Last week (February 20, 2017) VAEEC participated in the first Mid-Atlantic PACE Alliance (MAPA) kick-off meeting in northern Virginia. MAPA is the result of a 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.
