C-PACE finances EE improves for commercial and multifamily buildings
By now, many people in this industry have at least heard of Commercial Property Assessed Clean Energy, or C-PACE. Across the Mid-Atlantic region, VAEEC and other stakeholders, including the Mid-Atlantic PACE Alliance, or MAPA, have been working diligently to accelerate the implementation of C-PACE programs and projects. Through this work, over $50 million of C-PACE projects have been financed across the region since January 2017.
C-PACE is a voluntary special assessment that is added to a property’s real estate tax bill. It provides building owners with a means to finance energy efficiency, water conservation, renewable energy, stormwater management, and resiliency projects for new and existing commercial, industrial, multifamily (with five+ dwellings), and nonprofit properties.
C-PACE is more advantageous than traditional financing by providing 100% financing, no upfront cash investment, and immediate savings. In fact, many projects are cash-flow positive from day one.
Benefits of C-PACE
- Increased building value
- Reduced utility bills
- More comfortable space with improved air quality
- 100% financing: no upfront cash investment required
- Long-term loans up to 25+ years: lower annual payments, positive cash flow
- Repaid as a Special Assessment on the Real Estate Tax Bill
- Transferable: the loan stays with the property upon sale
- Non-accelerating
- Can fill a gap in the capital stack
- Contributes to economic development, local job creations, and improved public health
How C-PACE differs from traditional financing options
| Traditional Construction Loan | C-PACE Assessment |
| Purpose | HVAC and Lighting | HVAC and Lighting |
| Project Cost | $100,000 | $100,000 |
| Loan | $75,000
25% upfront cash investment required | $100,000
0% upfront investment required |
| Interest Rate | 5% | 6.25% |
| Term | 5 years, fully amortizing | 15 years, fully amortizing |
| Monthly Payment | $1,415 | $857 |
| Annual Payment | $16,984 | $10,290 |
What role does the lending community play?
Funding for C-PACE projects comes from private capital providers, including local, regional, and national banks and investors. Capital providers or lenders approve the financing eligibility and underwriting for the project. They even have the ability to act as the project originator and can assist the owner with obtaining mortgage holder consent.
How does C-PACE benefit the lending community?
- This fairly new financing mechanism provides lenders and capital providers with new funding opportunities.
- C-PACE provides a good fixed rate of return without the property owner needing to refinance or incur additional transaction costs.
- The ability to transfer the C-PACE assessment to a new owner upon sale provides the current owner with an incentive to make building improvements now.
How are mortgage lenders involved?
Since C-PACE is secured by a special assessment, a corresponding lien is placed on the property. This is similar to how localities fund public infrastructure projects, such as sewers. The assessment is senior to all commercial liens, including mortgages. Therefore, property owners must obtain consent from their mortgage lender before the project can be approved.
To date, over 200 mortgage lenders across the nation have consented to C-PACE assessments for a variety of reasons. In partnership with MAPA, VAEEC has put together a directory of mortgage lenders who have consented to C-PACE in the Mid-Atlantic region. If you are looking to utilize C-PACE financing, you can check this directory to see if your mortgage lender is on the list.
Don’t see your mortgage lender listed? MAPA has put together a guide highlighting the top six reasons a mortgage lender would consent to a C-PACE assessment. The Case for Lender Consent: A C-PACE guide for mortgage lenders & property owners is an excellent way to engage your property’s senior lender(s) to assess their receptiveness to C-PACE early on in the project.
Stay tuned to learn more! MAPA will be holding a webinar, Financing C-PACE with Regional and Local Lending Partners, in the near future.
Commercial Property Assessed Clean Energy (C-PACE) financing is most often used for energy efficiency upgrades to buildings, such as new lighting and HVAC systems. However, C-PACE can also be used to finance renewable energy systems in combination with energy efficiency improvements, or solely for renewable energy systems such as solar PV. Because C-PACE financing offers long loan terms (up to 30 years), it works advantageously in making PV systems pencil, reducing energy costs long term for building owners, and growing the distributed solar market. C-PACE allows a building owner to finance the purchase of the PV system and take advantage of the available Federal Investment Tax Credit.
The Mid-Atlantic PACE Alliance (MAPA) is offering a free webinar on May 26th. Our presenters will discuss the advantages of using C-PACE to finance rooftop solar PV systems, as well as provide case studies on how three different commercial buildings in the region were developed and financed.
