HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: CS/CS/CS/HB 927 Improvements to Real Property
SPONSOR(S): State Affairs Committee, Ways & Means Committee and Energy, Communications &
Cybersecurity Subcommittee, Trabulsy
TIED BILLS: IDEN./SIM. BILLS: CS/CS/SB 770
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Energy, Communications & Cybersecurity 15 Y, 0 N, As CS Keating Keating
Subcommittee
2) Ways & Means Committee 19 Y, 2 N, As CS Berg Aldridge
3) State Affairs Committee 17 Y, 4 N, As CS Mwakyanjala Williamson
SUMMARY ANALYSIS
In 2010, the Legislature provided specific authority for local governments to create qualifying improvement
programs, commonly referred to as Property Assessed Clean Energy (PACE) programs, to provide up-front
financing for certain qualifying improvements. Under these programs, property owners may apply to the local
government for funding to finance a qualifying improvement and voluntarily enter into a financing agreement
with the local government. Qualifying improvements include energy conservation and efficiency improvements,
renewable energy improvements, and wind resistance improvements to existing facilities. Property owners
finance qualifying improvements through a non-ad valorem assessment on their property. Local governments
may offer this program to residential and/or commercial property owners and may administer the program
directly or through a third-party.
The bill makes several changes to Florida law governing qualifying improvement programs:
Modifies eligible “qualifying improvements”
o For residential properties: Adds certain wastewater improvements, flood and water damage
resiliency improvements, and permanent generators, and removes some energy conservation
and efficiency improvements.
o For commercial properties: Adds wastewater improvements, flood and water damage resiliency
improvements, improvements to achieve a sustainable building rating or compliance with a
national model resiliency standard, improvements to achieve wind or flood insurance rate
reductions, and water conservation improvements.
Requires the holder or servicer of a mortgage that encumbers an applicant’s commercial property to
provide consent for the applicant to finance any qualifying improvement through the program.
Provides additional new terms and requirements for residential and commercial properties.
Establishes requirements relating to program contractors and third-party administrators, including
annual performance reviews; regulates program marketing and information sharing and prohibits
kickbacks from program administrators to contractors; specifies terms under which financing
agreements are unenforceable; and requires an annual report from each local government that has
authorized a qualifying improvement program.
Requires the Auditor General to conduct an operational audit of residential and commercial programs
every three years.
The bill does not have a fiscal impact on state or local government.
This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives .
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FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Current Situation
Property Assessed Clean Energy (PACE) Programs
Generally, PACE laws enable local governments to establish programs to provide financing for certain
qualifying improvements on real property that reduce energy consumption and increase energy
efficiency. PACE allows individual property owners to contract directly with qualified contractors for
energy efficiency and renewable energy projects. The local government issues revenue bonds and
uses the proceeds to provide initial project funding, which bonds are repaid by non-ad valorem
assessments on participating property owners’ tax bills. PACE programs are active in 30 states plus
Washington D.C., but only California, Florida, and Missouri offer residential PACE programs. 1
PACE in Florida
In 2010, the Legislature provided specific authority for local governments to create PACE programs.2
The law3 provides supplemental authority to local governments 4 concerning qualified improvements to
residential and non-residential real property. The law provides that if a local government authorizes a
PACE program, property owners may apply to the local government for funding to finance a qualifying
improvement and voluntarily enter into a financing agreement with the local government. 5 “Qualifying
improvements” include energy conservation and efficiency improvements, renewable energy
improvements, and wind resistance improvements to existing facilities. 6
At least 30 days before entering into the financing agreement, the property owner must provide notice
to any mortgage holder or loan servicer of the intent to enter into the agreement, the maximum amount
to be financed, and the maximum annual assessment required to repay the amount. 7 The law provides
that an acceleration clause for “payment of the mortgage, note, or lien or other unilateral modification
solely as a result of entering into a financing agreement … is not enforceable.” 8 However, the mortgage
holder or loan servicer may increase the required monthly escrow by an amount necessary to pay
annually the qualifying improvement assessment.
The law authorizes a local government to provide and finance qualifying improvements, levy a non-ad
valorem assessment to fund a qualifying improvement, incur debt to provide financing for qualifying
improvements, and collect costs incurred from financing qualifying improvements through a non-ad
valorem assessment. These non-ad valorem assessments are senior to existing mortgage debt, 9 so if
the homeowner defaults on his or her mortgage or goes into foreclosure, the delinquent PACE
assessment payments may be recovered before the mortgage. Current law also specifies that a PACE
1 California offers residential PACE financing for improvements related to electric vehicle charging, infrastructure, energy
efficiency, renewable energy, seismic strengthening and water efficiency. Missouri offers PACE financing for
improvements related to energy efficiency and renewable energy. Additionally, Maine offers residential programs without
holding a lien against properties. See PACE Nation, PACE Programs https://www.pacenation.org/pace-programs/ (last
visited Jan, 27, 2024).
