What is PACE financing?
Property Assessed Clean Energy (PACE) financing is a mechanism by which communities can choose to give commercial and industrial property owners another tool to finance energy efficiency, renewable energy, water-saving upgrades and electric vehicle infrastructure on their property. Illinois Governor Bruce Rauner signed House Bill 2831 allowing PACE financing for commercial, industrial, and multi-unit residential properties in Illinois. This law will create a new path for energy efficiency and renewable advancements in Illinois by allowing property owners to pay for clean energy improvements through a voluntary assessment on their property.
Under the Illinois PACE law, a local government may create a financing program and a property owner may choose to participate. Commercial and industrial property owners interested in the program can sign up to be a part of it, and the municipality or county arranges for the payment of the upgrades, either through traditional muni bonds or conduit bonds with a third-party financier.
*Administrative costs for the program are recovered through program participants, so the program is cost-neutral to the municipality and has no cost to other non-participating property owners.*
PACE is attractive to local governments because it provides a service for local property owners and increases property values.
For building owners, PACE is a good deal for three reasons:
- PACE can offer attractive financing rates
- PACE-supported energy efficiency and solar improvements can increase building values
- PACE project can reduce a building’s energy costs and achieve quick payback in energy savings
Who is Eligible?
Once a local government has created a PACE program, owners of commercial and industrial properties and large-scale multi-family buildings (5 units or more) may participate. Condominium associations, however, are excluded. Various protections for property owners have been added, including:
- Existing mortgage holders must sign-off on any PACE loan. This provision eliminates the concern previously held by many of the banks and credit unions.
- The building owner must sign-off on all completed projects, and all projects must be done by qualified contractors.
- PACE loans are limited to 25% of the assessed or appraised value, whichever is greater.