Presenters:
• John Burns, Solar Developer for Taylor Street Storage Solar + Green Roof project in DC
• Paul Fuhrmann, Sustainable Energy Systems; Solar developer for Frederick Indoor Sports Complex and Bar-T Ranch projects in MD
• Michele Pitale, M.D., Counterpointe Sustainable Real Estate
• Moderator: Abby Johnson, Virginia PACE Authority
Register today!
Over the past three years, Commercial Property Assessed Clean Energy, or C-PACE, has made significant headway in the Mid-Atlantic region. Localities are putting programs into place, projects have been completed from small retrofits to new buildings, and new legislation has been passed. This webinar will explore these advances with an emphasis on the Commonwealth of Virginia. Additionally, speakers will provide insight into the progress we can expect in the upcoming year.
Speakers include Daniel Farrell (VA Dept. of Mines, Minerals and Energy), Jessica Greene (VAEEC), and Abigail Johnson (Virginia PACE Authority).
Register here.
Thank you Mid-Atlantic PACE Alliance (MAPA) for sponsoring this event.
We are excited to announce that there has been a lot of C-PACE movement in Virginia over the past couple of months. The summary below provides an overview of the key highlights. Stay tuned for more information coming soon as C-PACE momentum is building across the Commonwealth.
Attorney General Opinion
In response to a request from Loudoun County’s Attorney, the Virginia Office of the Attorney General issued an Advisory Opinion on the Commonwealth’s C-PACE law on February 1, 2019. The opinion clarifies two key issues: 1) local governments may authorize capital providers or third-party program administrators to perform billing and collecting of C-PACE loan payments, and 2) localities may assign rights to capital providers to record and enforce the voluntary special assessment liens that underlie C-PACE deals in the case of defaults. The full letter can be viewed here.
Loudoun County
Since the release of the Attorney General’s Advisory Opinion, Loudoun County has been moving ahead at full force. The Board of Supervisors approved the County’s ordinance on February 21st. Now the County is in the procurement process for a third-party program administrator. The RFP is in development and is currently on schedule to be released later this month.
Fairfax County
Back in January of this year, the VAEEC participated on the Fairfax County C-PACE Stakeholder Group to provide feedback on the County’s draft ordinance. Since the passage of SB 1559, the County plans to add resiliency measures to this ordinance, which is now scheduled to be considered by the Board of Supervisors on March 19th.
Hampton Roads
The Virginia Energy Efficiency Council partnered with the Hampton Roads Chamber of Commerce, the Mid-Atlantic PACE Alliance, Sustainable Real Estate Solutions (SRS), Viridiant, and the Virginia PACE Authority (VPA) to host a C-PACE workshop for the Hampton Roads region. This was one of our most attended C-PACE events to date, with over 50 people present. The room consisted of representatives from the Cities of Norfolk and Portsmouth, along with area developers, property owners, contractors, engineers, and architects.
Speakers included Abby Johnson (VPA), City Councilmember Andria McClellan (Norfolk), Jessica Greene (VAEEC), Rob McRaney (Viridiant), and Scott Dicke (SRS). Topics covered included the value proposition of C-PACE for the Hampton Roads region, a history of C-PACE in Virginia, program administration basics, case studies, and action steps to bring C-PACE to the area. The full presentation can be viewed here.
Along with spreading the word about C-PACE, participants were encouraged to contact their local officials to urge the adoption of a C-PACE program. This includes contacting city councilmembers via phone, email, or by submitting letters of support. The VAEEC has created template letters of support that interested property owners, developers, or contractors can use to send to their local officials. Over the course of the past few years, the VAEEC has seen how constituent support and outreach plays a critical role in getting localities to move forward with developing a program.
If you would like to submit a letter to your local officials, the templates can be found below. Contact Jessica Greene (jessica@vaeec.org) with any questions.
