Environment & Energy committee reviews bill to create commercial PACE districts

At a meeting of the Environment & Energy committee, staff walked members through draft legislation to create a commercial Property Assessed Clean Energy program, or CPACE, that would let a municipal legislative body designate an entire municipality as a CPACE district and allow participating commercial property owners to secure private financing repaid through a special assessment on the property tax bill.

The bill text read by staff explains that, "Upon a vote ... the municipality shall allow for the imposition of a special assessment to secure private financing for property owners for projects relating to renewable energy" and that owners may enter into written agreements with the municipality only after an affirmative vote and after required analyses are completed. The draft defines "commercial or industrial building" as any building other than a residential dwelling with fewer than five units, explicitly allowing multi‑unit properties with five or more units to enroll.

Why it matters: CPACE programs are designed to stretch repayment terms and link financing to property tax bills so energy upgrades that may not pencil out on short commercial loans become financially viable. Committee members focused on the legal and market mechanics that would make the program workable in Vermont — lender consent, lien priority, who administers the program and what protections, if any, municipalities would carry.

Key provisions and committee questions

- Enrollment and studies: The bill requires that property owners obtain an energy or water usage analysis by a licensed professional engineer or firm and, where renewable energy is proposed, an engineering feasibility study. Staff emphasized these certifications must show proposed improvements will improve efficiency, reduce greenhouse gas emissions, add renewable generation or improve resilience; multiple members noted that "resilience" is not defined in the bill or in the cited Vermont statutes and asked for a statutory or regulatory definition.

- Timing: The draft limits entry into CPACE agreements to projects starting on or after January 1, 2027, and sets the program’s effective date in the bill as July 1, 2026.

- Repayment, liens and foreclosure: Staff summarized the repayment mechanism: assessments are collected via the municipal tax process and the lien "runs with the land." The draft makes CPACE assessments first and prior liens on the property and specifies that unpaid assessments due at the time a foreclosure action is filed must be paid for title to transfer. Committee members pressed for clarity about how CPACE liens interact with existing mortgages and whether lenders will provide the consent the statute requires.

- Lender consent and limits: The bill requires written statements from each mortgage or deed‑of‑trust holder consenting to the assessment and indicating the assessment does not trigger a default under the mortgage. The statute as drafted would permit a combined amount of assessment plus outstanding mortgage obligations up to 90% of assessed value. Members voiced concern about whether commercial lenders will accept lien priority or how consent will be negotiated.

- Program administration and liability: The draft allows municipalities, public agencies or private entities to contract to serve as program administrators but bars a capital provider that is also lending from acting as administrator in that municipality. Neither the program administrator nor a municipality would have liability to property owners for energy savings or resilience performance under the proposed language.

- Financing terms and prepayment: Unlike residential PACE (which the statute treats differently), CPACE repayment terms will be governed by the private financing agreement; the draft sets a maximum repayment period of 30 years and does not require waiving prepayment penalties — those terms are left to the private contracts.

What members want next

Committee members asked staff to seek clarifications or additions before further action: define or reference a standard for "resilience," confirm how municipalities that enforce state building codes should treat code‑exceeding improvements, explain how tax billing frequency would affect actual payment schedules, and collect evidence on lender willingness to provide the necessary consent. Staff proposed inviting testimony from the Department of Financial Regulation, the Vermont League of Cities and Towns, the Vermont Economic Development Authority, Efficiency Vermont, bankers and CPACE practitioners from other states; members agreed.

Committee process: The sponsors plan a panel of witnesses over the afternoon and the following day to address practical administration, lender perspectives and examples from other states. The staff closed the session noting the committee would take a 10‑minute break and then begin the scheduled testimony.

Ending

The committee did not take votes on the draft during this session; members directed staff to request targeted testimony and additional drafting clarifications (notably a definition of "resilience" and more detail on lender consent mechanics) before the committee considers formal action.