The Florida Senate
BILL ANALYSIS AND FISCAL IMPACT STATEMENT
(This document is based on the provisions contained in the legislation as of the latest date listed below.)
Prepared By: The Professional Staff of the Committee on Fiscal Policy
BILL: CS/CS/SB 950
INTRODUCER: Fiscal Policy Committee; Community Affairs Committee and Senator Rodriguez
SUBJECT: Improvements to Real Property
DATE: April 27, 2023
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Hackett Ryon CA Fav/CS
2. Hackett Yeatman FP Fav/CS
3.
Please see Section IX. for Additional Information:
COMMITTEE SUBSTITUTE - Substantial Changes
I. Summary:
CS/CS/SB 950 substantially amends a program authorized in current law, commonly known as
the “Property Assessed Clean Energy” or “PACE” program, which allows property owners to
make qualifying improvements to real property and finance the cost through annual non-ad
valorem tax assessments. Qualifying improvements are those that enhance energy efficiency,
renewable energy, wind resistance, and newly added by the bill wastewater treatment, flood and
water damage mitigation, and sustainable building improvements.
The bill enhances certain protections for consumers entering into PACE contracts, and oversight
for contractors that install improvements. The bill updates the legislative intent of the PACE
statute to reflect the expanded scope of the program, and introduces definitions used to clarify
the language of the statute.
The bill does not affect state or local revenues.
The bill takes effect January 1, 2024.
REVISED: BILL: CS/CS/SB 950 Page 2
II. Present Situation:
PACE in Florida
In 2010, the Legislature authorized local governments
1
to fund property owners making
qualifying improvements and to establish a financing agreement for the repayment of such costs
through annual non-ad valorem property tax assessments. Although Florida’s law does not use
the terms “PACE” or “Property Accessed Clean Energy,” it is generally understood that s.
163.08, F.S., is Florida’s PACE program.
2
Through a PACE program, a property owner
3
may apply to a local government for funding to
enhance energy conservation and efficiency improvements, such as energy-efficient HVAC
systems, replacement of windows, electric vehicle charging equipment, and efficient lighting
equipment; renewable energy improvements utilizing hydrogen, solar, geothermal, and wind
energy; and wind resistance improvements such as wind-resistant shingles, gable-end bracing,
storm shutters, and opening protections.
4
PACE programs in Florida are formed by local governments and operate typically in partnership
with several localities pursuant to an interlocal agreement. Additionally, PACE programs in
Florida can be operated by a third-party PACE administrator, which is either a for-profit or not-
for-profit entity acting on behalf of the local government.
5
However, it is the local government
that enters into a financing agreement directly with the property owner.
6
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
7
to enter into a financing agreement
wherein the partnership, as a separate legal entity, imposes the PACE assessment.
8
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.
9
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.” However, the
mortgage holder or loan servicer may increase the required monthly escrow by an amount
necessary to pay for the qualifying improvement.
10
1
“Local government” means a county, municipality, a dependent special district as defined in s. 189.012, F.S., or a separate
legal entity created pursuant to s. 163.01(7), F.S.
2
See generally Erin Deady, Property Assessed Clean Energy: Is There Finally a Clear Path to Success? Florida Bar Journal
Vol. 90, No. 6, June 2016, pg. 114, available at https://www.floridabar.org/the-florida-bar-journal/property-assessed-clean-
energy-is-there-finally-a-clear-path-to-success/ (last accessed Mar. 16, 2023).
3
While nationally it is common to separate PACE programs into residential and commercial programs, Florida Statutes do
not differentiate based on the nature of the property. See United States Office of State and Community Energy Programs,
Property Assessed Clean Energy Programs, available at https://www.energy.gov/scep/slsc/property-assessed-clean-energy-
programs (last visited Mar. 19, 2023).
4
Section 163.08(2)(b), F.S.
5
Section 163.08(6), F.S.
6
Section 163.08(8), F.S.
7
Section 163.01(7), F.S.
8
Chapter 2012-117, L.O.F.
9
Section 163.08(13), F.S.
