Local Option - Property Assessed Clean Energy Financing

Note: In 2010, the Federal Housing Finance Agency (FHFA), which has authority over mortgage underwriters Fannie Mae and Freddie Mac, directed these enterprises against purchasing mortgages of homes with a PACE lien due to its senior status above a mortgage. Most residential PACE activity subsided following this directive; however, some residential PACE programs are now operating with loan loss reserve funds, appropriate disclosures, or other protections meant to address FHFA's concerns. Commercial PACE programs were not directly affected by FHFA’s actions, as Fannie Mae and Freddie Mac do not underwrite commercial mortgages. Visit PACENow for more information about PACE financing and for a comprehensive list of all PACE programs across the country.

Property-Assessed Clean Energy (PACE) financing effectively allows property owners to borrow money to pay for energy improvements. The amount borrowed is typically repaid via property taxes, with a special assessment on the property over a period of years. Arkansas authorized PACE financing in 2013 with S.B. 640. Specifically, the state, cities, counties, and combinations of cities and counties may create a property assessed energy improvement district by adopting an ordinance and entering into a joint agreement with any other participating governmental bodies. Governmental bodies may also opt into existing districts by adopting an ordinance and entering into a joint agreement with any other participating governmental bodies.

The law requires property assessed energy improvement districts to be operated and controlled by a board of directors, and includes guidance for assembling the board. The law provides additional guidance in some aspects, but leaves a lot of authority with the property assessed energy improvement districts to design their own programs.