Local Option - Contractual Assessments for Energy Efficient Improvements (Texas)

From Open Energy Information


Last modified on February 12, 2015.

Financial Incentive Program

Place Texas

Name Local Option - Contractual Assessments for Energy Efficient Improvements
Incentive Type PACE Financing
Applicable Sector Agricultural, Commercial, Industrial, Multi-Family Residential, Residential, Real Property
Eligible Technologies Decided by locally determined municipal/county official, Decided by locally determined municipal/county official
Active Incentive Yes
Implementing Sector State/Territory
Energy Category Energy Efficiency Incentive Programs, Renewable Energy Incentive Programs

Terms Locally determined
Program Administrator Programs administered locally

References DSIRE[1]


Note: The Federal Housing Financing Agency (FHFA) issued a statement in July 2010 concerning the senior lien status associated with most PACE programs. In response to the FHFA statement, most local PACE programs have been suspended until further clarification is provided.

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 (SB 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 the following:

  • 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;
  • Specification of 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 or not a reserve fund will be created (and how).

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.

Authorities (Please contact the if there are any file problems.)

Authority 1: Texas Local Government Code § 376.001 et seq
Date Effective 2009-09-01
Date Enacted 2009-05-26

Authority 2: SB 385
Date Effective 2013-06-14
Date Enacted 2013-06-14

  • Incentive and policy data are reviewed and approved by the N.C. Solar Center's DSIRE project staff.[1]


  1. 1.0 1.1  "Database of State Incentives for Renewables and Efficiency (DSIRE)"