Category: PACE

‘Barrier Against Default for Private Lenders’ in Alexandria?

City Council will decide on Wednesday, May 1 whether to reserve funds for a “green” building program, which would enable private lenders to collect debts via the city government’s taxing power.

Proponents say the program — dubbed Commercial Property Assessed Clean Energy (C-PACE) — would enable building owners to invest in eco-friendlier building upgrades, like HVAC systems and roofs. They think such upgrades could yield a relatively big positive environmental impact, since buildings are major greenhouse gas emitters.

With C-PACE, eligible debt attaches to the building, which passes to the new owner if the building is sold. It’s repaid through a special assessment on the property, as a tax bill addition.

“This can address a key disincentive to investing in energy improvements because many property owners are hesitant … if they think they may not stay in the property long enough for the resulting savings to cover the upfront costs,” according to the Department of Energy.

With zero-down and long repayment terms, C-PACE may enables owners to finance upgrades for which they might otherwise lack sufficient cash.

“The annual energy savings for a PACE project usually exceeds the annual assessment payment, so property owners are cash flow positive immediately,” according to the C-PACE Alliance, a coalition of firms. “[Net new revenue] can be spent on other capital projects, budgetary expenses, or business expansion.”

The Ivy Knoll Caring Senior Community in Covington, Ky. illustrates the benefits, says Jessica Greene of the Virginia Energy Efficiency Council. With a $750,000 C-PACE loan, Ivy Knoll installed, among other things, heating and cooling controls that reduce energy costs by some 20 percent.

Read more (Alexandria Gazette Packet)

Albemarle supervisors get update on climate plan

Albemarle County’s goal is to reduce overall community greenhouse gas emissions by 45 percent by 2030 and reach net zero by 2050.

County staff is recommending the goal as part of the first phase of the Climate Action Plan process, and the goal is consistent with the latest recommendations of the International Panel on Climate Change.

“It’s not just a goal for county operations; this is a goal for the entire community included within the jurisdictional boundary of Albemarle County,” said Narissa Turner, the county’s climate programs coordinator.

Read More (Daily Progress)

NVRC Releases a New Interactive Dashboard of LEED Properties

VAEEC member, the Northern Virginia Regional Commission (NVRC), has put together an interactive dashboard of all LEED certified buildings in Virginia. These buildings represent a significant investment in resiliency and sustainability. Programs like PACE (Property Assessed Clean Energy) are an important financial tool to provide options to a building owner considering some level of LEED certification.

Read More (NVRC)

Lessons in Commercial PACE Leadership: The Path from Legislation to Launch

(Electricity Markets and Policy Group, Berkeley Lab)

Nonresidential buildings are responsible for over a quarter of primary energy consumption in the United States. Efficiency improvements in these buildings could result in significant energy and utility bill savings. To unlock those potential savings, a number of market barriers to energy efficiency must be addressed.

Commercial Property Assessed Clean Energy (C-PACE) financing programs can help overcome several of these barriers with minimal investment from state and local governments. With programs established or under development in 22 states, and at least $521 million in investments so far, other state and local governments are interested in bringing the benefits of C-PACE to their jurisdictions.

Lessons in Commercial PACE Leadership: The Path from Legislation to Launch, aims to fast track the set-up of C-PACE programs for state and local governments by capturing the lessons learned from leaders. The report examines the list of potential program design options and important decision points in setting up a C-PACE program, tradeoffs for available options, and experiences of stakeholders that have gone through (or are going through) the process.

C-PACE uses a voluntary special property assessment to facilitate energy and other improvements in commercial buildings. For example:

  • Long financing terms under C-PACE can produce cash flow-positive projects to help overcome a focus on short paybacks.
  • Payment obligations can transfer to subsequent owners, mitigating concern about investing in improvements for a building that may be sold before the return on the investment is fully realized.
  • 100% of both hard and soft costs can be financed.

Read the full report. 

SEIA Announces Release of Two Documents to Open Commercial & Industrial Solar

WASHINGTON, D.C. – The Solar Energy Industries Association (SEIA) announced today the release of two documents designed to spur investment in commercial solar projects.

The first document is a contract that combines the benefits of a Power Purchase Agreement (PPA) with Property Assessed Clean Energy (PACE) to provide customers with a valuable new financing option.

“The PACE PPA further builds out SEIA’s suite of model contracts so all solar transactions can be efficiently negotiated and financed,” said Mike Mendelsohn, SEIA’s senior director of project finance & capital markets. “Our goal is to broadly open the U.S. commercial real estate sector for solar deployment, and the PACE PPA is a valuable tool to allow that progress to happen.”

Read more (Solar Energy Industries Assoc.)

