Hope of reviving Boulder County’s residential ClimateSmart Loan Program — which has been defunct for more than a year — has been recently renewed thanks to a ruling by a federal judge in California and the introduction of U.S. legislation that’s supported by both parties.
Boulder County is also nearing completion of a replacement loan program that could move forward regardless of the outcome at the federal level.
Voters approved the ClimateSmart Loan Program in 2008, allowing homeowners to borrow money from the county to pay for a wide range of energy-efficient upgrades and renewable energy systems. Borrowers were able to pay back the loans through a 15-year assessment on their properties.
During the first two rounds of residential loans, the county issued about $13 million in loans to homeowners, which provided a boon to the local economy, according to green building contractors. But just as the county was preparing to close a third round of loans last year, Fannie Mae and Freddie Mac — quasi-federal agencies that buy secondary mortgages — announced that they would no longer buy mortgages with attached Property Assessed Clean Energy, or PACE, loans, such as ClimateSmart.
The ruling was confusing to governments across the country that had set up PACE loans because other federal agencies, especially the U.S. Department of Energy, had encouraged the creation of such programs. Last summer, the state of California, Sonoma and Placer counties, the city of Palm Desert and the Sierra Club joined together to sue the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac.
Late last month, U.S. District Judge Claudia Wilken ruled that the FHFA should have solicited public comment before deciding that Fannie Mae and Freddie Mac would not buy mortgages with clean energy assessments on the secondary market. And though Wilken did not suspend the FHFA’s rule, she did order the agency to open up the rule for public comment now in accordance with the federal Administrative Procedures Act.
This is good news for PACE programs, according to Boulder County Commissioner Will Toor, because the programs have typically enjoyed tremendous support and provided economic benefits in the communities where they’ve been set up.
“I think it’s going to be very hard for the FHFA to come to a similar conclusion if they have to follow an open, public process that includes the ability to present an actual analysis,” he said.
At the same time, a bill known as the PACE Assessment Protection Act of 2011 — which would require the FHFA to accept mortgages with PACE assessments — has been introduced into the U.S. House of Representatives by two Republicans and a Democrat. Co-sponsorship of the bill has grown to more than 20 representatives from both sides of the aisle, including Jared Polis, D-Boulder.
“Our bill facilitates participation by homeowners in states with PACE programs, which will promote conservation, energy savings and job creation,” said Rep. Nan Hayworth, R-N.Y., one of the bill’s primary sponsors.
But Boulder County is not waiting for resolution of either of the processes unfolding at the federal level. Since the county had to suspend its ClimateSmart program last summer, staffers have been working to create an alternative loan program that could meet the same goals.
“It’s been quite complicated to come up with an alternative program, but we are still moving forward on that and we believe that we have come up with a model that will work,” Toor said.
Essentially, the county would like to use some of the money it has been awarded by the Department of Energy for energy-efficiency programs to finance the loans, though the DOE has not yet given final approval.
“We need to gather some additional information before we’re able to move forward, but we’re hopeful that in a few months we’ll be able to launch a new financing program,” Toor said.
But even if the program materializes, it’s only a temporary fix, since the money for the loans would come form a fixed pool. By comparison, a PACE program allows a county to sell more bonds to finance the program as demand grows.
“The beauty of PACE financing — because you have the ability to go out on the bond market to get the financing — is it’s limited only by the demand,” he said.