I 

113TH CONGRESS 

2D SESSION H. R. 4285 

To facilitate State and local governmental entities in developing and implementing private sector job creating programs through local government 

financing of the installation of energy efficiency, water conservation, 

and renewable energy generation improvements on privately owned property with the financing to be repaid from assessments that may be 

levied on the local property tax bill, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 24, 2014 

Mr. THOMPSON of California (for himself, Mr. KING of New York, Mr. SEAN

PATRICK MALONEY of New York, Mr. CALVERT, Ms. MATSUI, Ms. 

ESHOO, Mr. GEORGE MILLER of California, Mr. SCHIFF, Mr. MCNERNEY, Mr. FITZPATRICK, and Mr. GARAMENDI) introduced the following 

bill; which was referred to the Committee on Financial Services 

A BILL 

To facilitate State and local governmental entities in developing and implementing private sector job creating programs through local government financing of the installation of energy efficiency, water conservation, and renewable energy generation improvements on privately owned 

property with the financing to be repaid from assessments that may be levied on the local property tax bill, 

and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 


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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘PACE Assessment 

3 Protection Act of 2014’’. 

4 SEC. 2. FINDINGS AND PURPOSE. 

5 (a) CONGRESSIONAL FINDINGS.—The Congress finds 

6 that the legislatures of 31 States and the District of Co7 lumbia have determined that there exist job creation bene8 fits, other economic benefits, and significant other public 

9 benefits from the installation of improvements encouraged 

10 by local government finance programs, and have therefore 

11 enacted legislation authorizing their State and local gov12 ernments to develop and implement programs under which 

13 such State and local governments finance the installation 

14 of the improvements on private property and the property 

15 owners may pay the financing costs on the property tax 

16 bill. Such legislatures include Arkansas, California, Colo17 rado, Connecticut, Florida, Georgia, Hawaii, Illinois, Lou18 isiana, Maine, Maryland, Massachusetts, Michigan, Min19 nesota, Missouri, Nevada, New Hampshire, New Jersey, 

20 New Mexico, New York, North Carolina, Ohio, Oklahoma, 

21 Oregon, Pennsylvania, Texas, Utah, Vermont, Virginia, 

22 Washington, DC, Wisconsin, and Wyoming. 

23 (b) PURPOSE.—It is the purpose of this Act to ensure 

24 that PACE programs which incorporate prudent pro25 grammatic safeguards to protect the interest of mortgage 

26 holders and property owners remain viable as a potential 


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1 avenue for States and local governments to achieve the 

2 many public benefits associated with energy efficiency, 

3 water efficiency, and renewable energy retrofits. In addi4 tion, it is essential that the power and authority of State 

5 and local governments to exercise their longstanding and 

6 traditional powers to levy taxes for public purposes not 

7 be impeded. 

8 SEC. 3. DEFINITIONS. 

9 For purposes of this Act the following definitions 

10 apply: 

11 (1) The term ‘‘local government’’ includes coun12 ties, cities, boroughs, towns, parishes, villages, dis13 tricts, and other political subdivisions authorized 

14 under State laws to establish PACE programs. 

15 (2) The term ‘‘PACE agreement’’ means an 

16 agreement between a local government and a prop17 erty owner detailing the terms of financing for a 

18 PACE improvement. 

19 (3) The term ‘‘PACE assessment’’ means a tax 

20 or assessment levied by a local government to pro21 vide financing for PACE improvements. 

22 (4) The term ‘‘PACE improvements’’ means 

23 qualified clean energy improvements, qualified en24 ergy conservation and efficiency improvements, and 


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1 qualified water conservation and efficiency improve2 ments. 

3 (5) The term ‘‘PACE lien’’ means a lien, held 

4 by a local government, that secures a PACE assess5 ment, which may be senior to the lien of pre-existing 

6 purchase money mortgages on the same property 

7 subject to the PACE lien. 

