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 (firstname.lastname@example.org) if you have any questions, or if you would like to schedule a meeting or call.
The Virginia Energy Efficiency Council recently held our latest Commercial Property Assessed Clean Energy, or PACE, Lunch + Learn for Fairfax County and surrounding areas. With an audience of approximately 70 contractors, developers, property owners, lenders, and government officials, this was our largest PACE Lunch + Learn event to-date. The Great Falls Group of the Virginia Sierra Club co-hosted the event, and sponsors included Petros PACE Finance (event sponsor) and John Marshall Bank- Tysons Corner Region (lunch and networking sponsor).
The following speakers provided attendees with an overview of Commercial PACE, including its status across the Commonwealth, case studies, and its value proposition for the area, as well as the development and status of Arlington County’s PACE program:
- Abigail Johnson, President, Abacus Property Solutions and Atlantic PACE
- Cliff Kellogg, Vice President of Strategic Initiatives, Petros PACE Finance
- Richard Dooley, Community Energy Coordinator, Arlington County
The timing of this event allowed speakers to update guests on the recent PACE advances in the Commonwealth:
On November 18th, the Arlington County Board approved the County’s PACE ordinance, thus making Arlington the first locality in Virginia to offer a PACE program. Sustainable Real Estate Solutions, or SRS, will serve as the County’s program administrator in charge of outreach and education, project underwriting, and quality assurance. The program is expected to launch this month, and the County is holding a PACE training for contractors on December 12th.
In October, Loudoun County’s Finance Committee forwarded a resolution to adopt a PACE program to the full Board for discussion. The Board will be reviewing this resolution at their January 18th meeting.
- Virginia Model Ordinance and Regional Guidelines will become available in January 2018.
The VAEEC is working with our partners to create a PACE model ordinance, which will help jurisdictions looking to develop their own PACE program. The ordinance will define the roles of all key parties (program administrator, jurisdiction, property owner, and lender), list qualifying improvements, specify how PACE works, and provide a cooperative procurement rider.
As a part of the Mid-Atlantic PACE Alliance, or MAPA, the VAEEC is working with partners across Virginia, Maryland, and DC to develop regional PACE program guidelines. These guidelines will include: project eligibility standards; the process for a typical PACE project; a suite of template documents; and application requirements. The guidelines will help provide consistency of design, administration, and documents within the Mid-Atlantic region while encouraging standardization and transparency.
The Fairfax County Lunch + Learn Presentation and C-PACE Resources document are available to view and download. Visit the VAEEC’s PACE webpage or contact Jessica Greene (email@example.com) to learn more about PACE and its status 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.
– 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
– 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.
– 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
– 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
|Purpose: HVAC and Lighting
||Purpose: HVAC and Lighting
|Project Cost: $100,000
||Project Cost: $100,000
25% upfront cash investment required
$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.
Last week VAEEC participated in the first Mid-Atlantic PACE Alliance (MAPA) kick-off meeting in northern Virginia. MAPA is the result of an U.S. Department of Energy grant to support the development, implementation, and utilization of Commercial Property Assessed Clean Energy (C-PACE) programs throughout Virginia, Maryland, and Washington, D.C. The Virginia Department of Mines, Minerals and Energy is leading this effort between private and public stakeholders to develop and promote best practices, which will make the development of PACE programs more effective and will accelerate the growth of C-PACE programs throughout the region.
Educating stakeholders and standardizing templates and models are two key focuses of the MAPA team. Partners will use grant money to educate primary stakeholders (localities, property owners, lenders and borrowers, and contractors) about PACE. The second focus is to develop streamlined, consistent practices that will propel the adoption of PACE across Virginia while supporting the expansion of existing programs in Maryland and Washington, D.C. This includes the creation of consistent, cost-effective practices for program administration, drafting ordinances, financial underwriting guidelines, measurement and verification requirements, contractor training, and overall support.