10
Section 163.08(15), F.S. BILL: CS/CS/SB 950 Page 3
Qualifying Improvements
The types of projects PACE financing may fund are referred to as “qualifying improvements.” A
local government may not offer PACE financing for any project not included in the statutory
definition of qualifying improvements. As provided in current law, qualifying improvements
include the following:
Energy conservation and efficiency improvements,
11
to include:
o Air sealing;
o Installation of insulation;
o Installation of energy efficient HVAC systems;
o Building modifications which increase the use of daylight;
o Replacement of windows;
o Installation of energy controls or energy recovery systems;
o Installation of electric vehicle charging equipment; and
o Installation of efficient lighting equipment.
Renewable energy improvements,
12
which means installation of any system in which the
electrical, mechanical, or thermal energy is produced from a method utilizing hydrogen, solar
energy, geothermal energy, bioenergy, or wind energy.
Wind resistance improvements,
13
to include
o Improving the strength of the roof deck attachment;
o Creating a secondary water barrier to prevent water intrusion;
o Installing wind-resistant shingles;
o Installing gable-end bracing;
o Reinforcing roof-to-wall connections;
o Installing storm shutters; and
o Installing opening protections.
Wind resistance improvements applied to buildings under new construction do not qualify for
PACE financing.
14
Florida PACE Consumer Protections
Current law provides that, before entering into a financing agreement, the local government must
reasonably determine that:
All property taxes and other assessments are current and have been paid for the preceding 3
years;
There are no involuntary liens including construction liens;
There are no notices of default or other evidence of property-based debt delinquency
recorded and not released in the preceding 3 years; and
The property owner is current on all mortgage debt on the property.
15
11
Section 163.08(2)(b)1., F.S.
12
Section 163.08(2)(b)2., F.S.
13
Section 163.08(2)(b)3., F.S.
14
Section 163.08(10), F.S.
15
Section 163.08(9), F.S. BILL: CS/CS/SB 950 Page 4
Further, any work requiring a license to make a qualifying improvement must be performed by a
properly certified or registered contractor.
16
The total amount of PACE assessments for any
property may not exceed 20 percent of the property’s market value, unless an energy audit
determines that the savings from the qualifying improvement equals or exceeds the repayment
amount of the non-ad valorem assessment.
17
Consumer Protections for Residential PACE Financing Generally
Concerns have arisen about issues consumers may face regarding residential PACE financing.
Because the PACE financing is structured as a tax assessment instead of a loan, PACE programs
historically have not been required to provide homeowners with the same disclosures about the
financing costs that traditional lenders must provide.
Additionally, the tax liens for PACE financing take priority over other lien-holders, including the
property’s mortgage holder.
18
Such priority has influenced Fannie Mae and Freddie Mac to
refuse the purchase of loans with existing PACE-based tax assessments,
19
and properties
encumbered with PACE obligations are not eligible for Federal Housing Administration insured
financing.
20
However, priority lien position protects local governments, who are authorized to
take on debt for the financing they provide.
21
Advocates also state that the priority lien position
enables local governments to offer competitive interest rates, ranging from approximately 6 to 9
percent.
22
Consumer Financial Protection Bureau Steps
In 2018, the United States Congress directed the Consumer Financial Protection Bureau (CFPB)
to promulgate regulations regarding PACE financing.
23
The CFPB has issued advance notices of
proposed rulemaking in order to apply the Truth in Lending Act’s ability-to-repay requirements,
currently in place for residential mortgage loans, to PACE financing.
24
The existing federal ability-to-repay requirements prohibit creditors from making a residential
mortgage loan unless the creditor makes a reasonable and good faith determination based on
verified and documented information that, at the time the loan is consummated, the consumer has
a reasonable ability to repay the loan according to its terms, and all applicable taxes, insurance,
and assessments.
25
In making such a determination, the creditor must verify and consider specific
16
Section 163.08(11), F.S.
17
Section 163.08(12), F.S.
18
Debra Gruszecki, INLAND: Realtors Offer Word of Warning About Solar Financing Program,” Jan. 19, 2015, The Press-
Enterprise, available at https://www.pe.com/2015/01/19/inland-realtors-offer-word-of-warning-about-solar-financing-
program/ (last accessed Mar. 16, 2023).
