LANSING, Mich., Oct. 31, 2023 — At the request of state Rep. Betsy Coffia (D-Traverse City), Attorney General Dana Nessel has issued a formal opinion concluding that contractual assessments imposed by local governments under the Property Assessed Clean Energy (PACE) Act are considered special assessments by the local government and treated in a similar manner as the real estate taxes on the property.
“Supporting affordable housing operations and promoting renewable energy use were some of the top issues I heard about while knocking doors and during my four years serving as a Grand Traverse County Commissioner,” Coffia said. “I thank Attorney General Nessel for issuing this opinion, which brings us one step closer to allowing Michigan developers of workforce and low-income housing to work in tandem with HUD and our state’s PACE program.”
Nessel’s opinion addressed two distinct components:
- Contractual assessments imposed by a local unit of government on property within a specified district to recover improvement costs, “are indeed ‘special assessments’ under Michigan law.”
- The assessments levied under the PACE Act are treated similarly to real estate taxes on the property, due to “the matter in which the assessments are collected, the nature of the assessments as a lien on the property, the priority the lien has in regard to the property, and the rights of the local unit of government in the case of a delinquency.”
The PACE program enables property owners, including commercial property owners, to finance energy or water efficiency improvements on their properties or to install renewable energy systems, with the financing being secured by a voluntary, contractual assessment on the property by the local unit of government. This financing is frequently sought by developers of low-income housing who are also accessing financing from the United States Department of Housing and Urban Development (HUD), but HUD would not consent to PACE financing for such housing projects in Michigan without meeting certain criteria, with one of those criteria being this opinion from the Attorney General.