2 Ch. 2010-139, Laws of Fla.
3 S. 163.08, F.S.
4 Section 163.08(2)(a), F.S., defines the term “local government” to mean a county, a municipality, a dependent special
district as defined in s. 189.012, or a separate legal entity created pursuant to s. 163.01(7) (the Flori da Interlocal
Cooperation Act).”
5 S. 163.08(4), F.S.
6 S. 163.08(2)(b), F.S.
7 S. 163.08(13), F.S.
8 S. 163.08(15), F.S.
9 See ss. 125.01(1)(r), 170.01 and 170.09, F.S.
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program may be administered by a for-profit entity or a not-for-profit organization on behalf of and at
the discretion of the local government.
In 2012, the Legislature expanded the definition of “local government” to allow a partnership of local
governments formed pursuant to the Florida Interlocal Cooperation Act 10 to enter into a financing
agreement wherein the partnership, as a separate legal entity, imposes the PACE assessment. 11
Before entering into a financing agreement, the local government must reasonably determine that:
All property taxes and other assessments on the property are paid and have not been
delinquent for the preceding three years (or the property owner’s period of ownership, if less
than three years).
There are no involuntary liens on the property, including, but not limited to, construction liens .
No notices of default or other evidence of property-based debt delinquency have been recorded
during the preceding three years (or the property owner’s period of ownership, if less than three
years).
The property owner is current on all mortgage debt on the property. 12
The total assessment cannot be for an amount greater than 20 percent of the just value of the property
as determined by the county property appraiser, unless consent is obtained from the mortgage
holders.13 Consideration of the property owner’s ability to repay the assessment is not required.
In Florida, local governments typically have multiple non-exclusive agreements with a number of PACE
providers. Generally, PACE providers are private companies that administer the local government’s
PACE program on behalf of the local government and provide funding from private sources. PACE
providers generally act as the program administrator for special districts created pursuant to an
interlocal agreement between two or more Florida local governments. Once the PACE district is
created, additional counties or municipalities may join the special district as members, authorizing the
PACE provider for the special district to administer PACE programs on behalf of the newly joined
members.14 PACE providers generally maintain a list of approved contractors authorized to provide
qualifying improvements.15
For example, Broward County authorizes the following PACE providers:16
Counterpointe Energy Solutions administers a commercial PACE program for the Florida PACE
Funding District.
Berkadia administers a commercial PACE program the Florida Renewable Energy District.
CleanFund administers a commercial PACE program for the Florida Renewable Energy District.
Dividend Finance administers the “Dividend” Program for the Florida Renewable Energy
District.
FortiFi Financial administers a residential PACE program for the Florida PACE Funding Agency
District.
Greenworks Lending administers a commercial PACE program for the Florida Resiliency and
Energy District.
Lever Energy Capital administers a commercial PACE program for the Florida Resiliency and
Energy District.
10 S. 163.01(7), F.S.
11 Ch. 2012-117, Laws of Fla.
12 S. 163.08(9), F.S.
13 S. 163.08(12)(a), F.S.
14 See, e.g., Green Corridor Property Assessed Clean Energy (PACE) District Town of Cutler Bay, Florida Financial
Report for the Fiscal Year Ended Sept. 30, 2020, at 13,
https://flauditor.gov/pages/specialdistricts_efile%20rpts/2020% 20green% 20corridor%20property%20assessment%20clea
n%20energy%20(pace)% 20district.pdf (last visited Jan. 27, 2024).
15 See, e.g., Sarasota County, PACE, https://www.scgov.net/government/uf-ifas-extension-and-sustainability/pace (last
visited Jan. 27, 2024).
16 Broward County, Property Assessed Clean Energy (PACE)
https://www.broward.org/Sustainability/Documents/PACEProviderList_2022.pdf (last visited Jan. 27, 2024).
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Home Run Financing administers a residential PACE Program for the Florida PACE Funding
Agency District.
Rahill administers a commercial PACE program for the Florida Resiliency and Energy District.
Renew Financial administers PACE programs under the “RenewPACE” Program (residential
and commercial) for the Florida Green Finance Authority.
Structured Finance Associates administers a commercial PACE program for the Florida
Resiliency and Energy District.
Twain Financial Partners administers a commercial PACE program for the Florida Renewable
Energy District.
Local governments may choose whether to offer a residential or commercial PACE program and
whether to administer the program directly or through a third-party PACE provider.