8 (6) The term ‘‘PACE program’’ means a pro9 gram implemented by a local government under 

10 State law to provide financing for PACE improve11 ments by levying PACE assessments. 

12 (7) The term ‘‘residential property’’ means a 

13 property with up to 4 private residences. 

14 (8) The term ‘‘non-residential property’’ means 

15 private property that is— 

16 (A) not used for residential purposes; or 

17 (B) residential property with 5 or more 

18 residences. 

19 (9) The term ‘‘clean energy improvements’’ 

20 means any system on privately owned property for 

21 producing electricity for, or meeting heating, cooling, 

22 or water heating needs of the property, using renew23 able energy sources, combined heat and power sys24 tems, or energy systems using wood biomass (but 

25 not construction and demolition waste) or natural 


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1 gas. Such improvements include solar photovoltaic, 

2 solar thermal, wood biomass, wind, and geothermal 

3 systems. Such term includes the reasonable costs of 

4 a study undertaken by a property owner to analyze 

5 the feasibility of installing any of the improvements 

6 described in this paragraph and the cost of a war7 ranty or insurance policy for such improvements. 

8 (10) The term ‘‘energy conservation and effi9 ciency improvements’’ means measures to reduce 

10 consumption, through conservation or more efficient 

11 use, of electricity, fuel oil, natural gas, propane, or 

12 other forms of energy by the property, including air 

13 sealing, installation of insulation, installation of 

14 heating, cooling, or ventilation systems, building 

15 modification to increase the use of daylighting, re16 placement of windows, installation of energy controls 

17 or energy recovery systems, installation of building 

18 management systems, and installation of efficient 

19 lighting equipment, provided that such improve20 ments are permanently affixed to the property. Such 

21 term includes the reasonable costs of an audit un22 dertaken by a property owner to identify potential 

23 energy savings that could be achieved through instal24 lation of any of the improvements described in this 

25 paragraph. 


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1 (11) The term ‘‘water conservation and effi2 ciency improvements’’ means measures to reduce 

3 consumption, through conservation or more efficient 

4 use of water by the property, including installation 

5 of low-flow toilets and showerheads, installation of 

6 timer or timing system for hot water heaters, and 

7 installation of rain catchment systems. 

8 (12) The term ‘‘property owner’’ means the 

9 owner of record of real property that is subject to 

10 a PACE assessment, whether such property is zoned 

11 or used for residential, commercial, industrial, or 

12 other uses. 

13 (13) The term ‘‘qualified’’ means, with respect 

14 to PACE improvements, that the improvements meet 

15 the criteria specified in section 5. 

16 SEC. 4. TREATMENT OF PACE PROGRAMS BY FNMA AND 

17 FHLMC. 

18 (a) LENDER GUIDANCE.—The Director of the Fed19 eral Housing Finance Agency, acting in the Director’s 

20 general supervisory capacity, shall direct the Federal Na21 tional Mortgage Association and the Federal Home Loan 

22 Mortgage Corporation to— 

23 (1) issue guidance, within 30 days after the 

24 date of enactment of this Act, providing that the 

25 levy of a PACE assessment and the creation of a 


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1 PACE lien do not constitute a default on any loan 

2 secured by a uniform instrument of Federal Na3 tional Mortgage Association or Federal Home Loan 

4 Mortgage Corporation and do not trigger the exer5 cise of remedies with respect to any provision of 

6 such uniform security instrument if the PACE as7 sessment and the PACE lien meet the requirements 

8 of section 5; 

9 (2) rescind any prior issued guidance or Selling 

10 and Servicing Guides that are inconsistent with the 

11 provisions of paragraph (1); and 

12 (3) take all such other actions necessary to ef13 fect the purposes of this Act. 

