Washington State

House of Representatives

Office of Program Research



Local Government Committee

HB 2405

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

Brief Description: Concerning commercial property assessed clean energy and resilience.

Sponsors: Representatives Duerr, Barkis, Fitzgibbon, Shewmake, Hoff, Kloba, Corry, Gildon, Ybarra, Jenkin, Pollet and Doglio.

Brief Summary of Bill

  • Creates a commercial property assessed clean energy and resiliency (C-PACER) program that facilitates a partnership for the financing of energy efficiency retrofits and new construction.

  • Authorizes a capital provider (private entity) to provide financing for qualifying capital improvements such as energy efficiency, water conservation, renewable energy, and resiliency projects which are repaid through assessments on property.

Hearing Date: 1/21/20

Staff: Elizabeth Allison (786-7129).


Property Assessed Clean Energy Programs.

Property Assessed Clean Energy (PACE) programs provide a financing mechanism to encourage the installation of renewable energy systems and energy efficiency improvements on residential, industrial, or commercial properties. PACE programs exist for both residential properties (commonly referred to as Residential PACE or R-PACE) and commercial properties (commonly referred to as Commercial PACE or CPACE). Eligible improvements frequently include installation of solar thermal panels, high efficiency air conditioning, and insulation. Both commercial and residential PACE programs allow a property owner to finance the up-front cost of energy or other eligible improvements on a property and then pay the costs back over time through a property assessment. A PACE assessment is attached to the property rather than the individual.

Special Assessments.

Special assessments, or benefit assessments, may be imposed on benefitted property to pay for local improvements or to finance their activities and public facilities. Special assessments are not property taxes, but rather special charges created to recover funds to pay for services or improvements that have a particular direct benefit to land and their owners. Unlike property taxes that are based on the assessment value of the property, special assessments are generally determined by an assessment plan that is meant to charge amounts to a parcel of property that reflect the actual benefit the property will receive. These assessments are usually based on a flat fee per parcel, an amount per acre, or a combination of characteristics. Properties may typically be charged in different amounts if it is found that different classes of property benefit in different ways. Special assessments are not subject to the same limitations and procedures that govern property tax levies.

Summary of Bill:

A Commercial Property Assessed Clean Energy and Resiliency (C-PACER) program is established. This program authorizes local jurisdictions and private entities to provide financing to property owners. The financing must be used to provide qualified building improvements.

"Qualified improvement" means a permanent improvement affixed to real property and intended to: (1) decrease energy consumption or demand through the use of efficiency technologies, products, or activities that reduce or support the reduction of energy consumption, allow for the reduction in demand, or support the production of clean, renewable energy, including but not limited to a product, device, or interacting group of products or devices on the customer's side of the meter that generates electricity, provides thermal energy, or regulates temperature; (2) decrease water consumption or demand through the use of efficiency technologies, products, or activities that reduce or support the reduction of water consumption or allow for the reduction in demand; or (3) increase resilience, including but not limited to seismic retrofits, flood mitigation, storm water management, wildfire and wind resistance, energy storage, and microgrids.

Local Jurisdictions.

In order to establish a C-PACER program, the governing body of a county must adopt a resolution or ordinance and hold a public hearing on the proposed program. The ordinance or resolution must include a statement that:

Program Handbook.

Each local jurisdiction that establishes a C-PACER program must prepare a program guidebook that includes, at minimum:

The program guidebook must be available for public inspection on the county's website or the website of the county's designated program administrator.

Program Requirements.

In order to participate in a C-PACER program, the following documentation (as well as any documentation specified in the program guidebook) is required for each proposed project:

Financing obtained under a C-PACER program authorizes a property owner to directly: (1) purchase the related equipment and materials for the installation or modification of a qualified improvement; and (2) contract for the installation or modification of a qualified improvement.

After a qualified project is completed, the county must require written verification, from one or more qualified independent third parties listed in the program guidebook, stating that the qualified project was properly completed and is operating as intended.

