PACE (Property Assessed Clean Energy) is a simple and effective way to finance energy efficiency, renewable energy, and water conservation upgrades to buildings. PACE can pay for new heating and cooling systems, lighting improvements, solar panels, water pumps, insulation, and more for almost any property – homes, commercial, industrial, non-profit, and agricultural.
Property owners across the US are using PACE because it lowers utility bills and may make their buildings more valuable. PACE pays for 100% of a project’s costs and is repaid for up to 20 years with an assessment added to the property’s tax bill. PACE financing may stay with the building upon sale and is easy to share with tenants. State and local governments sponsor PACE financing to create jobs, promote economic development, and protect the environment.
1. Payments are tax deductible
2. High Product Standards
3. Flexible terms and fixed rates
4.Longer terms than traditional energy financing
5. Prime Interest rates with longer terms equal lower Monthly Payments
How PACE works?
The process of securing PACE funding takes approximately two months and requires the following analysis and approvals:
Mortgage Lender Consent – The senior lender on the property is required to sign a consent form agreeing to placement of an additional assessment on the property.
Energy Engineering Report – This report is required by the district and the PACE lender. The key components of the report are the Savings to Investment Ratio (SIR) and the weighted average useful life of the PACE funded measures. The weighted average useful life must be greater than or equal to the term of the assessment, and the savings generated by those measures over that term must be greater than the upfront investment.
District Approval –Each municipality selects a third party PACE administrator. The administrator must review each application to ensure they meet the intent of the PACE legislation and oversee the process of placing the assessment placed on the property tax bill, collecting and remitting payments to the PACE lender.
Financial Underwriting & Term Sheet Negotiation – The underwriting process for PACE is different than that of a mortgage. There are no personal guarantees, the primary focus on loan to value ratios (less emphasis on DSCR and the annual assessment amount as a percentage of property value). PACE terms typically include annual payments, the ability to capitalize 1-‐2 years of payments, and a fixed rate fully amortized payment. Because PACE lenders are focused on long term deals, pre-‐payment penalties are normal.