14 (b) PROHIBITION OF DISCRIMINATION.—The Direc15 tor of the Federal Housing Finance Agency, the Comp16 troller of the Currency, the Federal National Mortgage 

17 Association, the Federal Home Loan Mortgage Corpora18 tion, the Federal Deposit Insurance Corporation, the Na19 tional Credit Union Administration, the Board of Gov20 ernors of the Federal Reserve System, and all Federal 

21 agencies and entities chartered or otherwise established 

22 under Federal law shall not discriminate in any manner 

23 against States or local governments implementing or par24 ticipating in a PACE program, or against any property 


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1 that is obligated to pay a PACE assessment or is subject 

2 to a PACE lien, including, without limitation, by— 

3 (1) prohibiting the origination, lending, pur4 chasing, or guaranteeing of loans on residential 

5 property within such jurisdiction or requiring more 

6 restrictive underwriting criteria for properties within 

7 such jurisdiction; 

8 (2) except for the escrowing of funds as per9 mitted by section 5(g)(2), requiring payment of 

10 PACE assessment amounts that are not due or that 

11 are not delinquent; or 

12 (3) applying more restrictive underwriting cri13 teria to any property that is obligated to pay a 

14 PACE assessment and is subject to a PACE lien 

15 than any such entity would apply to such property 

16 in the event that such property were subject to a 

17 State or municipal tax or assessment that was not 

18 a PACE assessment. 

19 SEC. 5. PACE PROGRAMS ELIGIBLE FOR PROTECTION. 

20 (a) IN GENERAL.—A PACE program, and any 

21 PACE assessment and PACE lien related to such pro22 gram, are entitled to the protections of this Act only if 

23 the Program meets all of the requirements under this sec24 tion at the time of its establishment, or, in the case of 

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1 ment of this Act, not later than 60 days after such date 

2 of enactment. 

3 (b) CONSUMER PROTECTIONS APPLICABLE TO RESI4 DENTIAL PROPERTY.—A PACE program shall provide, 

5 with respect to residential property, for the following: 

6 (1) PROPERTY OWNER AGREEMENTS.— 

7 (A) PACE ASSESSMENT.—The property 

8 owner shall agree in writing to a PACE assess9 ment, either pursuant to a PACE agreement or 

10 by voting in the manner specified by State law. 

11 In the case of any property with multiple own12 ers, each owner or the owner’s authorized rep13 resentative shall execute a PACE agreement or 

14 vote in the manner specified by State law, as 

15 applicable. 

16 (B) PAYMENT SCHEDULE.—The property 

17 owner shall agree to a payment schedule that 

18 identifies the term over which PACE assess19 ment installments will be due, the frequency 

20 with which PACE assessment installments will 

21 be billed and amount of each installment, and 

22 the annual amount due on the PACE assess23 ment. Upon full payment of the amount of the 

24 PACE assessment, including all outstanding in25 terest and charges and any penalties that may 


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1 become due, the local government shall provide 

2 the participating property owner with a written 

3 statement certifying that the PACE assessment 

4 has been paid in full and the local government 

5 shall also satisfy all requirements of State law 

6 to extinguish the PACE lien. 

7 (2) DISCLOSURES BY LOCAL GOVERNMENT.— 

8 The local government shall disclose to the partici9 pating property owner the costs and risks associated 

10 with participating in the PACE program, including 

11 risks related to their failure to pay PACE assess12 ments and the risk of enforcement of PACE liens. 

13 The local government shall disclose to the property 

14 owner the effective interest rate of the PACE assess15 ment, including all program fees. The local govern16 ment shall clearly and conspicuously provide the 

17 property owner the right to rescind his or her deci18 sion to enter into a PACE assessment, within 3 days 

19 of the original transaction. 

20 (3) CONFIDENTIALITY.—Any personal financial 

21 information provided by a property owner to a local 

22 government or an entity administering a PACE pro23 gram on behalf of a local government shall comply 

24 with applicable local, State, and Federal laws gov25 erning the privacy of the information. 


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1 (c) REQUIREMENTS APPLICABLE ONLY TO NON-RES2 IDENTIAL PROPERTY.—A PACE program shall provide, 

3 with respect to non-residential property, for the following: 

4 (1) AUTHORIZATION BY LIENHOLDERS.—Be5 fore entering into a PACE agreement with a local 

6 government or voting in favor of PACE assessments 

7 in the manner specified by State law, the property 

8 owner shall obtain written authorization from the 

9 holders of the first mortgage on the property. 

