ClimateSmart Loan Program

In 2008, voters approved Boulder County Issue 1A, which authorized the county to sell $40 million in bonds to fund a ClimateSmart Loan Program. The program allows property owners to borrow money from the county for a wide range of energy-efficient upgrades and to pay the loans back through a 15-year assessment on their properties.

So far, the program has issued $13 million in loans to 612 participants through two rounds of residential financing. Commercial property owners have until July 12 to apply for $12 million in loans. A third round of residential loans has been suspended indefinitely.

Last fall, voters did not pass a second ballot measure that would have increased the funding for ClimateSmart loans by another $40 million.

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Boulder County has indefinitely suspended the third round of its residential ClimateSmart Loan Program, which would have provided 173 homeowners with a total of $3.1 million for energy-efficiency upgrades and renewable-energy projects.

The county originally suspended the program in May for 60 days while staffers worked to understand how the program would be affected by new rules from the U.S. Department of Energy and a new policy enacted by Fannie Mae and Freddie Mac, the quasi-federal agencies that buy secondary mortgages.

The county was able to bring ClimateSmart into compliance with the DOE's rules, which required only relatively minor tweaks. But staffers were not able to work with Fannie Mae and Freddie Mac to change their new policy, which says they will no longer buy mortgages for homes that have an attached property assessment for energy-efficiency upgrades or renewable-energy projects.

"We believe that it will get resolved because Fannie and Freddie's position makes so little sense," said Boulder County Commissioner Will Toor. "But since we can't tell people when it will be resolved, we can't ask people to sit there and wait -- both individuals who are looking at doing improvements and local contractors who are counting on those bids."

The suspension does not affect the commercial ClimateSmart Loan Program, which includes upgrades to apartment buildings.

Mortgages for homes that have attached property assessments are commonly bought and sold on the secondary mortgage market by Fannie Mae and Freddie Mac. Typically, these assessments are enacted through local improvement districts and pay for projects such as sewer system upgrades or street repaving.

But Fannie Mae and Freddie Mac have now singled out Property Assessed Clean Energy, or PACE, loans such as the ClimateSmart program, even though the assessments used to pay back ClimateSmart loans are also enacted through a local improvement district and are comparable in size to other, more traditional assessments.

"There have been assessment districts for a hundred years now. They're used for all sorts of improvements that provide benefits for a particular property or set of properties and provide a broader public benefit," Toor said. "Fannie and Freddie have never raised an issue with them in the past. ... There's no logical reason why Fannie and Freddie should treat these differently from any other assessment district."

The mortgage-buying giants argue that PACE loans are a different kind of assessment because they provide no public benefit. But Toor says that position isn't shared by the growing number of local and state governments that are working to start their own PACE loans -- which are often modeled after Boulder County's.

And it appears that Fannie and Freddie's position is also not shared by other agencies within the federal government. Boulder County, for example, just received $8 million in grants from the DOE to support the ClimateSmart Loan Program.

"One of the things that has been so odd about this is that the federal government as a whole has been very supportive," Toor said. "The DOE really sees the value of these programs."

For Loraine Masterton, the suspension of the ClimateSmart Loan Program is a bitter disappointment. Masterton based her decision to buy an older house near Lafayette in March on the fact that she could use a ClimateSmart loan to replace the windows, install an evaporative cooler and add insulation.

"For us, personally, this is a real bummer," she said. "We made a bunch of very important life decisions based on this."

Masterton planned to borrow between $22,000 and $27,000 to upgrade the house. She said she'll continue to research other financing options, but having just taken out a mortgage, she suspects it will be difficult to find another loan at a good rate.

The suspension of the program -- which has given out $13 million in loans over the last two years -- will also have a negative impact on the local economy, said Julie Herman, executive director of the Boulder Green Building Guild.

"Literally, millions of dollars were spent in our community in the retrofit industry because of the ClimateSmart Loan Program," she said. "Those millions of dollars directly supported our local contractors and our local economy."

Contact Camera Staff Writer Laura Snider at 303-473-1327 or