19
FHFA, Statement of the Federal Housing Finance Agency on Certain Super-Priority Liens (Dec. 22, 2014) (last visited
Oct. 27, 2021).
20
“ML 2017-18: Property Assessed Clean Energy (PACE)," December 7, 2017, U.S. Department of Housing and Urban
Development, available at https://www.hud.gov/sites/dfiles/OCHCO/documents/17-18ml.pdf (last accessed Mar. 16, 2023).
21
Section 163.08(7), F.S.
22
AboutPACE, Florida PACE Funding Agency, available at https://floridapace.gov/about-pace/ (last visited Mar. 16, 2023).
23
Section 307, Economic Growth, Regulatory Relief, and Consumer Protection Act, Public Law No 115-174 (May 24, 2018).
24
Advance Notice of Proposed Rulemaking on Residential Property Assessed Clean Energy Financing, Docket No. CFPB-
2019-0011, available at https://files.consumerfinance.gov/f/documents/cfpb_anpr_residential-property-assessed-clean-
energy-financing.pdf (last accessed Mar. 16, 2023).
25
Id., citing TILA section 129C(a), 15 U.S.C. 1639c(a). BILL: CS/CS/SB 950 Page 5
factors including the consumer’s income, assets, and existing debt obligations.
26
The Truth in
Lending Act’s stated purpose is “to assure that consumers are offered and receive residential
mortgage loans on terms that reasonably reflect their ability to repay the loans and that are
understandable and not unfair, deceptive, or abusive.”
27
The CFPB’s regulations on residential PACE financing are still in development and have not
been finalized at this time.
California’s Consumer Protection Measures
California, one of the three states currently offering residential PACE financing,
28
has taken
measures to protect consumers independent of federal regulation. In 2016, California’s law
changed to require PACE programs to provide mortgage-level disclosures and to conduct live
recorded calls with homeowners to confirm financing terms and obligations.
29
In 2017, California legislation required that PACE program administrators be licensed by the
California Department of Financial Protection and Innovation, provided oversight for contractors
and third party solicitors, and authorized the same department to bring enforcement actions
against PACE administrators and contractors. The law also required that a PACE administrator
thoroughly determine the property owner’s ability to repay the loan before approving a financing
contract.
30
In 2021 California took further action specifically to protect senior citizens being
solicited at home, criminalizing transactions that are part of a pattern in violation of specific
PACE consumer protections.
31
III. Effect of Proposed Changes:
The bill substantially amends Florida’s PACE program in s. 163.08, F.S. It defines key terms,
expands the types of qualifying improvements, imposes new consumer protections, extends
participation in the program to lessees of government property, and enacts new PACE contractor
oversight and accountability provisions.
Definitions
The bill defines the following terms:
“Commercial property” means real property not defined as residential, including multifamily
residential, commercial, industrial, agricultural, nonprofit-owned, long-term care facilities,
and government commercial property.
“Facility” means a portion of a building, structure, or site improvement.
26
Id.
27
7 TILA section 129B(a)(2), 15 U.S.C. 1639b(a)(2).
28
California, Florida, and Missouri are the only three states offering PACE financing on residential property.
29
James Reed, “Consumer Protections for PACE Now Written into State Law,” Orange County Register, October 7, 2016,
available at https://www.ocregister.com/2016/10/07/consumer-protections-for-pace-now-written-into-state-law/ (last visited
Mar. 16, 2023).
30
Assembly Bill 1284 (Dababneh, Chap 475, Stats. 2017) – California Financing Law: Property Assessed Clean Energy
program: program administrators.
31
Assembly Bill 790 (Quirk-Silva, Chap 589, Stats. 2021) – Consumer Legal Remedies Act. BILL: CS/CS/SB 950 Page 6
“Government commercial property” means property owned by a local government and leased
to a nongovernmental lessee for commercial usage.
“Program administrator” means an entity, including, but not limited to, for-profit or-not-for-
profit entities, with whom a local government contracts to administer a PACE program.
“Qualifying improvement contractor” means an independent contractor enrolled in a program
to install or otherwise work on qualifying improvements.
