Banks, program operators and committee weigh commercial PACE bill
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Summary
Bankers and PACE providers described lender‑consent, lien priority and administration models for commercial PACE; witnesses said lender consent language is critical to securing commercial lending support and administrators can minimize municipal burden through third‑party operation.
The committee shifted to S.301, a bill to authorize commercial Property Assessed Clean Energy (C‑PACE) financing. Christian Delia (Vermont Bankers Association) told the committee that the draft’s consent language on page 6—requiring applicants to seek approval from existing lienholders before taking a PACE assessment—is “absolutely vital” to preserve commercial lenders’ priority positions and make the product workable for larger commercial loans.
Delia explained commercial mortgages are often large and lenders will resist a new lien that takes priority over their position. “To have somebody who’s got a lien on a property all of a sudden go and get another loan that sits in front of ours…does not work for your commercial landlords,” he said, advocating lender consent as a practical safeguard.
Kirk Polam of Counterpoint Sustainable Real Estate, a national C‑PACE capital provider and administrator, described typical market mechanics: municipalities usually opt in and provide the tax‑lien mechanism while third‑party administrators handle origination, underwriting, collections and servicing. Polam said his firm services roughly 9,000 assessments across several states with very few problem cases and that proper underwriting and lender consent reduce credit risk. “PACE is a pretty mature financing vehicle for energy and resiliency improvements across the United States,” he said.
Committee members raised implementation questions: how to protect small towns with limited staff, how repayments are collected (tax roll or direct billing), fees to municipalities, default experience, and resident protections learned from residential PACE programs. Witnesses said fees are typically borne by property owners as part of assessments, and administrators or investors commonly absorb program servicing so municipal resources are minimal. They also recommended consumer protections for residential programs and robust underwriting for commercial programs.
No vote occurred; committee staff will continue drafting to address municipal opt‑in procedures, voter‑approval language (the bill currently included a residual voter‑approval provision), and lien‑priority consent mechanics.
Ending: Committee members asked staff to revisit language on voter approval, lien priority mechanics, and municipal opt‑in procedures so the bill can preserve lender confidence while minimizing municipal administrative burden.