BRADENTON, Fla. — The first-ever statewide PACE program, which already has $2 billion of validated bonding capacity from a Florida court, is on an aggressive track toward implementation with the selection of nationally recognized financial advisors.
The Florida PACE Funding Agency’s three-member oversight board last week selected Public Financial Management Inc., First Southwest Co. and Southeastern Investment Securities LLC as its team of co-advisors. The agency is an independent unit of local government authorized to operate across the state. Its founding sponsors are Flagler County and the city of Kissimmee.
PACE stands for property-assessed clean energy. Florida’s program will allow residential and commercial property owners to borrow money to pay for renewable energy, energy efficiency, and hurricane-hardening improvements. The funds borrowed to make the improvements are repaid with a special assessment that runs with the improved property.
“Florida PACE, being the first statewide PACE program nationally, will become the standard bearer of PACE programs,” said Toby Wagner, president of Southeastern. “The agency should be a consistent jobs producer and the source of green-energy finance both residentially and commercially in Florida for decades to come.”
“We look forward to helping the agency implement the critical financing aspects of the program as a tool to help our state implement energy-efficiency improvements in a cost-effective manner,” PFM managing director David Moore said.
The newly appointed board of the agency expects to meet frequently over the next three months to establish a structure for the program, according to chairwoman Barbara Revels, a Flagler County commissioner who is a realtor and general contractor.
The PACE agency could begin accepting cities and counties as subscribers to the program by the middle of next year, she said. Once local governments subscribe, homeowners and commercial property owners can participate in the assessment program. Others appointed to the board recently are Kissimmee Mayor pro tem Cheryl Grieb, a specialist in commercial and residential construction, and Edward Marquez.
Marquez was recently named finance deputy mayor for Miami-Dade County. He is a former senior vice president from First Southwest, and held a number of managerial and finance posts with South Florida local governments over the years.
Revels said board members are “extremely versatile” because of their occupations, and will help prepare the agency to capture economies of scale in financings that have eluded smaller PACE programs.
She said a statewide program has the potential to be more cost-effective because it will spread costs among thousands of people, adding: “I think this is why we will be successful where others have not.”
With the recession’s toll on the availability of home equity loans and second mortgages, Revels said PACE provides property owners with another option to do energy and hurricane-proofing projects to capture savings and improve safety.
“I just think the program is very uniquely designed, and is one more avenue for homeowners and commercial building owners to have the ability to do energy efficiency, renewable energy and windstorm improvements,” she said. “And right now, they don’t have a lot of avenues.”
On Sept. 27, a Florida judge’s ruling became final, validating up to $2 billion of municipal bonds to fund the agency’s program.
The validation also recognized that the special assessments levied in the program are valid and cannot be challenged if, for example, the assessments are used to back bonds.
The validation ruling also confirmed a provision in the state’s PACE law, which prevents a mortgage lender from declaring a default or accelerating the payment of a mortgage, note or lien if a property owners enters into a financing agreement with the PACE agency.
The binding nature of the court ruling on Florida’s program and on private and federal mortgage agencies should resolve questions that stalled many PACE programs across the country, said attorney Bob Reid with Bryant Miller Olive PA, the Florida PACE Funding Agency’s bond counsel.
Many of those questions surfaced in the last two years when the Federal Housing Finance Agency ordered Fannie Mae and Freddie Mac to stop buying mortgages with PACE liens.
The FHFA said it took the action due to the lack of standard underwriting and energy retrofit guidelines among the various programs across the country, as well as questions about a PACE assessment priority over mortgages when homeowners default. The FHFA’s action drew lawsuits from several states.
In California, a federal judge ruled recently that the FHFA violated the administrative procedures act when it failed to comply with the proper notice and comment requirements for rulemaking when it changed policy regarding PACE programs. That case has not yet concluded.
Meanwhile, 48 co-sponsors have now signed on to federal legislation designed to clear the way for PACE programs to resume, and for Fannie Mae and Freddie Mac to purchase mortgages with PACE assessments that meet certain guidelines.
HR 2599, called the PACE Assessment Protection Act of 2011, was filed in July by Rep. Nan Hayworth, R-N.Y. It has been referred to the House subcommittee on insurance, housing and community opportunity, though no hearings have been scheduled.
In Florida, PACE assessments are already considered governmental assessments, according to Reid. “That is binding on all mortgage lenders operating in Florida, including Fannie Mae and Freddie Mac,” he said.
Even if the issues concerning Fannie and Freddie are not resolved, and the government-sponsored enterprises don’t begin buying mortgages with PACE assessments, Reid said he believes others in the mortgage market will.
Reid said Florida’s concept, which he helped create, will avoid the patchwork of different programs that has emerged across the country.
“The agency’s unique statewide uniform platform will be easily subscribed to by each jurisdiction and allows for access to capital and governmental oversight through the agency,” Reid said, noting that it will give vendors a single set of procedures to work with. Florida PACE Funding Agency is in the process of reviewing eight responses to a request for information from firms interested in being its bankers or administrators. The next step will be the issuance of a formal request for proposals for those services.
The agency’s board holds its next meeting Dec. 7.