“Qualifying improvement program” is a program established by a local government or local
governments to finance PACE improvements.
“Residential real property” means a residential property of four or fewer dwelling units
which is or will be improved by a qualifying improvement.
Expansion of Qualified Improvements
The bill amends the definition of “qualifying improvements” to expand the universe of the types
of projects a local government’s PACE program may finance. Significantly, the bill adds the
following three new categories of qualifying improvements:
Wastewater treatment improvements.
Flood and water damage mitigation.
Resiliency improvements.
The “wastewater treatment improvement” category includes the replacement or improvement of
an onsite sewage treatment and disposal system with an advanced system of the same type, or
replacement with a central sewage system. The term includes repairs or modifications made to an
onsite sewage treatment and disposal system regulated by the Department of Health under ss.
381.0065 and 381.00651, F.S. This expansion applies only to residential properties.
The “flood and water damage mitigation” category, applying only to residential properties,
includes projects and installations:
Raising a structure above the base flood elevation to reduce flood damage;
Building or repairing a flood diversion apparatus;
Utilizing flood damage resistant building materials;
Mitigating or eliminating the potential for microbial growth;
Using electrical, mechanical, plumbing, or other system improvements to reduce flood
damage; and
Qualifying for reductions in flood insurance premiums.
For commercial property, the bill includes “resiliency improvements,” which includes:
Improving the strength of a roof deck attachment;
Seconday water barriers;
Wind-resistant shingles;
Gable-end bracing;
Roof-to-wall connection reinforcement;
Storm shutters;
Opening protections;
Stormwater and flood resistance measures including shoreline improvements; and BILL: CS/CS/SB 950 Page 7
Improvements necessary to achieve a sustainable building rating or compliance with a
national model resiliency standard.
The bill also provides that a PACE contract can cover any qualifying improvements on buildings
under new construction, and that PACE financing may be used for refinancing existing loans on
qualifying improvements.
Consumer Protection Measures
To account for recent consumer protection concerns regarding PACE financing nationwide, the
bill provides regulations aimed at mitigating these concerns and ensuring consumers are well-
informed of their obligations before entering into a PACE financing agreement.
Specifically, the bill provides that, before entering into a PACE financing agreement, a PACE
administrator must reasonably determine that the property owner has the ability to pay the annual
PACE assessment. This determination should be based on observations that:
All property taxes and other assessments are current and have not been delinquent for more
than 30 days for the preceding 3 years;
There are no involuntary liens greater than $10,000, including construction liens;
There are no notices of default or other evidence of property-based debt delinquency
recorded and not released in the preceding 3 years;
The property owner has recorded all other non-ad valorem assessments on the property;
The property owner is current on all mortgage debt on the property;
The property, if residential real property, is not subject to an existing home equity conversion
mortgage or reverse mortgage product, or is not currently a residential property gifted to a
homeowner by a nonprofit entity;
The property owner is not currently in bankruptcy; and
The total estimated annual payment amount for all assessment financing agreements funded
under the PACE program does not exceed 10 percent of the property owner’s annual
household income. Such income should be confirmed by a reputable third party and may not
be confirmed solely by the property owner.
The bill also requires that residential property owners procure two quotes from unaffiliated,
competitive contractors before signing the agreement.
Before or concurrent with entering into a residential PACE financing agreement, the PACE
administrator must provide a financing estimate and disclosure to the property owner that
includes:
The total amount estimated to be funded including program fees and capitalized interest;
The estimated annual PACE assessment;
The term of the PACE assessment;
The interest charged and estimated annual percentage rate;
A description of the qualifying improvement;
A disclosure that if the property owner sells or refinances the property, the property owner
may be required to pay off the full amount owed under each PACE financing agreement; BILL: CS/CS/SB 950 Page 8
A disclosure that the PACE assessment will be collected alongside other property taxes, and
will result in a lien on the property a lien on the property during the term of the agreement;
and
A disclosure that failure to pay the PACE assessment may result in penalties and fees, along
with the issuance of a tax certificate that could result in the property owner losing the real
property.