10 (2) PACE AGREEMENT.— 

11 (A) TERMS.—The local government and 

12 the owner of the property to which the PACE 

13 assessment applies at the time of commence14 ment of assessment shall enter into a written 

15 PACE agreement addressing the terms of the 

16 PACE improvement. In the case of any prop17 erty with multiple owners, the PACE agreement 

18 shall be signed by all owners or their legally au19 thorized representative or representatives. 

20 (B) PACE IMPROVEMENTS.—The property 

21 owner shall contract for PACE improvements, 

22 purchase materials to be used in making such 

23 improvements, or both, and upon submission of 

24 documentation required by the local govern25 ment, the local government shall disburse funds 


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1 to the property owner in payment for the 

2 PACE improvements or materials used in mak3 ing such improvements. 

4 (C) PAYMENT SCHEDULE.—The PACE 

5 agreement shall include a payment schedule 

6 showing the term over which payments will be 

7 due on the assessment, the frequency with 

8 which payments will be billed and amount of 

9 each payment, and the annual amount due on 

10 the assessment. Upon full payment of the 

11 amount of the assessment, including all out12 standing interest and charges and any penalties 

13 that may become due, the local government 

14 shall provide the participating property owner 

15 with a written statement certifying that the as16 sessment has been paid in full and the local 

17 government shall also satisfy all requirements 

18 of State law to extinguish the PACE lien. 

19 (3) DISCLOSURES BY LOCAL GOVERNMENT.— 

20 The local government shall disclose to the partici21 pating property owners the costs and risks associ22 ated with participating in the program, including 

23 risks related to their failure to make payments and 

24 the risk of enforcement of PACE liens. 


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1 (4) CONFIDENTIALITY.—Any personal financial 

2 information provided by a property owner to a local 

3 government or an entity administering a PACE pro4 gram on behalf of a local government shall comply 

5 with applicable local, State, and Federal laws gov6 erning the privacy of the information. 

7 (d) PUBLIC NOTICE OF PACE ASSESSMENT.—The 

8 local government shall file a public notice of the PACE 

9 assessment in a manner sufficient to provide notice of the 

10 PACE assessment to potential lenders and potential pur11 chasers of the property. The notice shall consist of the 

12 following statement or its substantial equivalent: ‘‘This 

13 property is subject to a tax or assessment that is levied 

14 to finance the installation of qualifying energy and water 

15 conservation and efficiency improvements or clean energy 

16 improvements. The tax or assessment may be secured by 

17 a lien that is senior to all private liens.’’. 

18 (e) ELIGIBILITY OF RESIDENTIAL PROPERTY OWN19 ERS.—Before levying a PACE assessment on a property, 

20 the local government shall ensure that at least all of the 

21 following are true with respect to the property: 

22 (1) All property taxes and any other public as23 sessments are current. 

24 (2) There are no involuntary liens, such as me25 chanics liens, on the property in excess of $1,000. 


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1 (3) No notices of default, including property 

2 taxes and other public assessments, have been re3 corded during the past three years or the property 

4 owner’s period of ownership, whichever is shorter. 

5 (4) The property owner has not filed for or de6 clared bankruptcy in the previous 3 years. 

7 (5) The property owner is current on all mort8 gage debt on the property and has not had more 

9 than one instance of property-based debt delin10 quency during the past 6 months or the property 

11 owner’s period of ownership, whichever is shorter. 

12 (6) The property owner or owners are the hold13 ers of record of the property. 

14 (7) The property title is not subject to power of 

15 attorney, easements, or subordination agreements 

16 restricting the authority of the property owner to 

17 subject the property to a PACE lien. 

18 (8) The property meets any geographic eligi19 bility requirements established by the PACE pro20 gram. 

21 The local government may adopt additional criteria, ap22 propriate to PACE programs, for determining whether to 

23 provide PACE financing to a property. 

