Edina has become the first Minnesota city to allow businesses that make energy-efficient improvements to their properties to pay for those improvements through their property taxes.

The Edina Emerald Energy Program allows "property assessed clean energy," better known as PACE. Minnesota passed a PACE law in 2010, and is one of 27 states with the program.

City Council members approved the program last month. Some members were wary of being the state pioneer for the program, which they worried could become a financial liability for the city if a property that used the program went into foreclosure. But City Manager Scott Neal assured the council that if a property were foreclosed on, the city would be first in line for repayment, even before mortgage holders.

"If there was a default situation here, we might not get paid right away, but we would always get paid," he said.

Under Edina's program, only commercial and industrial properties in the city are eligible. The city would not lend public money to a business but would serve as an intermediary using special assessments on the business owner's tax bill as a conduit to attract private financing.

By getting the city involved, businesses should be able to line up loans more readily because lenders would be assured of repayment. On a loan taken out directly by the business from a lender, the lender would not have such assurance because mortgage holders and other creditors could be in line to be paid first if a property went into foreclosure.

Edina's decision to make only commercial and industrial buildings eligible is a departure from the pioneering program in California's Sonoma County, where over the past two years PACE has helped fund more than $53 million in projects in more than 2,400 homes and 77 commercial properties.

While the program has been praised for creating jobs and cutting energy use, federally chartered mortgage lenders Fannie Mae and Freddie Mac have objected to the program because PACE loans are first in line for repayment on foreclosed properties.

While Congress is working on legislation to fix that problem, Edina decided to avoid the issue by not including residences for now.

The cost of improvements will be limited to 10 percent of the property's assessed value. Properties would have to be up-to-date on property taxes to be eligible.

The PACE proposal was hustled through the council because one Edina business is interested and wants to take advantage of government and utility rebates that are available this year. The owners of Grandview Tire and Auto on W. 70th St. want to add solar panels on the roof that could reduce utility costs by 20 percent and would last 20 to 25 years.

The city received a $10,000 grant from the state that should cover almost all the cost of implementing the program, Neal said.

Mary Jane Smetanka • 612-673-7380 • Twitter: @smetan