The program administrator must also conduct a recorded telephone call with the property owner
to confirm the following:
That the property owner has access to the contract and financing estimates and disclosures;
The qualifying improvement that is being financed;
The total estimated annual costs, including fees;
The total estimated average monthly equivalent amount required to pay such annual costs;
The estimated date the property owner’s first tax payment including the PACE assessment
will come due;
The term of the PACE financing agreement;
That payments will cause the owner’s annual tax bill to increase, that payments will be made
through additional annual assessments, and that such payments will be made either directly to
the county tax collector’s office or through the owner’s mortgage escrow account;
That the owner has disclosed whether the property has received or is seeking additional
PACE assessments and has disclosed all other PACE assessments or special taxes about to be
placed on the property;
That the property will be subject to a lien during the term of the PACE financing agreement
which may require the contract to be paid in full before selling or refinancing the property;
That any potential utility or insurance savings are not guaranteed and will not reduce the
PACE or total assessment amount; and
That the program administrator does not provide tax advice and that the owner should seek
professional tax advice with questions regarding tax credits, deductibility, or other impacts of
the qualifying improvement or PACE financing agreement.
A property owner may cancel the PACE financing agreement within five business days after
signing the contract, without financial penalty.
The term of a PACE financing agreement may not exceed the lesser of 30 years and the useful
life of the qualifying improvement being installed, or the weighted average useful life of all
qualifying improvements being financed if multiple improvements exist.. Additionally, a
program administrator may not offer a PACE financing agreement on any residential real
property that includes a negative amortization schedule, a balloon payment, or prepayment fees
other than nominal administrative costs.
The bill also amends the disclosure given to a purchaser of improved property subject to an
assessment under a PACE program to include a statement that the assessment uses a program
formerly referred to as Property Assessed Clean Energy, or PACE. BILL: CS/CS/SB 950 Page 9
Maximum Assessments on Property
Current law provides that the total amount of any non-ad valorem assessments for a property
may not exceed 20 percent of the just value of the property, as determined by the property
appraiser. The bill amends this requirement to read that total assessments may not exceed 20
percent of the fair market value as determined by a reputable third party.
The bill also newly provides that the combined mortgage-related debt and total amount of non-ad
valorem assessments may not exceed 97 percent of the fair market value of the property.
Judicial Remedies for Failure to Establish Ability to Pay
The bill provides that, in the event that a court or tribunal determines by clear and convincing
evidence that the program administrator’s determination of the property owner’s ability to pay
was not objectively reasonable based on the information provided by the property owner, the
yearly assessment payment shall be reduced in the amount which is within the property owner’s
ability to pay. This provision does not require or authorize the administrator to reduce the total
amount owed on the assessment.
This provision requires reduction of the monthly payments to meet the buyer’s ability to pay,
which without reducing the total amount due will extend the term of the assessment.
Notwithstanding, the term of a PACE financing agreement may not exceed the lesser of 30 years
or the useful life of the improvement.
PACE Contractor Oversight
The bill provides that for residential real property, a program administrator may not enroll a
contractor unless the administrator makes a reasonable effort to review the contractor’s
professional standing. This includes reviewing the appropriate licensure, permits, and
registrations required for its business operations. Additionally, the administrator must obtain the
contractor’s written agreement that the contractor will act in accordance with all applicable laws
to include advertising and marketing laws and regulations.
Further, the bill requires a program administrator to maintain a process to enroll new contractors
that includes reasonable review of each contractor’s relevant work or project history, financial
and reputational background, criminal background, and status on Better Business Bureau or other
online platform tracking contractor reviews. A program administrator may rely on a background
check conducted by the Florida Department of Business and Professional Regulation
Construction Industry Licensing Board to comply with the criminal background check.
Before disbursing funds to a contractor for a qualifying improvement on residential real property,
a program administrator must confirm that the applicable work or service has been completed.
This is accomplished through either written or telephonic certification with the property owner,
or through a third-party site inspection.
BILL: CS/CS/SB 950 Page 10
A contractor should not present a higher price for a qualifying improvement on residential real
property financed by a PACE financing agreement than the contractor would otherwise present
were the improvement not financed by PACE.
A program administrator may not provide a contractor with any payment, fee, or kickback in
exchange for referring business relating to a specific assessment financing agreement.
