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Committee reviews new CPACE draft, focuses on statewide administrator and lien mechanics
Summary
The Natural Resources & Energy Committee reviewed draft 3.1 of S.138 to authorize commercial property assessed clean energy (CPACE) financing, debating a statewide program administrator, the municipality’s role as collector (not lender), required engineering analyses, lien priority, and mortgage‑holder consent.
A Vermont legislative committee on Thursday examined a new draft of S.138 that would expand property assessed clean energy financing to commercial and industrial buildings while adding a statewide program administrator and clarifying municipal roles.
The bill’s drafter, who identified herself as Suna, said draft 3.1 replaces earlier language and envisions a program administrator ‘‘that would be statewide’’ to handle key administrative duties. Suna said municipalities would ‘‘not be the ones who are lending’’ and instead would work with third‑party lenders and, in her words, act primarily to collect special assessments on tax bills.
Why it matters: proponents say CPACE helps commercial property owners afford energy efficiency, renewable energy and resiliency upgrades that might otherwise not pencil out; opponents and committee members pressed for detail on borrower protections, mortgage priority and municipal exposure.
What’s in draft 3.1: the committee reviewed provisions that would (a) create a separate subchapter for commercial PACE, (b) allow municipalities to establish a property assessed clean energy district by voter or legislative action and then impose a special assessment to secure private financing, (c) require a pre‑project performance analysis by a licensed engineer quantifying costs, energy savings and estimated carbon impacts (and optionally resiliency benefits), (d) limit the combined amount of assessment plus outstanding mortgages to no more than 90% of assessed value, and (e) cap repayment terms to the lifetime of the improvement (with a 30‑year maximum cited in existing PACE law).
Mortgage and foreclosure issues drew repeated questions. The draft requires the property owner to obtain written consent from mortgage holders attesting that the assessment will not constitute an event of default. Suna and other members asked for testimony from lenders to clarify how the lien will be subordinated and whether CPACE will be practicable for smaller municipalities.
On administration and fees, the draft allows a municipality to act as program administrator or for the state agency to contract with a private third party to perform administration; municipalities that administer the program could charge a fee for performing billing and collection. The bill preserves separate legal protections: the municipality would not pledge its full faith and credit for CPACE financing and would not be liable for project performance beyond contractual duties.
Next steps: the committee flagged mortgage‑priority, the practical role of municipalities versus a state program administrator, and how lenders will assess and underwrite projects. Members said they will request additional testimony from banking and mortgage stakeholders and may refine the guidebook and model‑document language before advancing the draft.
Ending: Committee members concluded the walk‑through and scheduled further testimony to resolve lien priority, administrative duties and operational questions raised during the session.