Program Fees and Assessments.

Before a county may enter into a contract with a property owner to impose an assessment to repay assessments and C-PACER financing for a project, the county must receive written consent that the property may participate in the program, from: (1) the lien holder or person who holds security interest in the real property; or (2) all holders of affordable housing covenants, restrictions, or regulatory agreements in the real property in the case of a multifamily residential property.

The C-PACER financing for which the assessments may be imposed, includes the cost of materials and labor necessary for installation or modification of a qualified improvement, permit fees, inspection fees, lender's fees, program application and administrative fees, project development and engineering fees, third-party review fees, capitalized interest, interest reserves, escrow for prepaid property taxes and insurance, or any costs that may be incurred by the property owner incident to the installation, modification, or improvement on a specific or pro rata basis.

In addition, a county may impose fees to offset costs for administering a C-PACER program, including the costs of a third-party administrator. Such fees may be imposed as an application fee paid by the property owner requesting to participate in the program, a percentage of the assessment amount, or in any other manner that reflects the just and reasonable cost of administering the assessment to the county for its administration of the program or any contracted program administrator. The fees included in the total C-PACER financing cannot exceed the actual costs of qualified project approval and management incurred by the county or any contracted program administrator.

Multiple counties may agree to jointly implement or administer a C-PACER program. A county may also contract with another county or taxing district to perform the duties of the county relating to the administration and collection of the assessments. Enforcement of delinquent assessments or C-PACER financing installment payments remains the responsibility of the county itself or may be assigned to a capital provider.

Department of Commerce.

Subject to available appropriations, the Department of Commerce (COM) must establish a C-PACER program to administer the approval and recording of qualified improvements.

Counties may contract with the COM to implement and perform the duties of administering a C-PACER program. The COM may also contract with a third party to administer a C-PACER program available to counties.

If funding is available, the COM must allocate appropriated funds to cover start-up costs associated with the program over the course of the first 24 months following the designation of a contracted program administrator. Start-up costs include, but are not limited to, program promotion and contractor education, a stakeholder collaboration process, and early program costs before the contracted program administrator becomes self-sustaining. In addition, the COM may establish a loan loss reserve or credit enhancement program to support financing of qualified projects.

C-PACER Assessments for Repayment.

A county that authorizes C-PACER financing through assessments must record written notice of each assessment in the real property records of the county in which the property is located. The assessments, plus any interest, penalties, and charges accrued or accruing on the assessment, is a lien against the real property on which the assessment is imposed.

C-PACER assessments must take precedence over all other liens or encumbrances except a lien for ad valorem taxes on the property. Each C-PACER lien runs with the land, and that portion of the assessment that has not yet become due is not accelerated or eliminated by foreclosure of a property tax lien. Delinquent payments due on an assessment incur interest and penalties in the same manner as delinquent property taxes.

Alternatively, any time after an assessment is recorded, a county may assign a capital provider any C-PACER liens filed by the tax authority. The capital provider may sell or assign any lien received from the participating county. The capital provider has the same powers and rights as a participating county with regard to the precedence and priority of such lien, the accrual of interest and the fees, and expenses of collection. The capital provider or their assignee shall have the same rights to enforce such liens as any private party holding a lien on real property.

After the notice of an assessment is recorded with the county, the C-PACER lien may not be contested on the basis that the improvement is not a qualified improvement or that the project is not a qualified project.

A county that establishes a region, in which the C-PACER program if offered, is prohibited from: (1) making the issuance of a permit, license, or other authorization from the county to a person who owns property in the region contingent on the person entering into a contract to repay the financing of a qualified project through C-PACER assessments; or (2) compelling a person who owns property in the region to enter into a contract to repay the financing of a qualified project through assessments.

Appropriation: None.

Fiscal Note: Requested on January 14, 2020.

Effective Date: The bill takes effect 90 days after adjournment of the session in which the bill is passed.