Cara Martinson is CSAC’s Legislative Analyst for Agriculture and Natural Resources. For more, visit The County Voice.

The Federal Housing Finance Agency (FHFA) seems to have pulled the plug on a popular energy financing program that would have allowed homeowners to finance solar panels and other energy improvements through an assessment on their property tax bills.

In an official statement released yesterday, the Federal Housing Finance Agency (FHFA) reaffirmed its concerns with Property Assessed Clean Energy financing programs, stating that these programs, “present significant safety and soundness concerns that must be addressed by Fannie Mae, Freddie Mac and the Federal Home Loan Banks.” In its statement, the FHFA also urged state and local governments to reconsider these programs and continued to call for a moratorium on PACE programs.

The Property Assessed Clean Energy (PACE) program, codified in statute by AB 811 (Chapter 159, 2008), allows local governments to finance renewable energy and energy-efficiency loans to eligible property owners. Property owners can finance renewable energy installations, such as solar panels and energy efficiency improvements through a voluntary assessment on their property tax bills.

The increasingly popular PACE programs allow property owners to install solar panels or other energy efficiency projects in the home without up-front financing.  California promotes these programs as a way to create green jobs, energy efficiency and renewable energy. The federal government has supported the program in California through American Recovery and Reinvestment Act dollars directed through the California Energy Commission. In fact, $110 million in these stimulus funds have been dedicated to energy efficiency programs, including PACE financing programs.

The federal change of position lies in the details of the financing program. The FHFA’s opinion is that PACE loans acquire a priority lien over existing mortgages, threatening a bank’s ability for repayment in the case of foreclosure. California’s position is that PACE programs are tax assessments, not loans, and do not pose this increased financial risk.

Gov.Schwarzenegger expressed his disappointment at the FHFA opinion, stating in a press release today that, “The FHFA’s bureaucratic breakdown threatens one of California’s most promising new engines of job creation in this struggling economy.

“FHFA’s action threatens thousands of new sustainable jobs in California, especially in the hard-hit construction industry, while denying homeowners the opportunity to reduce monthly energy costs and add equity to their homes,” Schwarzenegger said.

Counties have a vested interest in this program, as many have initiated PACE programs already – including those participating in a pilot program established by California Communities, the joint powers authority formed by CSAC and the League of California Cities. The pilot program, CaliforniaFIRST, was scheduled to begin in a number of counties and cities this fall and has already received $16.5 million from the California Energy Commission’s State Energy Program.

CaliforniaFIRST, along with numerous other PACE programs in California, has now been put on hold by the FHFA opinion and will remain in limbo until issues with Freddie Mac and Fannie Mae can be resolved.

For more, visit The County Voice, a place where CSAC, county officials and stakeholders can voice their thoughts on governance and issues that impact California’s 58 counties.