This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives.
STORAGE NAME: h1151a.ECC
DATE: 3/13/2023
HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: CS/HB 1151 Financial Improvements to Real Property
SPONSOR(S): Energy, Communications & Cybersecurity Subcommittee, Amesty
TIED BILLS: IDEN./SIM. BILLS: SB 810
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Energy, Communications & Cybersecurity
Subcommittee
14 Y, 0 N, As CS Keating Keating
2) Local Administration, Federal Affairs & Special
Districts Subcommittee
3) Ways & Means Committee
4) Commerce Committee
SUMMARY ANALYSIS
In 2010, the Legislature provided specific authority for local governments to create Property Assessed Clean
Energy (PACE) programs to provide up-front financing for certain qualifying improvements. Under these
programs, 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. “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 determine whether to offer a residential or commercial PACE
program, whether to administer the program directly or through a for-profit or not-for-profit administrator, or any
combination thereof.
The bill makes several changes to Florida’s PACE law as it relates to commercial real property. In particular,
the bill:
Defines “commercial property;”
Expands the types of improvements to commercial property that are eligible for PACE financing;
Modifies the requirements for commercial property owners to be eligible for PACE financing, including
the addition of a requirement for mortgage holder consent;
Provides that a PACE financing agreement on commercial property may be executed before a
certificate of occupancy or similar evidence of substantial completion of new construction or
improvement is issued;
Authorizes progress payments, or payments made before completion, for commercial property;
Limits fees imposed on PACE assessments on commercial property; and
Authorizes the use of PACE financing on government property leased for commercial uses.
The bill authorizes the use of a PACE financing agreement to refinance a qualifying improvement on any
eligible property.
The bill provides for prospective application only.
The bill does not appear to impact state revenues or state or local expenditures. The bill may have an
indeterminate impact on local government revenues. See Fiscal Analysis & Economic Impact Statement.
The bill has an effective date of July 1, 2023.
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DATE: 3/13/2023
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 law
4
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 Mar. 5, 2023).
2
California offers residential PACE financing for improvements related to electric vehicle charging, infrastructure, energy efficiency,
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 Mar. 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 district 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. STORAGE NAME: h1151a.ECC PAGE: 3
DATE: 3/13/2023
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.
15
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.
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
Some local governments in Florida have implemented more stringent eligibility requirements than those required by Florida law.
16
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 Mar. 5, 2023).
17
Broward County, Property Assessed Clean Energy (PACE)
https://www.broward.org/Sustainability/Documents/PACEProviderList_2022.pdf (last visited Mar. 5, 2023). STORAGE NAME: h1151a.ECC PAGE: 4
DATE: 3/13/2023
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.
Interest rates and fees for a project are set by the PACE provider when the agreement is finalized with
the property owner.
18
Costs incurred by a local government are collected as part of a PACE
assessment.
19
Further, PACE assessments must be collected pursuant to s. 197.3632, F.S., which
provides in part that tax collectors are entitled to receive a commission, on behalf of each special
assessment district, of the actual costs of collection, not to exceed 2 percent, on the amount of special
assessments collected and remitted.
20
Effect of the Bill
The bill makes several changes to Florida’s PACE law as it relates to commercial property.
21
Uses for PACE Financing
The bill expands the types of improvements to commercial property that are eligible for PACE financing
to add the following:
Energy conservation and efficiency improvements necessary to achieve a sustainable building
rating or compliance with a national model green building code.
Resiliency improvements, including creation or improvement of stormwater and flood resiliency
(including shoreline improvements) and any other improvements: (a) necessary to achieve a
sustainable building rating or compliance with a national model resiliency standard; or (b) made
to achieve wind or flood insurance rate reductions, including building elevation.
The bill maintains a prohibition against residential property owners using PACE financing for wind-
resistant improvements on new construction but allows PACE financing to be used for such
improvements on other types of property.
The bill authorizes the use of a PACE financing agreement to refinance a qualifying improvement on
any eligible property.
Eligibility Requirements for PACE Financing
The bill modifies PACE eligibility requirements for commercial property as follows:
Delinquency in payment of property taxes or other assessments on a property during the
preceding 3 years do not preclude the use of PACE financing if such taxes and assessments
are current.
18
See PACE Broward, Frequently Asked Questions,
https://www.broward.org/Climate/Documents/PACE%20Broward%20FAQ%20Sheet_Update6_09272021.pdf (last visited Mar. 5, 2023).
19
S. 163.08(4), F.S.
20
Id.; ss. 197.3632(8)(c) and 192.091(2)(b)2., F.S. It is not clear if the costs incurred by a local government include the commissions
that tax collectors are authorized to receive.