This grant will enhance the work the VAEEC is already doing to further promote and advance PACE throughout the Commonwealth.
Click here to learn more about MAPA and here to read a copy of Governor McAuliffe’s press release about the grant.
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)
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)
The Virginia Energy Efficiency Council is diligently working to build a coalition of support for Property Assessed Clean Energy financing, or PACE, and to provide guidance and resources to localities interested in developing PACE programs. To assist with this effort, VAEEC has initiated a series of events across the Commonwealth suitably called “PACE Lunch + Learns”. Each event is open to anyone interested in learning more about PACE; however, these events target commercial property owners, contractors, lenders, and local government officials. Knowledgeable speakers from the field will provide attendees with information on PACE and answer PACE-related questions. VAEEC is teaming up with different sponsors to host the events and provide a complimentary lunch to all in attendance.
On Monday, December 5, VAEEC and Williams Mullen kicked off the first Lunch + Learn for the Hampton Roads/Norfolk area with a diverse group of nearly 30 people in attendance. Speakers included Abby Johnson, Bill Nusbaum, and Rich Dooley. Abby Johnson is the President and founder of Abacus Property Solutions, an independent real estate advisory firm. Abacus provides PACE project development and consulting and works with capital partners to identify PACE opportunities and develop PACE programs. Bill Nusbaum is an attorney with Williams Mullen, a full-service law firm, which is a key stakeholder in developing PACE financial underwriting guidelines with the Department of Mines, Minerals and Energy along with Abacus and VAEEC. Rich Dooley is the Community Energy Coordinator with Arlington Initiative to Rethink Energy (AIRE) in Arlington County. AIRE’s goal is to cut greenhouse gas emissions from County operations. Arlington County is the first locality in the Commonwealth on track to develop a PACE program.
The presentation provided a wealth of knowledge for all in attendance as it covered many different aspects of PACE. Here are my key take-aways:
- PACE provides a win-win opportunity for property owners, contractors, localities, and lenders. Through PACE financing, commercial and multifamily property owners can receive 100% project funding for energy efficiency, renewable energy, and water conservation upgrades. The loan is paid back as a line item on the property tax bill, and in most cases, the utility savings from the funded projects cover the costs of the loan. Additionally, as a senior lien status, PACE assessments stay with the property upon sale.
- Contractors benefit from PACE through increased sales volume and improved profit margin. By helping customers reduce costs and improve the value of their property, customers are able to spend more on additional building improvements.
- PACE spurs economic development within localities. Not only does PACE provides jobs, it improves building stock and increases property values, which produces more revenue for the jurisdiction. PACE serves as a redevelopment tool for older buildings at little to no cost to the locality; third party providers carry the cost of starting and maintaining the program. Furthermore, PACE helps decrease a locality’s carbon footprint.
- Based on the types of questions posed by the audience, the advantages of PACE to lenders is perhaps the hardest to grasp. In order for a PACE program to be full-fledged and offer the most benefits to all parties involved, the existing mortgage holder must consent to allow PACE to take senior lien status. However, PACE is still beneficial to lenders because it increases the value of their collateral. Moreover, PACE improves a property’s net operating income (through reduced utility bills), and the project is cash flow positive (the loan payment is typically less than the energy savings). In fact, over 200 lenders nationwide have already consented to make their mortgage junior lien status because they recognize these benefits.
- Arlington County is on track to become the first locality within the state to develop a PACE program. Other localities, such as Norfolk, the City of Fairfax, and Richmond have expressed interest in developing PACE programs.
- To facilitate interest in and garner support for PACE, Arlington engaged with the real estate community and coordinated with the private sector and several County departments. By building a relationship with these groups, there was enough interest in PACE to begin developing a program. Currently, Arlington is in the midst of finalizing a Program Administrator. The program is on track to launch in early 2017.
Our next PACE Lunch + Learn is scheduled for Tuesday, January 31 in Ashland. Stay tuned for a Lunch + Learn event in your area.