24 (f) QUALIFYING IMPROVEMENTS AND QUALIFYING

25 CONTRACTORS FOR RESIDENTIAL PROPERTIES.—PACE 


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1 improvements for residential properties shall be qualified 

2 if they meet the following criteria: 

3 (1) U.S. DEPARTMENT OF ENERGY ENERGY

4 STAR QUALIFIED PRODUCTS OR OTHER STATE GOV5 ERNMENTAL AGENCIES QUALIFIED PRODUCTS.—For 

6 clean energy improvements and energy conservation 

7 and efficiency improvements, products shall meet 

8 Energy Star guidelines or other similar guidelines 

9 provided by State governmental agencies of the ap10 plicable State. 

11 (2) AFFIXED FOR USEFUL LIFE.—The local 

12 government shall have determined the improvements 

13 are intended to be affixed to the property for the en14 tire useful life of the improvements based on the ex15 pected useful lives of energy conservation, efficiency, 

16 and clean energy measures approved by the Depart17 ment of Energy. 

18 (3) OWNER IMPROVEMENTS.—A local govern19 ment may elect to provide financing for improve20 ments made by the owner of the property, but shall 

21 not permit the value of the owner’s labor to be in22 cluded in the amount financed. 

23 (4) DISBURSEMENT OF PAYMENTS.—A local 

24 government must require, prior to disbursement of 

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1 mission by the property owner in a form acceptable 

2 to the local government of— 

3 (A) a document signed by the property4 owner requesting disbursement of funds; 

5 (B) a certificate of completion, certifying 

6 that improvements have been installed satisfac7 torily; and 

8 (C) documentation of all costs to be fi9 nanced and copies of any required permits. 

10 (g) FINANCING TERMS APPLICABLE ONLY TO RESI11 DENTIAL PROPERTY.—A PACE program shall provide, 

12 with respect to residential property, for the following: 

13 (1) AMOUNT FINANCED.—In determining the 

14 amount that may be financed by a PACE assess15 ment, the total amount of all rebates, grants, and 

16 other direct financial assistance received by the 

17 owner on account of the PACE improvements shall 

18 be deducted from the cost of the PACE improve19 ments. 

20 (2) PACE ASSESSMENTS.—The total amount of 

21 PACE assessments for a property shall not exceed 

22 15 percent of the estimated value of the property. A 

23 property owner who escrows property taxes with the 

24 holder of a mortgage on a property subject to PACE 

25 assessment may be required by the holder to escrow 


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1 amounts due on the PACE assessment, and the 

2 mortgage holder shall remit such amounts to the 

3 local government in the manner that property taxes 

4 are escrowed and remitted. 

5 (3) OWNER EQUITY.—As of the effective date of 

6 the PACE agreement or the vote required by State 

7 law, the property owner shall have equity in the 

8 property of not less than 10 percent of the estimated 

9 value of the property calculated without consider10 ation of the amount of the PACE assessment or the 

11 value of the PACE improvements. 

12 (4) TERM OF FINANCING.—The maximum term 

13 of financing provided for a PACE improvement may 

14 be 25 years. The term shall in no case exceed the 

15 weighted average expected useful life of the PACE 

16 improvement or improvements. Expected useful lives 

17 used for all calculations under this paragraph shall 

18 be consistent with the expected useful lives of energy 

19 conservation and efficiency and clean energy meas20 ures approved by the Department of Energy or the 

21 Internal Revenue Service. 

22 (h) COLLECTION AND ENFORCEMENT.—A PACE 

23 program shall provide that— 

24 (1) PACE assessments shall be collected in the 

25 manner specified by State law; 


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1 (2) PACE assessment installments that are not 

2 due may not be accelerated by foreclosure; and 

3 (3) payment of a PACE assessment installment 

4 from any loss reserve that may be established for a 

5 PACE program shall not relieve a participating 

6 property owner from the obligation to pay that 

7 amount. 

Æ 


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