Illinois Legislation Passed to Encourage Renewable Energy Investment

Posted on August 4, 2010 by William H. Holmes

From our colleague Sarah Johnson Phillips:

Last month, Governor Pat Quinn of Illinois signed two pieces of legislation expanding state policies that encourage investment in the state’s renewable energy sector.

H.B. 4797 extends the Illinois program providing for uniform statewide property-tax assessment of wind energy systems through 2016. Prior to 2007, assessments were made based on a county-by-county basis, which created significant inconsistency across the state. The uniform program allows wind projects to anticipate operating costs.

H.B. 4758 expands Property Assessed Clean Energy (PACE) financing opportunities to unincorporated areas of the state. PACE programs allow local governments to issue bonds to help finance energy improvements on homes and businesses. The PACE funding is then repaid by property owners through a surcharge on their property tax bills. At least 23 states have authorized PACE programs since 2008. Illinois first adopted PACE enabling legislation in August 2009 (SB 583) and now expands access to the program in 2010.

While popular, PACE programs around the country are facing an uncertain future following actions by the Federal Housing Finance Agency (FHFA), Fannie Mae, and Freddie Mac that have effectively shut down many programs. At issue is the fact that under most PACE programs, a lien is placed on the property that has priority over the mortgage. FHFA is characterizing these liens differently from routine tax assessments, arguing that they pose “unusual and difficult management challenges for lenders, servicers, and mortgage securities investors” that justify calling a halt to PACE financing while these concerns are addressed. The State of California has sued Fannie Mae and Freddie Mac for blocking its PACE program.

But despite the near standstill in implementation, Illinois and other states (including Minnesota and Missouri) have continued to authorize and expand PACE programs this year.

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