Texas Legislature Authorizes Innovative PACE Program for Low-Cost Financing of Water, Energy Conservation Projects

AUSTIN, Texas, May 15, 2013 /PRNewswire/ -- The Texas Legislature has approved a bill that allows commercial and industrial building owners in the state to obtain low-cost, long-term private sector financing for water conservation and energy-efficiency improvements.

The legislation, sponsored by Sen. John Carona and Rep. Jim Keffer, allows municipalities and counties to work with commercial lenders and property owners to pursue the improvements using voluntary property assessments as a secure repayment mechanism.  The amount of the PACE assessment must be less than the utility savings resulting from the retrofits, essentially allowing a project to pay for itself without upfront costs.

The program, known nationally as Property Assessed Clean Energy (PACE), is expected to allow property owners to upgrade and enhance the value of existing structures, save substantial amounts in water and energy costs, and create thousands of jobs statewide through implementing the improvements.

Both Houses passed the PACE bill unanimously, allowing the legislation to become effective immediately after it is signed by Governor Perry.

"PACE will help Texans meet the conservation goals in our State Water Plan and reduce demand on our electric grid," says Sen. John Carona, sponsor of SB 385. "These savings will benefit the building owners directly and help keep the Texas economic engine primed for growth and prepared for the continuing influx of people moving to Texas to share in our prosperity."

"A legislative priority for this Session is investment in Texas' infrastructure – roads, power, and water – to support this state's economic boom.  Investing in building infrastructure to address delayed maintenance will improve our buildings' value, create jobs, and help the state meet its water and energy conservation goals," says Jim Keffer, sponsor of the House companion bill, HB 1094.

The PACE financing process begins when a property owner identifies a qualifying conservation improvement to an existing building. The owner then engages a contractor to determine the scope of the work, and obtains an independent analysis to confirm that the work will achieve the projected energy savings. The owner then arranges financing through a bank or other lender, and applies for approval of the financing. 

The local PACE program reviews the building owner's application, and, if the project meets all requirements, the program places an assessment on the property, collects the assessments and transfers those payments to the lender. 

"This is a voluntary, market-based economic development program that does not create a burden on government resources," says Charlene Heydinger, Executive Director of Keeping PACE in Texas, a non-profit association formed by the law firm of Thompson & Knight to promote PACE-related legislation. "PACE has received support from a wide range of corporations, governmental organizations and trade associations in Texas. We expect this coalition will move forward to make the program a reality and offer a proven way to conserve valuable resources for future generations."

The implementation of PACE financing will require counties and municipalities to adopt resolutions and reports that formalize the program within their communities, typically with the support and interest of property owners, lenders and third-party administrators.

"A PACE assessment will have the same legal status as a lien for ad valorem taxes", says Stephen M. Block, a Partner in the Houston office of Thompson & Knight.  "Because the lien will attach to the land, each owner of the property will be obligated to pay only the portion of the cost that accrues during its period of ownership."

A copy of SB 385, introduced by Sen. Carona, is available at http://www.capitol.state.tx.us/tlodocs/83R/billtext/pdf/SB00385H.pdf#navpanes=0

More information about the PACE program is available at www.keepingpaceintexas.org.

Contact: Charlene Heydinger, 512-469-6184, [email protected].

SOURCE Thompson & Knight

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