PACE Financing Ready for the Green Light

Countdown time. After years of anticipation, PACE (Property Assessed Clean Energy), the government-sponsored financing program to help building owners pay for projects that reduce carbon emissions and lower energy usage, is getting ready to launch in New York City. “We’re finalizing the legal documentation for the loans with the Department of Finance and the Mayor’s office,” says Peter Erwin, an associate director at the New York City Energy Efficiency Corporation (NYCEEC), a local green bank. “Once that’s done, by summer at the latest, buildings can start applying.”

Prep steps. The process is fairly straightforward. Building owners must first complete an energy audit or a feasibility study. “All measures financed with a PACE loan must be supported by an ASHRAE (American Society of Heating, Refrigerating and Air-Conditioning Engineers) Level 2 or Level 3 energy audit,” says Elizabeth Kelly, Senior Policy Advisor at the NYC Mayor’s Office of Sustainability. Boards should also consult their current mortgage lender, since their consent is required to obtain a PACE loan.

Finding financing. The next step is selecting a pre-qualified PACE lender (a list of lenders will be made available on the NYC Accelerator website.) Eligible projects are required to have a Savings-to-Investment Ratio of 1.0 or greater, meaning that the value of all expected savings has to be greater than the total cost of the project; those savings are used to pay back the PACE loan. “The PACE program allows building owners to work with any pre-qualified lender they choose, which should drive down interest rates and fees,” says Kelly. 

Payment plan. Building owners do not have to start making payments on PACE loans until after the project is completed and up and running. Owners will pay off the loans semiannually on their property tax bill (it will appear as a line item). The term of the loan is typically as long as the lifetime of the installation – up to 20 or 30 years.