Commercial PACE Financing Keeping Pace

paceProperty Assisted Clean Energy (PACE) loan structures enable a wide range of renewable and energy efficiency projects. They are a recent innovation in which loans from third parties are repaid as line items on the owner’s property tax bill. A PACE loan, like a mortgage, stays with the property and moves from seller to buyer when it is sold.

There has been news on the commercial PACE front. Late last month, several groups — the Wisconsin Counties Association, the League of Wisconsin Municipalities, Green Tier Legacy Communities, the Wisconsin State Energy Office, von Briesen & Roper and WECC – created the Wisconsin PACE Commission. That body subsequently formed PACE Wisconsin. The goal is to establish “an efficient and cost-effective solution for administering” commercial PACE activities. The program has been adopted by Eau Claire, La Crosse, Douglas, Dunn, Chippewa, Iowa, Jefferson, Fond du Lac, Sheboygan, and Washington counties.

Wisconsin clearly sees PACE as a sound platform to move its economy forward. “This partnership identified the Wisconsin PACE Commission as an opportunity to create a competitive advantage for Wisconsin communities to stimulate investment,” Kimberly Johnston, the Marketing Manager for PACE Wisconsin told Energy Manager Today. “The Commission invites local governments, businesses, and property owners to participate in this exciting new opportunity to make Wisconsin’s built environment and communities more economically and environmentally sustainable.”

Another place where things are looking up for commercial PACE is Hillsborough County, FL. Today, the Tampa Bay Times reported that the County Commission on November 16 voted unanimously to identify requirements for vendors interested in participating in a PACE program. If the program is created, it will be open to residential and commercial property owners.

A final piece of recent good news for commercial PACE is in Hartford, Connecticut. Financing from PACE lender Greenworks Lending was a key enabler of the transformation of a landmark – the Hartford National Bank Building at 777 Main Street – to a residential complex. C-PACE financing funded solar arrays and what Greenworks says is the first PACE-financed commercial microgrid in the country. The building has been awarded LEED Platinum certification.

Those all are good signs. Indirectly, the commercial PACE sector can take heart that the federal government released best practices for residential PACE financing. The document provides guidelines for the protection of consumers and lenders. The key is that anything that strengthens the program overall – even if it is aimed specifically at residential involvement – will buoy the commercial side as well.

There are clouds – or at least a level of uncertainty — on the PACE horizon as well. An ongoing issue concerning PACE financing structures is how things are handled when a property goes into foreclosure. The concern is that PACE lenders are able to jump to the head of the line to be paid. This has led mortgage companies to shy away from such arrangements.

Last month, National Mortgage News and The San Diego Business Journal posted commentary on the topic. The National Mortgage News piece suggests that things are handled differently on the commercial side, and that mortgage lenders often are asked for approval before PACE financing is used. The San Diego Business Journal commentary suggests that PACE lenders’ objections to other lenders being allowed to jump the line in foreclosure actions is a red herring. The mortgage companies, writes Chula Vista, CA, mayor Mary Casillas Salas, have their own green lending programs and may using the issue to hobble potential competitors.

At the end of the day, the biggest uncertainty in how PACE will evolve simply is that the incoming administration may have a different attitude than the Obama administration and not support the program in the same way.

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