PACENation responds to the August 15, 2017 Wall Street Journal story, “More Borrowers Are Defaulting on Their ‘Green’ PACE Loans”

Residential PACE has been the best financing solution for the roughly 160,000 homeowners who have used it for energy, water, and safety related projects that they wanted or needed to make; projects that made their homes more comfortable, healthier, safer, less expensive to heat and cool, and more valuable. State and local government partners also appreciate the tens of thousands of local jobs that R-PACE has helped create and sustain. PACE financing for commercial, industrial, agricultural and non-profit owned properties is now available widely throughout the United States, a success story the Journal has ignored.

There is a great story to tell. But instead, the Wall Street Journal, yesterday, ran another in a series of misleading stories about PACE. Yesterday’s, again, includes many ill drawn conclusions and seems to reflect the author’s clear bias for sensationalism.

There is simply no evidence to suggest that PACE is a looming crisis for the banking industry or homeowners.  None.  Zero. There is no data to suggest that PACE homes are delinquent or likely to default at rates higher than those for the broader housing market in PACE served communities. With more than 60,000 new homes using PACE over the previous year, it is not surprising that the number of defaults has increased. But there is absolutely no indication that the PACE assessment has been the direct cause of the delinquencies or defaults in any but the tiny number of anecdotal cases that the Journal has reported on.

Read more (PACENation)

News: Congress should let communities set their own PACE

In hundreds of counties and cities across America, local officials are embracing Property Assessed Clean Energy (PACE). PACE effectively expands access to credit to help property owners improve or repair their properties with efficient products, while creating and sustaining local jobs at no cost to public budgets. Solution-oriented mayors like us appreciate the innovation and value of PACE – which is why it’s bewildering to see lawmakers in Congress trying to kill it off.

PACE has bipartisan appeal – and is also supported by groups as varied as the National Association of Manufacturers and the Natural Resources Defense Council – because it offers a free-market approach to advancing public-policy objectives. PACE gives property owners access to private capital to make energy, efficiency and resiliency improvements to their properties; the financing is then repaid at a fixed rate through an additional line item on the owner’s property taxes.

Read the full op-ed.(The Hill; Authors: Jeri Muoio Ph.D. (D), Mayor of West Palm Beach, Fla. and Rex Parris (R), Mayor of Lancaster, Calif.)

The low-down on PACE financing in Virginia

Property Assessed Clean Energy financing, or PACE, is starting to get more and more attention around the Commonwealth and the nation. In fact, Governor McAuliffe and his administration recognized PACE as a viable means to create more jobs, save energy, and lower electricity bills in a recent press release. As it’s popularity increases, many are still unaware of just exactly what PACE is and who it can benefit.

PACE financing is a loan program to help bring low-cost, long-term capital to fund the rehabilitation of existing and new privately owned commercial buildings through energy efficiency, renewable energy, and water conservation projects. The loan is repaid annually through the property’s real estate tax bill.

Thirty-three states and Washington, D.C. have passed legislation at the state level to enable PACE financing; nineteen of those states have already started a PACE program. In Virginia, a commercial PACE, or C-PACE, enabling law was originally enacted in 2009 and amended in 2015. Virginia’s PACE law requires a locality to develop a PACE program, and private lenders make the loan and negotiate directly with the property owner on rates and terms. Currently, Arlington County is the only Virginia jurisdiction actively developing a PACE program; however, several over localities are exploring the development of their own programs.

Practically all privately-owned commercial buildings, regardless of size, are eligible for PACE financing, including office, retail, hotel, and industrial space. Eligible PACE projects must either reduce energy consumption or generate energy, and they must be permanently affixed to the property. Eligible improvements include: insulation, solar panels, lighting, roofing, and HVAC systems. In Virginia, commercial, nonprofit, and multifamily buildings (except condos and dwellings with less than five units) are eligible regardless of their age.

PACE offers an array of benefits for each key stakeholder: property owner, contractor, lender, locality.

Property owners:

100% financing: PACE covers 100% of all hard and soft project costs, eliminating the need for upfront cash investment.

Long-term loan: With terms up to 20+ years, PACE loans result in lower annual payments and immediate positive cash flow.

Transferable: PACE loans do not have to be paid off at the time of sale; they transfer to the new owner.

Non-accelerating loan

 

Contractors:

Increase sales volume and improve profit margin: By covering 100% of project costs and eliminating the requirement for out-of-pocket expense, PACE brings financing to more customers. Since PACE is based on equity in the property and not personal credit, it is easier for more customers to obtain financing.

Fund deeper energy retrofits: Long-term financing enables customers to take advantage of projects with longer paybacks, which leads to more comprehensive projects with greater effect on energy usage. PACE can also fund efficiency improvements that are not allowable uses of Weatherization Assistance Program funds (i.e. replacement windows).

