California Sues Feds over PACE

California Attorney General Jerry Brown, also the Democrat candidate for Governor, sued the Federal Government asking the Federal Court to enjoin FAN and FRED from blocking the PACE—property assessed clean energy program.[1] [2]

In an action filed July 14th, Brown said that under California law the tax assessments agreed to in the PACE program are considered tax assessments and the Feds should not be permitted to undermine California law.[3]

Jerry also fired off a strongly worded letter to President Obama asking him to get his housing bureaucracy under control. [4]

PACE has been a popular program for encouraging the market penetration of solar and other renewable energy programs for homeowners.[5] Under the program the upfront installation costs can be repaid through a loan from the state or loan government as a tax assessment thus overcoming one of the biggest hurdles for homeowners in stalling solar rooftop systems—the high upfront costs.  About half of the California’s counties have PACE programs in place or plan to start one.

The warning letter from Fannie Mae and Freddie Mac sent a chilling uncertainty through the mortgage market making it almost impossible to close on a transaction involving a PACE loan.  As the PACE loans stalled so did sales of solar energy systems and the jobs they create and impeding California’s ambitious One Million Solar Roofs initiative and its renewable energy goals.  California also risks losing more than $100 million in federal stimulus money.

The problem for FAN and FRED is the PACE program is spreading like wildfire across the country and not every state, of course, has the same California law or case law to back it up.  California responds that is not our problem and the Feds should not undermine California law in an area where it is entitled to deference because there might be a problem in other states.

If FAN and FRED get their way then the PACE program will likely fail nationwide since the loans would have to be paid off by existing home owners before the house could be sold or even refinanced thus undermining the entire premise of the program to allow the upfront capital cost of installing renewable energy systems to be amortized over the life of the system through tax assessments.