2019 General Assembly: passage of two C-PACE bills
Senate Bill 1559 (Sen. Lynwood Lewis) was introduced to amend the current Commercial Property Assessed Clean Energy (C-PACE) statute to add “shoreline resiliency” to the list of projects that can be financed using C-PACE. VAEEC members Abby Johnson of the Virginia PACE Authority and Attorney Bill Nusbaum, along with Cliff Kellogg, drafted proposed amendments to expand the bill’s reach to cover all resiliency improvements as well as stormwater management measures. State staff also contributed language modifying the stormwater management reference by adding “with a preference for natural or nature-based features and living shorelines”. Further amendments also clarified the language around the need for a local government to specify a “maximum aggregate dollar amount” financeable under a C-PACE program in a local ordinance. In the amended version, a cap on total dollars allowed by a program would only be required if public funds were utilized. By contrast, if a C-PACE project were privately financed, then only a total project cap would be needed. The House approved the bill 99-0, and it was signed by the President of the Senate on February 22nd as SB1559ER.
Senate Bill 1400 (Sen. J. Chapman Petersen) was introduced to add stormwater management to the list of projects that could be financed using C-PACE. Initially, this bill also authorized localities to establish Residential Property Assessed Clean Energy (R-PACE) financing; however, this language was stricken from the bill. By February 20th, the bill unanimously passed the House and the Senate to allow for C-PACE financing of stormwater management.
Both bills are now headed to the Governor’s desk for signature, and the new amendments will become effective on July 1, 2019. We hope that by making financing of resiliency and stormwater improvements available, more localities will adopt a C-PACE ordinance, thus making energy saving and renewable energy benefits of C-PACE more broadly available across Virginia.
We are excited to see such progress happening within these past few months and look forward to seeing more C-PACE programs come online across Virginia. For more information about C-PACE, check out our webpage, vaeec.org/PACE.
What is C-PACE and how can it benefit developers and building owners in Hampton Roads?
Join VAEEC, Viridiant, the Hampton Roads Chamber, and the Mid-Atlantic PACE Alliance to hear the latest developments on Commercial Property Assessed Clean Energy (C-PACE). Featured speakers and guests will review available C-PACE options, discuss the needs of the Hampton Roads area, and outline next steps in moving C-PACE forward in the Hampton Roads area.
Lunch will be provided. Register here.
There has been an increase in C-PACE activity and progress across the Commonwealth in the past few months, including several localities taking steps to enact their own program. Learn about these updates and resources by reading below, or by listening to a recording of our September webinar, C-PACE in Virginia: Resources Available to Localities.
Localities Moving Forward
Arlington County: The pipeline of projects is growing, and in a milestone for the program one was recently reviewed with capital providers to determine funding interest.
City of Fredericksburg: Staff is currently drafting a C-PACE ordinance, and a project is already in line to utilize C-PACE once a program is launched.
Fairfax County: In June, the Fairfax County Board of Supervisors Environmental Committee directed staff to write an ordinance. Staff will develop and submit a draft C-PACE ordinance to be considered by the Environmental Committee during their February 2019 meeting.
Loudoun County: Back in January of this year, the Loudoun County Board of Supervisors voted to direct staff to develop a C-PACE program structure, evaluate options for program administration, and draft an ordinance. In July, the Board reconvened and staff recommended the development of a C-PACE ordinance that would utilize a third-party program administrator for services such as billing and collection of loan payments and allow the County to enforce special assessment liens in the case of defaults.
Other localities looking to move forward with developing a C-PACE program include the cities of Alexandria, Charlottesville, Norfolk, and Roanoke, and the counties of Albemarle, Spotsylvania, and Stafford.
Resources Available to Virginia Localities
Several resources have been recently released to assist localities with the development of C-PACE programs, including case studies, model ordinances, program guidelines, and an RFP template.
Model Ordinances:
- Arlington County has their Ordinance posted to the Arlington C-PACE website for anyone to view.
- Earlier this year, the VAEEC released a Virginia Model Ordinance for localities to use. This document was commissioned following input and review from a wide variety of C-PACE experts and incorporates key factors we consider to be crucial to implementing an effective C-PACE program.
- The Virginia PACE Authority, or VPA, used the Virginia Model Ordinance to create an updated and abbreviate Ordinance that localities can use.
Mid-Atlantic PACE Alliance (MAPA) Resources and Regional Toolkit: MAPA has a variety of resources available on their website. This includes fact-sheets, such as What is C-PACE and Frequently Asked Questions. Additionally, there are several case studies highlighting projects in Washington D.C. and Maryland.
As part of its mission to accelerate the development and utilization of C-PACE in the Mid-Atlantic region, MAPA has released a Regional Toolkit. The toolkit provides best practices specific to this region and guidance and resources that streamline efforts to develop and launch a C-PACE program.