PACE financing interest rates vary but are typically higher than traditional financing.17 Interest rates and
fees for a project are set by the PACE provider when the agreement is finalized with the property
owner.18
Federal Housing Finance Agency and Super-Priority Liens
In 2010, and again in 2014,19 the Federal Housing Finance Agency (FHFA) directed mortgage
underwriters Fannie Mae and Freddie Mac not to purchase mortgages of homes encumbered by a
PACE assessment due to its senior status above a mortgage. Under normal circumstances, real estate
lien priority is established by the order in which the liens are filed. 20
According to the FHFA, such super-priority liens increase the risk of losses to taxpayers. Fannie Mae
and Freddie Mac support the housing finance market by purchasing, guaranteeing, and s ecuritizing
single-family mortgages. Therefore, mortgages supported by Fannie Mae and Freddie Mac must
remain in first-lien position, meaning they have first priority in receiving the proceeds from the sale of a
property in foreclosure. Although the FHFA generally supports energy retrofit financing programs, the
FHFA acknowledges that such programs should be structured to ensure protection of the core
financing for the home.21
17 The Balance, How PACE Loans Work , https://www.thebalancemoney.com/pace-loans-financing-for-upgrades-4124071
(last visited Jan. 27, 2024).
18 See PACE Broward, Frequently Ask ed Questions,
https://www.broward.org/Climate/Documents/PACE%20Broward% 20FAQ% 20Sheet_Update6_09272021.pdf (last visited
Jan. 27, 2024).
19 Federal Housing Finance Agency, FHFA Statement on Certain Energy Retrofit Loan Programs (July, 6, 2010),
http://www.fhfa.gov/Media/P ublicAffairs/Pages/FHFA -Statement-on-Certain-Energy -Retrofit-Loan-Programs.aspx (last
visited Jan. 27, 2024). See also Federal Housing Financial Agency, Statement of the Federal Housing Finance Agency on
Certain Super Priority Liens (December 22, 2014)(“FHFA wants to make clear to homeowners, lenders, other financial
institutions, state officials, and the public that Fannie Mae and Freddie Mac’s policies prohibit the purchase of a mortgage
where the property has a first-lien PACE loan attached to it”) http://www.fhfa.gov/Media/PublicAffairs/Pages/Statement-of-
the-Federal-Housing-Financ e-Agency-on-Certain-Super-Priority-Liens.aspx (last visited Jan. 27, 2024).
20 “Real estate liens generally are ordered so that prior liens are paid in foreclosure before liens filed later in time. For
example, a mortgage loan used to buy the property takes priority over a later mortgage loan used to remodel the home.
The earliest and thus highest priority mortgage loan is known as a first lien, while the subsequent mortgage loan is
deemed a second lien. If the homeowner defaults on the second lien loan, the first lien mortgage holder retains the lien
even if the second lien mortgage holder forecloses; however, the converse is not true. Tax assessments are an exception
to this lien priority rule. Generally, unpaid property tax assessments have priority over other liens, regardless of the date
the prior liens were recorded or when the tax assessments became delinquent. This makes the lien priority for PACE
financing senior to liens for mortgage loans closed prior to the homeowner’s acceptance of the PACE financing. In the
case of default by the homeowner on the PACE assessment, local governments and investors in PACE bonds can expect
to collect the balance owed on a PACE assessment before any recovery by a mortgage lender.” Prentiss Cox, Keeping
PACE? The Case Against Property Assessed Clean Energy Financing Programs , 83 U. Colo. L. Rev. 83, 94 (2011),
https://scholarship.law.umn.edu/faculty_articles/549 (last visited Jan. 27, 2024).
21 FHFA Statement on Certain Energy Retrofit Loan Programs, supra, note 19.
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This restriction has two potential implications for borrowers. First, a homeowner whose property is
encumbered with a PACE assessment may not refinance his or her existing mortgage with a Fannie
Mae or Freddie Mac mortgage. Second, anyone wanting to buy a home that already has a first-lien
PACE loan cannot use a Fannie Mae or Freddie Mac loan for the purchase. These restrictions may
reduce the marketability of the house or require the homeowner to pay off the PACE loan before selling
the house.22
Additionally, in December 2017, the United States Department of Housing and Urban Development
announced that the Federal Housing Administration will no longer insure new mortgages on properties
that include PACE assessments, citing concerns about the potential for increased losses to the Mutual
Mortgage Insurance Fund resulting from the priority lien status given to such assessments.23
Some residential PACE programs are now operating with loan loss reserve funds, appropriate
disclosures, or other protections meant to address the FHFA's concerns.24 For example, in 2013,
California created a reserve fund to compensate first mortgage lenders in case of a foreclosure or a
forced sale attributable to a PACE loan. Additionally, Oklahoma and Vermont have passed legislation
to downgrade PACE from senior lien to junior lien, and there have been attempts by Congress to re