HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: CS/CS/HB 669 Improvements to Real Property
SPONSOR(S): Commerce Committee, Ways & Means Committee, Fine
TIED BILLS: IDEN./SIM. BILLS: CS/SB 950
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Energy, Communications & Cybersecurity 16 Y, 0 N Keating Keating
Subcommittee
2) Local Administration, Federal Affairs & Special 18 Y, 0 N Roy Darden
Districts Subcommittee
3) Ways & Means Committee 16 Y, 7 N, As CS LaTorre Aldridge
4) Commerce Committee 15 Y, 1 N, As CS Keating Hamon
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 l ocal 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 separate administrator.
The bill makes several changes to Florida law governing qualifying improvement programs, including:
Expanding eligible “qualifying improvements” to include:
o For residential properties: wastewater improvements, such as advanced onsite sewage treatment and
disposal systems and septic-to-sewer conversions.
o For commercial properties: stormwater and flood 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 wind-resistance improvements on new construction.
Requiring the holder or servicer of a mortgage that encumbers an applicant’s property to provide consent:
o For residential properties: for the applicant to exceed a 97% ratio of property -related debt to the
property’s fair market value as determined by a certified residential appraiser.
o For commercial properties: for the applicant to finance any qualifying improvement through the program.
Authorizing the use of a qualifying improvement program to refinance qualifying improvements.
Strengthening underwriting requirements for residential properties, including, among other things, a determination
that the property owner is able to repay the assessment and cover existing debts and expenses.
Providing new terms and requirements for residential properties, including:
o Written and oral disclosure requirements.
o Maximum terms for financing agreements based on the useful life of financed improvements.
o A rescission period of 5 business days.
o Requirements for enrolling, monitoring, suspending, and releasing funds to program contractors.
o Requirements for program marketing, and a prohibition on kickbacks to cont ractors.
Providing new terms for commercial properties, including:
o Allowing the property owner to execute a financing agreement before a certificate of occupancy or
evidence of completion is issued and allowing for progress payments.
o Providing terms for the use of qualified improvement programs by “nongovernment al lessees.”
Requiring an annual report from each local government that has authorized a qualifying improvement program.
The bill does not have a fiscal impact on state or local government. The bill has an effective date of July 1, 2023.
This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives .
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DATE: 4/24/2023
FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Current Situation
Property Assessed Clean Energy (PACE) Programs
Generally, Property Assessed Clean Energy (PACE) laws enable local governments to establish
programs to provide financing for certain qualifying improvements on real property which 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. 1 PACE
programs are active in 30 states plus Washington D.C., but only California, Florida, and Missouri offer
residential PACE programs.2
PACE in Florida
In 2010, the Legislature provided specific authority for local governments to create PACE programs. 3
The law4 provides supplemental authority to local governments 5 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. 6 “Qualifying
improvements” include energy conservation and efficiency improvements, renewable energy
improvements, and wind resistance improvements to existing facilities.7
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. 8 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.”9 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, 10 so if
the homeowner defaults on their mortgage or goes into foreclosure, the delinquent PACE assessment
payments may be recovered before the mortgage. Current law also specifies that a PACE 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.
1 For more information, see http://www.pacenation.org and http://floridapace.gov/ (last visited April 5, 2023).
2
California offers residential PACE financing for improvements related to electric vehicle charging, infrastructure, energy ef ficiency,
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 April 5, 2023).
3 Ch. 2010-139, Laws of Fla.
4 S. 163.08, F.S.
5 Section 163.08(2)(a), F.S., defines the term “local government” to mean a county, a municipality, a dependent special distric t as
defined in s. 189.012, or a separate legal entity created pursuant to s. 163.01(7) (the Florida Interlocal Cooperation Act).”
6 S. 163.08(4), F.S.
7 S. 163.08(2)(b), F.S.
8 S. 163.08(13), F.S.
9 S. 163.08(15), F.S.
10 See ss. 125.01(1)(r), 170.01 and 170.09, F.S.
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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 11 to enter into a financing
agreement wherein the partnership, as a separate legal entity, imposes the PACE assessment. 12
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 3 years (or the property owner’s period of ownership, if less than 3
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 3 years (or the property owner’s period of ownership, if less than 3 years);
and
The property owner is current on all mortgage debt on the property. 13
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.14 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.15 PACE providers generally maintain a list of approved contractors authorized to provide
qualifying improvements.16
For example, Broward County authorizes the following PACE providers: 17
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.
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.
11 S. 163.01(7), F.S.
12 Ch. 2012-117, Laws of Fla.
13 S. 163.08(9), F.S.
14 S. 163.08(12)(a), F.S.
15 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% 20clean%20energy
%20(pace)%20district.pdf (last visited April 5, 2023).
16 See, e.g., Sarasota County, PACE, https://www.scgov.net/government/uf-ifas-extension-and-sustainability/pace (last visited April 5,
2023).
17 Broward County, Property Assessed Clean Energy (PACE)
https://www.broward.org/Sustainability/Documents/PACEProviderList_2022.pdf (last visited April 5, 2023).
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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, whether
to administer the program directly or through a third-party PACE provider, or any combination thereof.
PACE financing interest rates vary but are typically higher than traditional financing. 18 Interest rates and
fees for a project are set by the PACE provider when the agreement is finalized with the property
owner.19
Federal Housing Finance Agency and Super-Priority Liens
In 2010, and again in 2014,20 the Federal Housing Finance Agency (FHFA) directed mortgage
underwriters Fannie Mae and Freddie Mac not to purchase mortgages of homes encumbered by a first-
lien PACE loan 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.21
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 securitizing
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 FHFA generally supports energy retrofit financing programs, FHFA
acknowledges that such programs should be structured to ensure protection of the core financing for
the home.22
This restriction has two potential implications for borrowers. First, a homeowner with a first-lien PACE
loan may not refinance their 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. 23
18
The Balance, How PACE Loans Work, https://www.theb alancemoney.com/pace-loans-financing-for-upgrades-4124071 (last visited
April 5, 2023).
19 See PACE Broward, Frequently Asked Questions,
https://www.broward.org/Climate/Documents/PACE%20Broward%20FAQ%20Sheet_Update6_0927 2021.pdf (last visited April 5, 2023).
20 Federal Housing Finance Agency, FHFA Statement on Certain Energy Retrofit Loan Programs (July, 6, 2010),
http://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Statement-on-Certain-Energy-Retrofit-Loan-Programs.aspx (last visited April 5,
2023). See also Federal Housing Financial Agency, Statement of the Federal Housing Finance Agency on Certain Supe r 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 fir st-lien PACE loan attached to
it”) http://www.fhfa.gov/Media/PublicAffairs/Pages/Statement-of-the-Federal-Housing-Finance-Agency-on-Certain-Super-Priority-
Liens.aspx (last visited April 5, 2023).
21
“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 h omeowner
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 ta x
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 April 5, 2023).
22 FHFA Statemen