Community PACE is PACE for all. It’s a unique nonprofit approach to financing clean energy improvements for property owners.
What is PACE, you ask? It stands for “Property Assessed Clean Energy,” and it’s the best (and usually cheapest) way to finance energy efficiency and renewables such as geothermal and solar.
If you’re looking for this kind of financing, or simply interested in learning more, you’ve come to the right place. This is your source for information, connections, and funding for your projects
Understanding PACE
PACE is often a little difficult to grasp because most people aren’t familiar with “special assessments,” and because a lot of things about finance are complicated. Members of the Community PACE have been involved with the PACE industry for a number of years, and can make it easily grasped and just as easily implemented.
Essentially, PACE involves financing clean energy upgrades for property owners the way municipalities have always funded public projects—the money is borrowed from the market, the improvements are made, and the residents pay for them through small charges added to their regular property tax. These charges, for libraries, sidewalks, sewers, etc. are called “special assessments” because they’re added on to the regular assessment on the owner’s property, which is usually based on their “assessed” value.
What’s unique about PACE is that it applies to investments in individual properties. These investments are actually provided by the private sector, but they’re facilitated by the public sector because of the policy goals of reducing emissions from fossil fuels. When they become a special assessment, the investors know they will get paid back because it’s the municipality acting as the collector. Because people regularly pay their taxes, this significantly reduces the risk for the investor, which is why PACE lenders will go up to 30 years at low market rates—based on the assessed value of the property, not the credit or personal guarantee of the owner. Effectively, the repayment is attached to the property, so it doesn’t go away if the property changes hands.
PACE investors are typically insurance companies, pension funds, and other financial institutions, so they can keep their rates low because they’re looking for longterm stable returns. Here’s a quick video about the process: https://youtu.be/kPqO4QlTkDU?si=S9ytTurOsYz3gKa4.
This video talks about C-PACE, which stands for Commercial PACE, because in most states PACE is restricted to commercial properties—and in practice to the larger commercial properties. C-PACE lenders are always looking for larger projects (usually $500,000 or more, up to $80 or $100 million), because evaluating each project individually is time-consuming and costly. They just aren’t set up to handle hundred or thousands of smaller projects.
Why We Need Community PACE
This is where the other C-PACE, Community PACE, comes in. It’s designed to serve, initially, the small to medium-sized business owner who doesn’t need a $500,000 project. It’s designed to be delivered in association with the municipality or county, using local banks, credit unions, and CDFIs,* to offer standard small loans for standardized upgrades. Want to replace gas furnaces with a geothermal heat pump? Or put solar on the roof, tighten up the building, and install energy control systems to reduce waste? Community PACE can do this—painlessly and cost-effectively.
Now there’s something for the over 90% of commercial properties owned and operated by small businesses. These include small office buildings, small multifamily and multi-use buildings, small retail, farms, private schools, and so on. Ultimately it will make sense to extend the program to homeowners as well, though that requires a separate set of program standards.
Want to know more? This website lays out a prototypical Community PACE program, assuming a role for the County, several financial institutions, small business associations, and commercial property owners. The application process is a simple matter of checking the boxes, providing building square footage, current energy usage, anticipated savings, and a small number of other items. All completed projects will be inspected by the relevant building inspectors, who need to sign off that the work was done correctly. Property owners are responsible for monitoring their savings.
The program also needs to include a review process to ensure that costs are not inflated; indeed standard loan amounts may be established by the program to cover typical costs. Of course a lot of detail needs to be considered, but the essence of the program is simple — it’s to enable the majority of commercial property owners to take advantage of PACE.
For more in-depth information see our paper Issues & Answers-Community-PACE.
_________________________
*Community Development Finance Institutions