By Amanda Mathieu
Property managers and owners know that the more energy efficient the building, the lower the utility costs and the greater the income. Further, energy efficient properties are good for the environment. But taking advantage of long-term gains takes near-term money. Given the high costs, few banks are willing to provide loans specifically for energy renovations.
Property Assessed Clean Energy (PACE) financing is a private and public sector method for raising capital that can be loaned to property owners to cover the cost of projects like solar panel installation, insulation retrofitting, heating systems upgrades or other investments that will make a building more efficient.
For a PACE program to be implemented, a state must pass special legislation under which its local governments, such as cities and counties, can launch or join a PACE district. Each district is then able to create district-specific guidelines regarding what property improvements they’ll finance. PACE financing can take two forms: municipal bonds or private loans.
After securing PACE financing, a building owner accepts a tax assessment on the property for up to twenty years and uses this special assessment to repay the loan. As of February 2013, sixteen Commercial PACE programs in seven states had been established. Additional states are contemplating PACE legislation as well.