21
The bill defines “commercial property” to mean real property not defined as residential property which will be or has been improved
by a qualifying improvement, including, but not limited to, the following: a multifamily residential property composed of five or more
dwelling units; a commercial real property; an industrial building or property; an agricultural property; a nonprofit-owned property; a
long-term care facility, including nursing homes and assisted living facilities; or
a government commercial property. STORAGE NAME: h1151a.ECC PAGE: 5
DATE: 3/13/2023
Involuntary liens on a property do not preclude the use of PACE financing if not greater than
$10,000.
Recorded notices of default or other evidence of property-based debt delinquency during the
preceding 3 years do not preclude use of PACE financing if released during that time.
Further, the bill requires that, prior to entering into a PACE financing agreement with a commercial
property owner, the local government must have the written consent of the current holders or servicers
of any mortgage that encumbers or is otherwise secured by the property (or that will be secured by the
property at the time the PACE financing agreement is executed by the local government).
The bill does not change the eligibility requirements for residential property.
22
Timing and Fees for Commercial PACE Financing
For qualifying improvements to commercial property, the bill provides that a PACE financing agreement
may be executed before a certificate of occupancy or similar evidence of substantial completion of new
construction or improvement is issued. Further, the bill provides that progress payments, or payments
made before completion, are allowed for commercial property if the property owner, upon request for a
final progress payment, subsequently provides written verification that the qualifying improvements are
completed and operating as intended.
The bill provides that a PACE assessment on commercial property is subject to a maximum annual fee
of 1 percent of the annual assessment collected or $5,000, whichever is less.
PACE Financing on Government Commercial Property
The bill defines “government commercial property” to mean real property owned by a local government
and leased to a nongovernmental lessee
23
to be used as commercial property. The bill provides that a
PACE financing agreement for government commercial property must be executed by the
nongovernmental lessee with the written consent of the governmental lessor, with evidence of this
consent provided to the local government operating the PACE program. The PACE financing
agreement with the nongovernmental lessee must provide that the lessee is the only party obligated to
pay the PACE assessment.
The bill specifies that a delinquent assessment under a PACE financing agreement with a
nongovernmental lessee of government commercial property must be enforced in the same manner as
other taxes and assessments on such lessees.
Other Provisions
The bill provides that it is prospective only and does not affect or amend any existing PACE
assessment or interlocal agreement between local governments.
B. SECTION DIRECTORY:
Section 1. Amends s. 163.08, F.S., relating to supplemental authority for improvements to real
property.
Section 2. Provides an effective date of July 1, 2023.
II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT
22
The bill defines “residential property” to mean a residential real property of four or fewer dwelling units which will be or has been
improved by a qualifying improvement.
23
The bill defines “nongovernmental lessee” to mean a person or an entity other than a local government which leases
government commercial property. STORAGE NAME: h1151a.ECC PAGE: 6
DATE: 3/13/2023
A. FISCAL IMPACT ON STATE GOVERNMENT:
1. Revenues:
None.
2. Expenditures:
None.
B. FISCAL IMPACT ON LOCAL GOVERNMENTS:
1. Revenues:
Indeterminate. The bill limits annual fees for PACE assessments on commercial property to the
lesser of 1 percent or $5,000. Current law allows local governments to collect their costs to
administer PACE financing as part of the PACE assessment. It is not clear whether these costs
include the commission that tax collectors are entitled to receive by law to cover the actual costs of
collection, not to exceed 2 percent, on the amount of special assessments collected and remitted.
Depending on the rate or amount of fees actually collected under current law for PACE
assessments on commercial property, the bill may impact local government revenues.
2. Expenditures:
None.
C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR:
By expanding eligible uses and easing terms for commercial PACE financing and authorizing PACE
financing by lessees of government commercial property, the bill may result in expanded use of PACE
financing by commercial and government commercial property owners. In turn, private PACE providers
may earn additional revenues on PACE loans.
D. FISCAL COMMENTS:
None.
III. COMMENTS
A. CONSTITUTIONAL ISSUES:
1. Applicability of Municipality/County Mandates Provision:
Not applicable. The bill does not appear to require counties or municipalities to spend funds or take
action requiring the expenditures of funds; reduce the authority that counties or municipalities have
to raise revenues in the aggregate; or reduce the percentage of state tax shared with counties or
municipalities.
2. Other:
None.
B. RULE-MAKING AUTHORITY:
The bill does not require or authorize rulemaking.
C. DRAFTING ISSUES OR OTHER COMMENTS:
None.
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DATE: 3/13/2023
IV. AMENDMENTS/COMMITTEE SUBSTITUTE CHANGES
On March 13, 2023, the Energy, Communications & Cybersecurity Subcommittee adopted one amendment
to the bill and reported the bill favorably as a committee substitute. The amendment:
Provided that only commercial property owners may use PACE financing for the additional types of
qualifying improvements authorized by the bill.
Made conforming changes.
This analysis is drafted to the committee substitute.