The encyclopedia · Finance & Accounting · Financial decision · 2008–2009
Berkeley's PACE pilot financed solar on the property tax bill, not the borrower.
Berkeley financed solar through a property-tax assessment repaid over 20 years, the first PACE program in the US.
City of Berkeley
the move
The barrier to rooftop solar was not the panels but the up-front cost, and a conventional home loan did not fit a solar project, so the City of Berkeley tried a new financing shape.
In September 2008 it launched BerkeleyFIRST: the city raised about $1.5m in bonds and loaned the money to homeowners, who repaid through a special assessment on their property over 20 years. The obligation stays with the property, so it survives a sale.
The pilot financed 13 solar installations. All 40 slots filled within minutes, most participants said the program was why they went solar, and the model spread to 17 states as PACE.
why it works
- Financing through the property tax bill lets the term stretch to 20 years, cutting the annual cost
- Basing eligibility on property value rather than credit opens it to owners who could not get a personal loan
- Because the debt follows the building, a seller is not left holding a loan after moving
what transfers
Repay a long-lived asset and you unlock long cheap loans: when the collateral is the property, not the borrower, the horizon stretches.
what came after
Berkeley's pilot ended and the city joined a county-wide program, but BerkeleyFIRST became the national template. PACE spread to many states, then ran into controversy over the seniority of the tax lien and consumer protections, and it was restricted or paused in some states even as commercial PACE kept growing.
references
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