvements, energy audit or engineer’s report (if needed), an application fee that is a percentage of the application request, and interest expense. The interest rate depends on market conditions at the time funds are made available. Generally, it is expected that the rate will be indexed to the 10-year U. S. Treasury bond and will be posted daily. All program expenses will be shown on the application form. There are no hidden fees or expenses.
Q: What limitations are there for participation in the program?
A: The owner of all types of real estate may participate; including residential, commercial, industrial, agricultural, not-for-profit and even public property. In order to qualify, the following criteria must be met:
Q: What if my city or county has not joined the Board?
A: You will not be able to participate until your municipality joins the Board. We suggest you contact your representative, mayor, or county commissioner for additional information.
Q: Do I need to get a building permit?
A: If your local government requires a building permit for the proposed improvement, you must obtain that permit. The Board will not release funds until any required permits have been presented. The costs of the permit may be included in the PACE financing, if the application is approved.
Q: How do I apply?
A: Applications will be available on the web site www.mocefllc.com .
Q: How long after I apply will I know if my application has been accepted?
A: The Board anticipates providing an initial response within one to two weeks of receipt of the application. In many cases, there will only be an initial response, but special cases may require additional information or documentation to allow the Board to come to a final determination.
Q: When will my first special assessment be due?
A: Special assessments are included with the annual real estate property tax bill. Payment is due on or before December 31 in the year billed. Each county sets it own deadline for filing special assessments but generally consider April is the last month of the year to have a special assessment filed for collection the same year. Assessments made April or later may not appear on the tax bill until the following year.
Q: My property has lost a lot of market value in the past two years. How much equity do I need?
A: The combined mortgage debt and PACE improvement costs must be less than 70% of the market value or, in some cases, the assessor’s fair market value. Large commercial and industrial properties may need to have an appraisal to determine fair market value.
Q: I recently replaced my furnace and air conditioner. Can I apply for reimbursement?
A: No. The funding is intended only for new improvements.
Q: What types of improvements qualify for PACE?
A: The Missouri statute that created PACE, Chapter 67-3000, et. seq., lists the types of projects that qualify. They include:
Renewable energy projects including, but not limited to:
Q: My company uses a lot of hot water. Can water conservation projects be included?
A: No. The statute does not authorize PACE for use in water conservation at this time. However, projects designed to reduce energy used to heat the water may be considered.
Q: I want to replace my HVAC system and ductwork. But my old ducts are covered with asbestos. Will the program cover the asbestos removal?
A: No. PACE funding cannot be used for any repair work. Repair work must be paid from other funds.
Q: I am planning on building a new home. Can I use PACE for that?
A: PACE is not available for construction. However, you may be able to use PACE to pay for the costs of high efficiency and energy conservation as well as renewable energy measures if they meet higher standards than are customary for a home of the type you are contemplating. This type of request requires additional information to show the Board that without PACE, the energy usage would be greater. Typically, an energy auditor’s or engineer’s report will be required.
Q: How much financing is available?
A: ESP will finance any qualifying improvement from a minimum of $5,000 to maximum of $50,000 for residential property. There are no set upper limits on the amount available for commercial, governmental, non-profit and industrial improvements. Each will be decided on a case-by-case basis.
Q: Do I need a high credit rating to be eligible?
A: Because repayments are made from property taxes, the Clean Energy Development Board relies less on credit scores. Nevertheless, the program board must have confidence that the property owner will be able to pay their property taxes in a timely matter.
Q: Is the cost of the special assessment deductible for federal income tax purposes?
A: Generally speaking, the interest component of the special assessment is deductible for those who itemize. You will need to consult with a qualified tax advisor to determine your specific situation.
Q: Is there a repayment penalty?
A: There is no prepayment penalty after the second annual assessment payment. Prior to that, there is a 2% prepayment fee due to bond redemption expenses.
Q: My mortgage holder pays my property taxes. Will they take care of this, too?
A: You should notify your lender of the assessment on the property so they can adjust the amount of monthly escrow payments. The program administrator for the board will require a letter from your mortgage company assenting to your participation in the program.
Q: What if I find I can’t pay my special assessment?
A: Failure to pay the special property tax assessment would be just like failing to pay your regular property taxes. Your county will charge a delinquency fee plus interest for each month the tax is delinquent. A continuing delinquency could result in a tax sale of your property.
Q: What happens if I sell my property before the assessment is paid off?
A: Because the assessment is used to pay for improvements that are attached to the real estate and stay with the property, the assessment stays with the property too. It is a good idea to disclose the existence of the special assessment to any prospective purchasers and to your real estate agent. The existence of the special assessment will be noted in the title search.
Q: I read that Fannie Mae and Freddie Mac don’t like PACE. Is that true?
A: In mid-2009, both agencies issued instructions to mortgage lenders stating they would no longer accept residential mortgages that are subject to a PACE lien. Later in the year, they softened their stance somewhat by saying they would accept such loans as long as the combination of the loan amount and the PACE lien met their customary standards for loan to value. What this means to most homeowners is that they should not consider participating in PACE if they anticipate selling their home within 5 to 7 years. For those who have recently purchased a home and are likely to stay in it for the foreseeable future, the Fannie Mae/Freddie Mac objections shouldn’t be a concern.
Q: Why is PACE better than a bank loan or credit card?
A: The Board intends PACE program funding to be a low cost means for property owners to finance energy conservation and renewable energy projects. If you have access to a home equity or other source of financing that offers lower costs and a lower rate of interest, congratulations. Keep in mind, though, that your lender will require payment in full upon the sale of your property whereas the PACE obligation stays with the property because the improvements are permanently attached. It is a rare credit card that offers low enough interest rates to be a viable source of funding for these types of projects. Also, keep in mind that financing is not dependent on your income or credit score. And it doesn’t appear on your financial statement, something that is especially important to business owners.
Q: I am not certain if my improvements will qualify. Who should I call?
A: The Board has designated Missouri Clean Energy Funding, LLC as the program administrator. You may call them at (314) 769-8300 during normal business hours.