Property Assessed Clean Energy (PACE)
PACE programs can help home and business owners pay for the upfront costs of green initiatives, which the property owner then pays back by property taxes increased by a set rate over about 20 years. While residential PACE programs are working through some procedural issues, commercial activities are beginning to expand. In areas with PACE legislation in place, municipal governments can offer a specific bond to investors and then turn around and loan the money to consumers and businesses to put towards energy retrofit projects. The loans are then repaid over the assigned term (typically 15 or 20 years) via an annual assessment on property tax bills. PACE bonds can be issued by municipal financing districts or finance companies, and the proceeds can be used to retrofit both commercial and residential properties. One of the most notable characteristics of PACE programs is that the loan is attached to the property rather than an individual.
How to Apply this Program
State legislation in required for this financing scheme. Current U.S. states with PACE legislation include Arizona, California, Colorado, Florida, Hawaii, Illinois, Louisiana, Maryland, Michigan, Missouri, Nevada, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Texas, Vermont, Virginia, and Wisconsin. For a city, PACE can play an important role in reducing local greenhouse gas emissions, promoting energy efficiency improvements in its buildings, making the shift to renewable sources of energy more affordable, and reducing energy costs for residents and businesses. PACE programs can also help to create jobs and thus spur local economic development if local installers and renewable energy companies partner with the program. It is also an opt-in program, so only those property owners who choose to participate are responsible for the costs of PACE financing.
EPA's Environmental Finance Website: https://www.epa.gov/envirofinance/contactus.html
GreenFinanceSF-Commercial officially launched on October 13, 2011, using the "open market" PACE model in which property owners can negotiate project financing, including the interest rate and repayment term, with qualified project lenders willing to fund their project. When a project is approved, the city sells a bond to the project lender, and the proceeds from the sale fund the project. A special tax is then levied on the property, which is collected through the property tax bill and paid back to the project lender. Other key features of PACE are that it provides for the option of amortizations longer than typical commercial loans, and the payment obligation can run with the property, not the owner. The program will assist in facilitating introductions between interested owners and qualified lenders. "GreenFinanceSF-Commercial is the next big step forward in San Francisco's efforts to dramatically reduce energy use and carbon emissions," said San Francisco Mayor Edwin Lee. "We are excited about the potential to unlock an enormous amount of private investment-from a wide range of sources-and create thousands of local construction jobs. As of today, we are open for business."