Accelerating the Payment of PACE Assessments

The "acceleration" of land-secured assessments allows municipalities to declare the entire value (not just the late payments) of a property owner's outstanding balance payable if a default occurs. State laws vary on whether acceleration is required, permitted, or prohibited. Acceleration can be attractive to bond investors because it strips out non-performing assessments, and may avoid delays in debt service payments to investors. The risk that non-acceleration will negatively impact bond investors is a particular issue in states without a process for rapidly resolving defaults. However, acceleration may also increase the risk to mortgage holders, as the full amount of the outstanding assessment becomes due and traditionally has priority over other lien holders. Acceleration also places a greater burden on the property owner. The issue of whether PACE programs should be structured such that liens are accelerated upon default has attracted some attention from program designers and policy makers. The White House's Policy Framework for PACE Financing Programs explicitly supports designing PACE programs such that property owner default does not trigger acceleration of the assessment. Ultimately, the importance of this issue varies greatly due to the differences in acceleration requirements and default resolution practices in each state.