RFPs for Program Administration:
- A template has been created to help localities craft their Request for Proposals (RFP) for Program Administrator services.
- Along with several resources included on their website, Arlington County has the option for Virginia localities to ride their contract with their program administrator, SRS. This step eliminates the need for a locality to go through their own RFP process for a Program Administrator.
To learn more about C-PACE, be sure to check out vaeec.org/pace or contact Jessica Greene at jessica@vaeec.org.
The much anticipated MAPA Regional Toolkit has been released!
The Mid-Atlantic PACE Alliance, or MAPA, is comprised of state agencies, non-profit institutions, and private businesses working to accelerate the development and utilization of C-PACE in Virginia, Maryland, and DC. As part of their objective to accelerate the development and utilization of C-PACE programs within the tri-state area, MAPA developed a regional toolkit with feedback and input from C-PACE experts across the country.
The toolkit is a resource for stakeholders, including but not limited to local governments, program administrators, building owners, contractors, capital providers, and local lenders, providing best practices specific to this region. For localities, the provided guidance and resources streamline efforts to develop and launch a C-PACE program.
“[The toolkit] includes guidance on program development, financial underwriting, technical project criteria, sample program documents, and a model ordinance developed by the Virginia Energy Efficiency Council (VAEEC). This section also includes information on Arlington County’s C-PACE program, the first active C-PACE program in Virginia which launched in January 2018.”
With C-PACE still relatively new in Virginia, there is still a need for materials that will help stakeholders better understand the benefits of the program. Therefore, along with program guidance for interested localities, the toolkit also includes marketing information and resources. These materials help educate stakeholders in an effort to build support for and to promote C-PACE.
As many of you know, the VAEEC has been carrying out outreach and education to Virginia localities for just shy of two years now. We have encountered countless city and county staff and representatives who have been anticipating the release of this toolkit. With a section completely devoted to setting up a program in Virginia, we believe this toolkit will prove itself to be a vital resource to getting additional C-PACE programs up and running throughout the Commonwealth. We welcome the opportunity to meet with any stakeholder interested in C-PACE.
Contact Jessica Greene (jessica@vaeec.org) if you have any questions, or if you would like to schedule a meeting or call.
The Mount Vernon Group of the Sierra Club and the Virginia Energy Efficiency Council are hosting a free Commercial Property Assessed Clean Energy (C-PACE) breakfast information session for businesses and government officials in the City of Alexandria and surrounding areas. We encourage anyone interested in learning more about C-PACE to attend this event. Virginia-based subject matter experts will provide attendees with an overview of C-PACE financing and will be available to answer questions. Come enjoy complimentary pastries and coffee and learn about all C-PACE has to offer.
A special thank you to our event sponsor, Petros PACE Finance, for making this event possible.
Register by Friday, May 25th. All questions can be sent to events@vaeec.org.
Agenda
8:30 – 9:00 AM: Light Breakfast and Networking
9:00 – 9:10 AM: Welcome and Introductions
9:10 – 9:30 AM: C-PACE Overview, Status in Virginia, and Value Proposition for the Area
ABIGAIL JOHNSON, President, Abacus Property Solutions and Atlantic PACE
9:30 AM – 9:45 AM: Development of C-PACE in Arlington County
RICH DOOLEY, Community Energy Coordinator, Arlington County, VA
9:45 – 10:30: Projects and Opportunities Panel
CLIFF KELLOGG, C-PACE Alliance; KEITH DERRINGTON, Recurrent Innovative Solutions; Moderated by JIM KAPSIS, Chair, Alexandria Environmental Policy Commission & Founder, Ad Hoc Group, Inc.
10:30 – 10:45 AM: Questions and Networking
Join us on September 12th as we host a Commercial Property Assessed Clean Energy updates webinar.
We will briefly cover the progress of C-PACE across the Commonwealth before diving into several resources that have recently been released. These resources, which include the Virginia Model Ordinance, the MAPA Regional Toolkit, and a template RFP, were developed to assist localities with program development by reducing the amount of time needed to launch a program.
Speakers Jessica Greene (VAEEC) and Abby Johnson (Abacus Property Solutions) will walk participants through using these resources. Time will be reserved at the end for questions.
This webinar is free and open to all. Registration is required.
