Senate committee reviews S.138 to authorize commercial PACE financing in Vermont
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Summary
Witnesses told the Senate committee S.138 would create a voluntary commercial PACE program that leverages private capital for energy and resilience upgrades; lenders urged a lender‑consent mechanism and clarity on valuation and administering agencies.
Testimony at the Senate Finance committee hearing outlined the proposal in S.138 to authorize commercial property assessed clean energy (CPACE) financing and the tradeoffs lawmakers must resolve as they tailor the program to Vermont.
Aaron Farris, deputy commissioner for banking at the Department of Financial Regulation, told the committee the department had raised earlier drafting concerns that have since been addressed. "In Vermont, generally, consumer financing, there is no prepayment penalty allowed," he said, noting that commercial financing is treated differently and that the bill as rewritten now complies with state law.
Business and finance groups spoke in support while also urging protective safeguards. Megan Sullivan, vice president for government affairs at the Vermont Chamber of Commerce, described CPACE as a voluntary, market-driven tool that leverages private third-party capital to finance energy efficiency, renewable energy, water conservation and resiliency measures. "S.138 offers Vermont a practical, voluntary, and market-driven tool to support energy efficiency, renewable energy, and resiliency investments at a time when federal incentives are less available," Sullivan said, urging the committee to allow repayment terms to align with the useful life of improvements.
Lenders raised several concerns about commercial-scale projects and the bill's interaction with existing mortgage lenders. Kristelia, president of the Vermont Bankers Association, emphasized differences between residential PACE and commercial PACE, saying commercial projects can be much larger and that lender consent — not mere notification — is necessary to protect prior-secured lenders. "My bankers have told me that if lender consent were not in the bill, they would not make a commercial PACE loan in a commercial PACE district," she said.
The committee questioned the bill's 90% cap on the combined amount of the PACE assessment plus outstanding mortgage obligations relative to a property's assessed value. Witnesses and members debated whether the limit should be measured against assessed value, market value or income-based valuation, and whether 90% was appropriate for commercial lending. Farris and others said assessed and market values can diverge substantially and that underwriters and PACE administrators would need to exercise judgment in underwriting and lender-consent decisions.
Committee members also pressed who would administer and implement the program. Witnesses said DFR would be a regulator but not the likely administrator; the bill anticipates third-party administrators and private capital providers will design program parameters, perform technical reviews and put up the capital, which reduces direct municipal financial exposure. Witnesses explained that PACE assessments behave like property-tax liens: delinquencies are collected as an annual property tax-type delinquency and liens remain with the property on sale, which affects resale and purchaser decisions.
Lawmakers did not take final action on S.138 during the hearing. Committee members agreed further work is needed on valuation language, the 90% threshold, and the question of which state agency or third party would run program administration. The committee signaled it will continue work in Finance and seek additional witnesses, including program administrators and Efficiency Vermont or national CPACE firms, before moving the bill forward.
