Has Florida Turned the Corner on Property Assessed Clean Energy Financing?

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By Travis Yelverton, Florida Market Leader, PACE Equity, and CEO and Founder, Capital Xpansion

December 1, 2015

Property Assessed Clean Energy, or PACE, is having a banner year across the U.S. both in projects approved and capital commitments. In Q2 of 2015, nearly $23 million in commercial projects alone was funded. (For more data on PACE, see PACENation.) Last month here at the Southeast Energy Efficiency Finance Network we took a look at PACE in North Carolina, and provided a quick primer on what makes PACE a useful and innovative tool. Today, we’re taking a closer look at recent PACE developments in Florida.

A Fast Start Followed by Legal Wrangling

There aNorth Carolinare currently 30 states plus the District of Columbia with PACE-enabling legislation on the books. While enabling PACE can be difficult, the real challenge is creating successful PACE districts, which means districts with sufficient ability to market, originate, and fund commercial or residential projects. Many states are in the midst of this challenge, including Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, North Carolina, and Virginia in the Southeast.

Florida’s PACE effort has uniquely outperformed other Southeastern states.  PACE was legislatively established in Florida in 2010, and by 2012 three statewide administrators had launched programs. However, early 2014 litigation cast a shadow over these programs and potential participants. In two cases, the Florida Supreme Court overturned 60 years of appellate case law and confirmed with minor changes a total of $700 million in bonds issued for Leon County and the Coastal Corridor District in South Florida.  These programs can now begin originating PACE projects.

In a third case, the Court , ruling against the Florida Bankers Association’s claim that PACE liens should not be senior to mortgage payments. (Because PACE assessments work like property taxes, in the event of default, most PACE liens are paid before mortgage debt.) All three cases were resolved in October, although not before judicial foreclosure was stricken from each program’s organizing documents. Even with this minor setback, though, these delayed PACE programs can now finally move forward

There have been a few bright spots during this legal malaise. In addition to the recently unshackled programs in Leon County and Coastal Corridor, the Solar Energy and Loan Fund (SELF) created a commercial district in St. Lucie County, bringing the number of PACE administrators in the state to six, the most in any state outside of California. Ygrene Energy Florida, which administers residential PACE in Miami-Dade County, contracted over $50 million in projects as of October. In addition, three commercial PACE projects totaling over $6 million have been funded for BrandsMart USA stores in Miami and West Palm Beach.

“PACE’s credibility and proven track record make it the clear choice to upgrade our stores from both a business and an environmental perspective,” said EVP Lary Sinewitz of BrandsMart USA in an October press release.

Turning the Corner

Optimism is returning one month removed from these critical State Supreme Court rulings. 2016 promises a substantial increase in the number of funded commercial projects along with the geographic spread of residential PACE, potentially making Florida the second biggest residential PACE market behind California. Another promising development is the recent acquisition of Florida PACE administrator EcoCity Partners by Renew Financial, the original architect of PACE financing. Industry leader SolarCity has shown considerable interest in Florida, although it has been deterred by regulations that ban Power Purchase Agreements. But, Florida voters will have a chance to overturn these regulations when a constitutional amendment to enable PPAs appears on the 2016 presidential election ballot.

Given these developments, 2015 may be looked back on as the year that marked the turning point for PACE in Florida. We’ll be continuing to profile the progress of PACE in states across the Southeast in future posts. Have insight into what’s happening with PACE in Alabama, Arkansas, Georgia, Kentucky, Louisiana, or Virginia?  Contact us at [email protected] to share your expertise!

For more information on PACE in Florida, please contact Travis Yelverton at [email protected].  For more information on the Southeast Energy Efficiency Finance Network, please contact Carol Rosenfeld at [email protected].