Tax-free bond program can create jobs, spur energy-efficiency projects

December 24, 2009|By John Sarbanes

In recent speeches all around the country, President Barack Obama has talked about the economic benefits of providing incentives for home or business owners to weatherize and install energy-efficient technology. The appeal of such an initiative is obvious - creating new, green manufacturing jobs, helping Americans save on their energy bills and protecting the environment through reduced energy usage. Dubbed "cash for caulkers" by some, the president's proposal involves rebates to individuals who purchase and install eligible equipment.

I support the president's proposal and believe that it would accomplish several critical goals in a timely and targeted way. But we should also look for ways to sustain a long-term movement toward energy efficiency and renewable-energy generation without additional federal spending. That is why I have introduced legislation to support something called Property Assessed Clean Energy (PACE) bonds. PACE bonds are an innovative way to finance energy-efficiency investments at the state and local level.

Here's how they work. First, local governments raise capital by issuing the bonds. Those funds are then used to provide loans to participating homes and businesses for the installation of energy-efficiency improvements. The owners gradually repay those loans through their property taxes.

The property owner saves on his or her energy bill immediately and in the long term. One further benefit is that the liability for repayment is treated much like a lien on the property and is not tied directly to the owner. This means when the owner sells, he or she is not on the hook for the entire cost because the new owner - a beneficiary of the energy savings - will be responsible for the monthly payments.

PACE programs are springing up in a few areas around the country; locally, the city of Annapolis and Montgomery County have programs under way. I've worked with energy-financing experts, the city of Annapolis, and my colleagues in Congress to introduce the PACE Tax Benefits Act, which will make these programs more successful and help them to expand more broadly.

Under current law, when state or local governments issue bonds for the construction of roads, schools or other infrastructure, their investors receive tax-free interest payments. The PACE Tax Benefits Act treats PACE bonds in the same manner, making it easier for state and local governments to raise adequate capital and creating low-cost financing to ensure that property owners' energy savings exceed their monthly payments.

The potential for economic growth and energy savings is vast if we establish a framework for more Americans to invest in energy efficient and renewable energy technologies. By doing so, we will create thousands of new jobs; save billions of dollars in energy costs for consumers; and make significant progress in our efforts to reduce greenhouse gas emissions.

I look forward to working with the president and my colleagues in Congress to enact common-sense solutions that move us in that direction.

Congressman John Sarbanes, a Democrat, represents Maryland's Third District. He may be contacted at www.sarbanes.house.gov.

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