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This week, the State of California sued mortgage giants Fannie Mae and Freddie Mac for blocking Property Assessed Clean Energy (PACE) programs; the town of Babylon in New York held a rally in support of PACE and threatened a lawsuit; and members of Congress prepared legislation that would direct the Federal Housing Finance Agency (FHFA) not to block PACE programs from moving forward.

As we explained in the last weekly update, PACE programs help residential and commercial property owners make energy improvements to their properties. Through PACE, local governments issue bonds to help finance property owners' renewable-energy and energy-efficiency projects. Property owners apply for financing for their projects, which they then pay off over a long period of time (usually 20 years) through a surcharge on their property tax bill. There are no up-front costs whatsoever, and property owners can usually expect to save more money on their energy bills than they will have to pay in increased property taxes. If the property changes hands, the cost of the upgrades is passed on to the next property owner.

PACE programs have been authorized in 23 states--most recently this week in Missouri, thanks in part to the efforts of the Missouri Apollo Alliance.

But these programs are in jeopardy, because Fannie Mae, Freddie Mac and the FHFA have recentlytaken actions that have frozen most PACE programs around the country and could lead to PACE's ultimate demise. They object to the fact that under most PACE programs, a lien is placed on the property that will take priority over the mortgage if the homeowner defaults. The FHFA and the U.S. Treasury Department have both instructed banks to place additional restrictions on home loans to borrowers in jurisdictions that have PACE programs, among other directives.

Thankfully, cities, states and federal policymakers are fighting back in an effort to save these programs that have so much potential to reduce greenhouse gas emissions from buildings, lower energy bills for consumers, and create jobs in home weatherization and renewable energy installation. The State of California filed a lawsuit on Wednesday charging Fannie Mae and Freddie Mac with misrepresenting the nature of PACE programs and municipal financing. The lawsuit asserts that PACE funding is an assessment, not a loan, and that Fannie Mae and Freddie Mac have long accepted local governments' use of assessments in California to finance improvements that serve a public purpose, from the paving of roads and the undergrounding of utilities, to privately owned improvements like seismic and fire-related retrofits.

"Fannie Mae and Freddie Mac received enormous federal bailouts," said California Attorney General Jerry Brown, whose office filed the lawsuit. "But now they're throwing up impermeable barriers to bank lending that creates jobs, stimulates the economy and boosts clean energy."

While most PACE programs in California have been suspended indefinitely because of the actions of Fannie, Freddie and the FHFA, the town of Babylon, New York has vowed to continue its PACE program, despite pressure from federal agencies. The Apollo Alliance has featured Babylon's Long Island Green Homes program among our clean energy success stories. More than 500 homeowners in the Town of Babylon have participated in the program, which reduces homeowners' energy bills by an average of more than $1,000 per year and a home's carbon emissions by close to four tons annually.

Babylon leaders joined with more than 50 local workers at a rally on Tuesday to announce that the town plans to sue the FHFA. "With a stroke of the pen, some faceless bureaucrats at Fannie Mae and Freddie Mac are attempting to kill the most potent jobs creation programs we have in this country," said Town of Babylon Supervisor Steve Bellone. "We refuse to go along with this arbitrary and capricious attack that is nothing more than a jobs killer."

Aside from a legal remedy to the PACE crisis, legislative remedies are also in the works. Representative Steve Israel (D-NY), who represents the town of Babylon, is working with Representative Mike Thompson (D-CA) on legislation explicitly directing the FHFA not to block PACE from moving forward and directing all federal regulators not to block commercial building PACE programs. The legislation should be introduced sometime next week. Israel's office said that government loan guarantees for PACE programs are another option to appease Fannie, Freddie and the FHFA. Loan guarantees along these lines were included in the American Clean Energy and Security (ACE Act, but have not gone into effect because the Senate has yet to pass similar legislation.

Reps. Israel and Thompson joined 14 other House members in signing a letter to FHFA Acting Director Edward DeMarco, urging him to work with other federal agencies to resolve the impasse over PACE-or to resign. As they said in the letter, PACE programs create jobs, and that is what our economy needs right now.

Stay tuned to the Apollo blog for new developments in the PACE debacle.

Photo: Babylon, NY Supervisor Steve Bellone and local workers rally in support of the Long Island Green Homes program.

In other news …

*California labor unions will put their weight behind the state's landmark global warming law. This week, at its annual legislative convention, the California Labor Federation voted to oppose Proposition 23, an effort funded by Texas oil companies to stop implementation of California's landmark global warming law, the Global Warming Solutions Act of 2006, also known as AB 32. AB 32 is a model law whose implementation will include a strong renewable portfolio standard; strict building and appliance energy efficiency standards; GHG emissions standards for passenger vehicles; a low-carbon fuel standard; and a cap-and-trade program; among many other measures. The California Labor Federation is made up of more than 1,200 AFL-CIO and Change to Win unions, representing 2.1 million union members in manufacturing, retail, construction, hospitality, public sector, health care, entertainment and other industries. Click here to read a press release about the California Labor Fed's opposition to Proposition 23.

*Policy Matters Ohio and the Ohio Apollo Alliance release new report on clean transportation. On Monday, Policy Matters Ohio and the Ohio Apollo Alliance released All Aboard: Clean Energy Transportation Opportunities Favor Ohio Economy. The report, based on research commissioned by the Apollo Alliance and conducted by Duke University, finds that increased public transit investment could drive demand for heavy transportation equipment and component parts produced in Ohio, retaining jobs and growing new ones. Click here to read the report.

*Support Clean and Safe Ports! The EPA award-winning Los Angeles Clean Truck Program has put more than 6,000 clean diesel and alternative fuel trucks on the road and reduced diesel emissions by more than 70 percent since it was first enacted in 2008. Unfortunately the trucking industry has challenged this cutting-edge program in court, which has put key components of the program in jeopardy. To support port truck drivers and communities near the ports, please sign this petition urging transportation leaders in Congress to stand up for strong environmental and labor standards at U.S. ports. Click here to sign the petition.

You can keep track of the quickening pace of state and federal action on clean energy policy on ourApollo Blog and Daily Digest.

And how about joining us on Twitter?

Take care and talk to you again next week.

Yours, 
Andrea Buffa
Senior Writer and Policy Associate
Apollo Alliance 
buffa@apolloalliance.org