Local Option - Local Improvement Districts

Last updated: July 24, 2020

Program Overview

Implementing Sector:State
Category:Financial Incentive
Incentive Type:PACE Financing
Administrator:Programs administered locally
Eligible Efficiency Technologies:Other EE
Terms:Locally determined


Name:ORS 223.396
Date Enacted:7/22/2009
Name:HB 4041
Date Enacted:03/06/2014
Effective Date:03/06/2014


Local Option - Local Improvement Districts

Note:  In 2010, the Federal Housing Finance Agency (FHFA), which has authority over mortgage underwriters Fannie Mae and Freddie Mac, directed these enterprises against purchasing mortgages of homes with a PACE lien due to its senior status above a mortgage. Most residential PACE activities subsided following this directive; however, some residential PACE programs are now operating with loan loss reserve funds, appropriate disclosures, or other protections meant to address FHFA's concerns. Commercial PACE programs were not directly affected by FHFA’s actions, as Fannie Mae and Freddie Mac do not underwrite commercial mortgages. Visit PACENow for more information about PACE financing and a comprehensive list of all PACE programs across the country.

Property-Assessed Clean Energy (PACE) financing effectively allows property owners to borrow money to pay for energy improvements. The amount borrowed is typically repaid via a special assessment on the property over the years. Oregon has authorized certain local governments to establish such programs, as described below. (Not all local governments in Oregon offer PACE financing; contact your local government to find out if it has established a PACE financing program.)

Oregon has authorized the creation of "local improvement districts" where cities and counties provide financing for the installation of renewable energy systems and energy-efficiency improvements to residential, commercial, industrial, or other qualifying real property. HB 2626, enacted in July 2009, authorizes local governments to provide loans for renewable energy and energy efficiency improvements. Local governments may issue revenue bonds to finance this loan program or can borrow money from the Oregon Department of Energy under the Energy Efficiency and Sustainable Technologies Loan Program for small-scale local energy projects. Before establishing the program, the local government must notify the electric and gas utilities in the area, as the loans may be paid back on utility bills. The loans may be secured with a lien on the property, although liens are not senior. Some potential options for loan repayment are via a special assessment on local government taxes, utility bills, or another approved method of loan repayment

HB 4041 of 2014 requires property owners to provide written notification to all mortgagees of their intent to enter into a loan agreement and to receive their written consent before entering into a loan agreement. 

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