A program administrator must develop and implement policies and procedures for responding,
tracking, and resolving questions and complaints. It must also have a process for monitoring
contractors with regard to performance and compliance with program policies, and implement
policies for suspending, terminating, and reinstating contractors based on violations of program
policies or unscrupulous behavior. Further, a program administrator must submit a report
annually showing the number of property owner complaints and what category the complaints
fall into.
The bill imposes certain marketing and communications guidelines for program administrators
and contractors to follow. Under these provisions, program administrators and contractors may
not suggest that PACE financing is a government assistance program, that qualifying
improvements are free or that PACE is a free program, or that utilizing PACE financing does not
require the homeowner to repay the financial obligation. A program administrator or contractor
may not make representations as to the tax deductibility of a PACE financing agreement on
residential real property. They may only encourage a property owner to seek the advice of a tax
professional.
Protections applying specifically to residential real property do not apply if the program
administrator determines that the residential real property is owned by a business entity that
owns more than four such properties, and the business entity’s ownership does not reside on the
property.
The bill takes effect January 1, 2024.
IV. Constitutional Issues:
A. Municipality/County Mandates Restrictions:
Not applicable. This bill does not require counties or municipalities to spend funds, limit
their authority to raise revenue, or reduce the percentage of a state tax shared with them
as specified in Article VII, s. 18 of the Florida Constitution.
B. Public Records/Open Meetings Issues:
None.
C. Trust Funds Restrictions:
None. BILL: CS/CS/SB 950 Page 11
D. State Tax or Fee Increases:
The bill does not create or raise state taxes or fees. Therefore, the requirements of Article
VII, s. 19 of the Florida Constitution do not apply.
E. Other Constitutional Issues:
None identified.
V. Fiscal Impact Statement:
A. Tax/Fee Issues:
The bill does not affect state or local revenue.
B. Private Sector Impact:
Property owners who live within a jurisdiction that offers PACE financing will see the
benefit of increased consumer protections.
C. Government Sector Impact:
PACE programs are designed to be budget-neutral for local governments. As such, no
government sector impact is expected for this bill.
VI. Technical Deficiencies:
None.
VII. Related Issues:
None.
VIII. Statutes Affected:
This bill substantially amends section 163.08 of the Florida Statutes.
IX. Additional Information:
A. Committee Substitute – Statement of Substantial Changes:
(Summarizing differences between the Committee Substitute and the prior version of the bill.)
CS/CS by Fiscal Policy on April 25, 2023:
The CS:
Removes phrasing and structure which would have renamed the program “Resiliency,
Energy, Environment, Florida (REEF),” maintaining current references to the
statutorily unnamed Property Assessed Clean Energy program. BILL: CS/CS/SB 950 Page 12
Revises definitions and phrasing throughout to replace "non-residential" with
"commercial" property, which is specified to include nonprofit owned property, long-
term care facilities, and government commercial property;
Adds definitions for government commercial property and nongovernmental lessee;
Adds sustainable building improvements to qualified improvements, including any
improvement necessary to achieve a sustainable building rating or compliance with a
national model green building code;
Allows for financing agreements prior to substantial completion and progress
payments for commercial property;
Provides that the combined mortgage and PACE debt cannot exceed 97% of the fair
market value of the property, reduced from 100%; and
Provides that the bill takes effect January 1, 2024.
Changes the title of the bill to an act relating to improvements to real property.
CS by Community Affairs on March 22, 2023:
The CS:
Expands the universe of what types of projects PACE can finance to include
wastewater treatment, flood and water damage mitigation, and health and
environmental hazards mitigation;
Alters judicial remedies for situations where a program administrator failed to
reasonably assess a property owner’s ability to pay;
Removes a provision forbidding an administrator from disclosing to a contractor or
third party the maximum financing amount available;
Includes a reference to Property Assessed Clean Energy in disclosures to property
owners;
Updates the legislative intent of the PACE statute to reflect the expanded scope of the
program; and
Introduces further definitions used to clarify the language of the statute.
B. Amendments:
None.
This Senate Bill Analysis does not reflect the intent or official position of the bill’s introducer or the Florida Senate.