BRADENTON, Fla. – Florida's first county-based program offering PACE financing to homes and businesses through a statewide conduit issuer will debut in the fourth quarter.
Leon County, home of the state capital in Tallahassee, will offer the new Property Assessed Clean Energy program to add to its focus on "building a culture of sustainability" with green initiatives such as providing gardening grants, encouraging recycling and pollution-reduction transportation programs.
After years of planning and legal setbacks, Leon County's 286,000 residents and 7,500 businesses will soon have access to bond-financed PACE loans.
The Leon County Energy Improvement District will offer separate commercial and residential PACE programs through the Florida Development Finance Corp., which has $2 billion in court-validated bonding capacity.
"I'm thrilled we are pushing this forward," Leon County Commissioner Kristin Dozier said July 12 when the board agreed to ink the deal. "It just feels like finally all these different pieces are coming together."
Renovate America will administer the residential program.
Ygrene Energy Fund will run the commercial program.
The programs will offer homes and businesses access to for energy-saving improvements such as adding solar panels, installing new windows and doors, upgrading heating and air conditioning systems, all established uses for PACE financings around the country.
In addition, Florida's PACE law also allow property owners to use the financing to strengthen homes and businesses by adding hurricane-protection improvements such as shutters and wind-resistant roofing.
"Renovate America is the newest residential PACE administrator in Florida," said Greg Frost, national communications director for the San Diego-based Renovate America. "We have been busy organizing our program for statewide launch, expected later this year.
"We are currently reaching out to counties, cities and towns throughout Florida," he said, adding that they are being offered the company's HERO - Home Energy Renovation Opportunity - program.
Property owners pay for upgrades with assessments on their tax bills. The assessments run with the land if the property is sold.
In Leon County, the assessments will be structured similarly to other tax assessments on the tax bill, operating in a subordinated fashion so that mortgages insured by the Federal Housing Administration qualify for PACE financing, county documents said.
"The FHA guidance requires that a PACE lien be treated like a tax assessment, and under Florida law it is exactly that," Frost said. "Under Florida law, a local government may levy non-ad valorem assessments to fund qualifying improvements."
On July 12, Leon County commissioners also approved a bond resolution for the Ygrene commercial PACE program to finance improvements.
Ygrene will use up to $100 million of $200 million in bonds under a court validation obtained by the Leon County Energy Improvement District, according to county documents.
The bond resolution includes a trust indenture between the Energy Improvement District and Zions Bank that will implement a taxable drawdown revenue bond program in multiple series.
The bonds will be sold to accredited investors and qualified institutions.
The district's bond counsel is Bryant Miller Olive PA.
While PACE programs have been in development across the country for years, a recent study found an important side-benefit to the improvements in addition to saving on energy costs and providing comfort to home and business owners.
Properties with PACE-financed improvements will increase in value, according to a study published in the Journal of Structured Finance's winter 2016 edition.
The analysis by the study's authors, housing economist Laurie Goodman and Jun Zhu, showed that property owners "who opt for PACE enhancements will get more than their money out" above the cost of the improvements.
"The results are robust when we compared PACE properties with similarly situated non-PACE properties," the authors wrote. "Every methodology showed a positive PACE premium at resale."
The study likely is good news for potential investors in PACE financings and green initiatives because it suggests that properties will appreciate because of the improvements.
In June, Renovate America closed on its seventh securitization of PACE bonds – the largest ever completed to date by any issuer and a designated green bond, according to the company.
Through its HERO program, Renovate America issued $305.3 million of Class A notes secured by 13,432 PACE assessments levied on residential properties in 31 California counties.
The notes, rated AA(sf) by Kroll Bond Rating Agency, were backed by assessments with a weighted-average annual interest rate of 7.96% and a weighted-average term of 14.95 years. The assessments were originated between January and April of this year, according to the company.
The notes were sold to accredited national and international investors and qualified institutional buyers under the provisions of Rule 144A of the Securities Act of 1933.
The bonds financing Leon County's residential and commercial programs are also expected to be issued to such qualified investors.
The Florida Development Financing Corp.'s board executed its agreement with Renovate America on April 1, according to FDFC executive director Bill Spivey.
Others PACE program providers are in the process of completing written agreements, including Ygrene Energy Fund of Florida Inc., PACE Funding Group, and CleanFund, he said.
Ryan Bartkus was hired by the FDFC to manage its PACE program on April 25. Bartkus has experience in the mortgage-banking and insurance industries.
"The FDFC is very excited to provide PACE as another economic development tool and alternative option for Florida businesses and residences," Spivey said. "As a special development financing authority, we are supporting a vision of a vibrant economy by providing access to capital through both our traditional bond financing and newly emerging PACE Program."
Spivey said the use of its $2 billion in bond capacity will depend on the volumes that program administrators draw following the completion of installations.