Blog: Andrew Brix

Tree Town's goal of moving to 20% percent renewable energy by 2015 makes it a LEEDer in the state's green movement these days (pun intended). Andrew Brix, energy programs manager for the city of Ann Arbor, talks this week on all things efficient and on how Michigan can become the next Sunshine State.

Post 3: Keeping PACE

When I agreed to write these few posts for Concentrate, I hardly expected to be commenting on such current events, but here I am, sitting down to tell you, my newly loyal readers, a tale of Fannie Mae and Freddie Mac... but let me start at the beginning.

In the beginning, there was Berkeley. (Actually, a whole heck of a lot happened before the first human set foot in the place we now call Berkeley, California, but this story starts in Berkeley. In 2007.) Berkeley had a lot of people who wanted to install solar panels on their homes, but even with the federal tax credits and California Solar Initiative incentives, they had a hard time coming up with enough cash to cover the upfront cost of a solar installation.

Fortunately, there were a few smart individuals working for the City of Berkeley and they realized they already had a solution available for these residents: the city could provide the upfront money for a resident's solar installation and assess the property over the next 10-15 years to effectively finance the cost of the solar panels. It's the same process cities around that country have used for 100 years to finance new sewer lines and sidewalks. After all, we don't expect everyone to be able to afford to buy a new car with a single check and electric companies don't bill us in advance for our next 20 years of electricity, so why wouldn't we allow folks to spread out the cost of a solar installation? Or, for that matter, insulation? Or a new furnace?

By 2009, the "Berkeley model" had become known as Property Assessed Clean Energy, or PACE, and Boulder County, Colorado had taken it to a whole 'nother level. Over the course of two application periods, Boulder County issued nearly $10 million in PACE assessments to homeowners for a wide variety of energy-saving measures, and the U.S. Department of Energy was offering significant stimulus funding for PACE programs through Energy Efficiency and Conservation Block Grants.

At the City of Ann Arbor, I like to think we know a good thing when we see it, and we put in to the Department of Energy for funding to start a PACE program here in Ann Arbor. Upon receiving notice that our funding was approved, one of our first tasks was to set about clarifying the legality of PACE in Michigan, which led to the introduction of the PACE Act (H.B. 5640) by Representative Rebekah Warren in December 2009. That bill passed the House on April 22, but has not yet been introduced in the State Senate, because this is where the games begin.

On May 5, 2010, Fannie Mae and Freddie Mac, the "government-sponsored entities" that hold trillions of dollars in mortgages reversed their previous support of PACE programs, stating in a lender letter that "[PACE] programs with first liens run contrary to the Fannie Mae-Freddie Mac Uniform Security Instrument and that [Fannie and Freddie] would provide additional guidance should the programs move beyond the experimental stage." This was followed by a July 6, 2010 FHFA Statement on Certain Energy Retrofit Loan Programs that effectively redlines communities that run PACE programs. The effect on PACE programs around the country?whether existing or in development?has been the policy equivalent of pulling the emergency brake on a train. Everything has come to a screeching halt. In California, Governor Schwarzenegger said in a statement that he is "deeply disappointed" with the Federal Housing Finance Agency's (FHFA) decision. In New York, the Town of Babylon is planning to sue FHFA in order to keep its Long Island Green Homes program active and avoid dozens of related layoffs.

What do you think? Are Fannie and Freddie simply doing their part to protect lenders or have they overstepped their regulatory bounds and shut down a great tool for economic development and environmental protection? I think it's clear where I stand on this one.