Gain support and resources: PACE programs can be developed to offer an array of contractor services to help grow business and streamline financing. Services include training, call center support, customizable marketing materials, tools to pre-qualify customers, project estimation calculators, and web portals for financial analysis and deal-tracking.

Spur demand for retrofits and energy auditors: As the number of people taking advantage of PACE increases, PACE could spur a surge of private demand for well-trained retrofitters. Additionally, as the program grows, so will the demand for energy audits. Energy audits are used to track a building’s energy usage before and after PACE improvements are installed.

 

Lenders:

Meet client’s needs of implementing upgrades

Increase value of collateral: upgrades and improvements increases the value of the property

– Enhances property owner’s ability to pay their debt: raises net operating income (NOI) through low annual payments and decreased operating costs

 

Localities:

– Creates employment opportunities for contractors, trades, engineers, vendors, etc.

– Serves as a redevelopment tool for “tired” buildings with obsolescent and inefficient systems

– Improvements make buildings more marketable, leading to better tenant retention and increases property values

Increased property taxes  and construction fees yields more revenues for jurisdictions

Reduces locality’s carbon footprint, enabling it to become a green leader

Minimal municipal burden: a third party administrator carries the cost of starting and running the program

 

The difference between traditional bank financing and PACE financing:

Traditional Bank Financing PACE Financing
Purpose: HVAC and Lighting Purpose: HVAC and Lighting
Project Cost: $100,000 Project Cost: $100,000
Loan: $75,000

25% upfront cash investment required

Loan: $100,000

$0 upfront cash investment required

Interest Rate: 5% Interest Rate: 6.25%
Term: 5 years, fully amortizing Term: 15 years, fully amortizing
Monthly Payment: $1,415 Monthly Payment: $857
Annual Payment: $16,984 Annual Payment: $10,290

 

PACE financing is a lucrative tool that can benefit all parties involved. We look forward to seeing Arlington get their program up and running later this year and are excited to continue working with other localities as they explore the feasibility of developing their own PACE programs.

If you would like additional information about PACE, please contact VAEEC Program Coordinator Jessica Greene.

How Commercial PACE Came to Michigan

Michigan passed the legislation for a Commercial PACE (Property Assessed Clean Energy) program in 2010. Businesses and commercial properties in participating municipalties can retrofit their buildings with renewable energy and energy efficient systems by borrowing money from a private lender, and repay the loan via a special assessment on their local property tax. It has taken longer for municipalities to opt in, and consequently, the state’s PACE programs didn’t really get started until 2016. Tommy Deavenport, Chief Operating Officer of Petros PACE Finance, explained how commercial PACE came to Michigan.

According to the press release:

“Petros PACE Finance, LLC has completed a $718,000 Property Assessed Clean Energy (PACE) transaction with a Michigan property owner that will fund significant energy efficiency upgrades to a 36-year-old commercial facility.

Property owner Delta Business Center, LLC plans to install a new HVAC system, LED lighting, high-efficiency fans, modern building automation system and skylights in its Delta Business Center, a 93,000 square foot light industrial building that previously housed the Lansing State Journal printing and distribution facility.

The investment is expected generate more than $1.8 million in energy savings over the 20-year life of the loan. The project will be financed without any out-of-pocket expense to Delta Business Center, LLC through the Lean & Green Michigan PACE program.”

Deavenport added, “A total of six projects have been funded in Michigan to date, with five of those funded in 2016 by Petros PACE Finance. We believe the number of projects funded by Michigan’s PACE program is going to grow rapidly in in 2017 and beyond. Our pipeline certainly continues to grow.”

Read more (Clean Technica)

PACE program seeks to spur investment in clean, efficient energy across Maryland

Maryland counties are increasingly signing on to an unorthodox program that makes it easier for owners of large office buildings and warehouses to pay for green energy projects.

Under recently enacted ordinances, companies in Baltimore, Harford, Howard counties and Baltimore City can agree to pay more in property taxes to finance solar panels, for example, or energy-efficient heating and cooling systems. The governments would pass the payments along to lenders that front the costs for the improvements.

Known as PACE — which stands for Property-Assessed Clean Energy financing — such programs have spurred $280 million in clean and efficient energy improvement projects around the country. Anne Arundel County was among the first of what are now 11 Maryland jurisdictions that have authorized PACE, and Maryland is among 19 states and the District of Columbia that have active PACE lending programs.

The arrangement aims to encourage energy-saving investments that otherwise wouldn’t happen because the loans are considered too risky by lenders or charge interest rates too high for borrowers to handle. Folding project costs into property tax bills gives lenders much stronger legal footing to go after delinquent borrowers, and that security allows them to charge lower interest rates over longer periods — about 6 percent over 20 years, for example.

Read more (The Baltimore Sun)

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