Property owners may, in most states, take advantage of the innovative Property Assessed Clean Energy (PACE) financing to finance upgrades and installation of energy-efficient systems, and renewable energy. PACE is a federal program initiated by the U.S. Department of Energy (DOE). Per the DOE, more than 35 states plus the District of Columbia have commercial PACE enabling legislation, and more than $800 million in projects have been financed. PACE provides financing for commercial and industrial properties, and in a few states (California, Florida, and Missouri), it also covers residential improvements. In this article, Denise Hamet, a creative and pragmatic community leader, discusses the PACE program, recent Ohio PACE projects, and opportunities for growth and efficient energy development through PACE financing.
What is PACE Financing?
The PACE program was launched by the DOE to provide incentives for energy development by allowing state and city governments to provide funding for energy improvements on properties that qualify under PACE guidelines. Local governments can make assessments to fund and finance these improvements.
PACE programs allow a property owner to finance the up-front cost of energy or other eligible improvements on a property and then pay the costs back over time through a voluntary assessment. The unique characteristic of PACE assessments is that the assessment is attached to the property rather than an individual. Financing is available for new construction as well as remediation and renovation of existing structures. PACE financing is available for a variety of energy-related projects, including installation of solar panels and boilers, LED lighting upgrades, energy-efficient reroofing, hurricane, and other disaster preparation improvements, and earthquake retrofitting.
A significant advantage of using PACE financing is that it preserves upfront cashflow while generating energy savings from the improvements and creating potential increases to property value. It is repaid to the local or state taxing authority through assessments added to annual property tax assessments over an extended time. It also transfers with the property rather than being tied to the owner. This reduces the concern that the payback period for energy efficiency might not be achieved prior to the sale or transfer of the property. Any outstanding assessments at the time of a property transfer are the responsibility of the new owner. Depending on the type and amount of financing, assessments to repay PACE loans typically range from 10 to 25 years. PACE assessments are subject to the same penalties and enforcement procedures as apply to unpaid property taxes.
PACE Financing in Ohio
Ohio law requires that PACE financing projects must take place within an Energy Special Improvement District (ESID), which is a public, nonprofit corporation chartered by the state. ESIDs have been used previously for many local public improvement projects.
PACE financing has been used for the renovation of the historic downtown Dayton Arcade, landmark commercial buildings that had been vacant and deteriorating for almost 30 years before financing. The redeveloped district will include over 330,000 square feet of redeveloped commercial, office, and residential space that uses state of the art energy efficiency construction and installation methods and materials.
In Cincinnati and Hamilton County, the Port and the Greater Cincinnati Energy Alliance have set up a partnership to market and administer the new GC-PACE program. The Alliance has years of experience in assisting local communities with assessment financing. Thus, it is well-positioned to qualify local development and project owners with energy-efficient PACE financing while working to assess and audit the energy savings and other benefits of the projects that can be covered with PACE financing.