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Incentives/Policies for Renewables & Efficiency

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Local Option - Contractual Assessments for Energy Efficient Improvements   

Last DSIRE Review: 08/28/2014
Program Overview:
State: Texas
Incentive Type: PACE Financing
Eligible Efficiency Technologies: Decided by locally determined municipal/county official
Eligible Renewable/Other Technologies: Decided by locally determined municipal/county official
Applicable Sectors: Commercial, Industrial, Residential, Multi-Family Residential, Agricultural, Real Property
Terms:Locally determined
Web Site:
Authority 1:
Date Enacted:
Date Effective:
Tex. Local Government Code § 376.001 et seq.
Authority 2:
Date Enacted:
Date Effective:
Tex. Local Government Code § 399.001 et seq.

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 activity 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.

Keeping PACE in Texas is currently assisting counties and municipalities with the creation, design, and implementation of locally-administered PACE programs. It provides a "PACE in a Box" toolkit for Texas counties and municipalities to create uniform, user-friendly, scalable, and sustainable PACE programs in Texas.

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 a period of years. Texas has authorized local governments to establish such programs, as described below. (Not all local governments in Texas offer PACE financing; contact your local government to find out if it has established a PACE financing program.)

Texas first enacted legislation in May 2009 that authorizes municipalities to establish contractual assessments for energy efficiency and renewable energy improvements to commercial, residential, and industrial property. The law establishes the process for a municipality to establish a program, but many of the details of the program are determined locally. Texas passed subsequent legislation in 2013 (S.B. 385) that allows counties to also establish PACE programs, but only for commercial, industrial, and multifamily residential property. Under this new legislation a city or county may designate a single region or multiple regions within its boundaries as an assessment area.   

As required by the original law, the municipality must first pass a resolution stating its intent to designate an area for the assessment, even if the area will cover the entire municipality. That same resolution must include proposed details of the program and a public hearing must be held to receive feedback from constituents. The resulting municipal plan must determine and specify:

  • eligible renewable energy systems and energy-efficient technologies;
  • a method for ranking requests from property owners for financing through contractual assessments if requests exceed the authorization amount;
  • whether the property owner may purchase the equipment directly or contract for the installation;
  • the maximum aggregate dollar amount of contractual assessments;
  • a map of the boundaries within which contractual assessments will be offered;
  • a draft contract specifying the terms to be agreed upon by the municipality and a property owner;
  • a method for ensuring that property owners who request financing have the ability to fulfill financial obligations; and
  • a plan for raising the capital required to pay for work performed.

The law allows municipalities to fund these directly or use proceeds from bonds. Furthermore, the plan must include information on how the interest rate and repayment schedule is determined and whether a reserve fund will be created.

Once the municipal plan is implemented, property owners within the assessment area may opt-in to the program voluntarily. Subsequently, after they enter into a contractual assessment and receive funding for their energy improvements, a lien will be placed on their property and will remain until the assessment, and interest is fully repaid.

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Disclaimer: The information presented on the DSIRE web site provides an unofficial overview of financial incentives and other policies. It does not constitute professional tax advice or other professional financial guidance, and it should not be used as the only source of information when making purchasing decisions, investment decisions or tax decisions, or when executing other binding agreements. Please refer to the individual contact provided below each summary to verify that a specific financial incentive or other policy applies to your project.

While the DSIRE staff strives to provide the best information possible, the DSIRE staff, the N.C. Solar Center, N.C. State University and the Interstate Renewable Energy Council, Inc. make no representations or warranties, either express or implied, concerning the accuracy, completeness, reliability or suitability of the information. The DSIRE staff, the N.C. Solar Center, N.C. State University and the Interstate Renewable Energy Council, Inc. disclaim all liability of any kind arising out of your use or misuse of the information contained or referenced on DSIRE Web pages.

Copyright 2014 - 2015 North Carolina State University, under NREL Subcontract No. XEU-0-99515-01. Permission granted only for personal or educational use, or for use by or on behalf of the U.S. government. North Carolina State University prohibits the unauthorized display, reproduction, sale, and/or distribution of all or portions of the content of the Database of State Incentives for Renewables and Efficiency (DSIRE) without prior, written consent.