Seton Medical Center, Daly City, California broke records this month when its $40-million-dollar seismic retrofit became the largest building-improvement project in history to be financed through PACE or Property Assessed Clean Energy. This financial tool is usually equated with energy and water conservation projects, however some cities in California and Oregon have added structural retrofits that help buildings withstand earthquakes to their list of PACE-eligible projects. Similarly, PACE programs in Florida have extended eligibility to projects that strengthen structures against hurricanes. Why? It's all in the name of increasing the long-term resiliency of building stock and creating safer communities. In Seton Medical's case, the project met the earthquake retrofitting requirements mandated by California's Hospital Facilities Seismic Safety Act.

 

Regardless of the type of retrofit, as more home and commercial building owners realize the value of energy-efficient and structurally-sound real estate and more cities begin to mandate retrofits, costs can run thousands to millions of dollars. What's a property owner to do? Some hike rents, while others hope for state tax credits to come into play. A growing number turn to a PACE program, which can provide up to 100% of the cost for eligible improvement projects on commercial, non-profit, and residential real estate. Property owners enjoy a payback period of 20 to 30 years without the dread of upfront, out-of-pocket expenses that can be a deal-breaker for pursuing upgrades. When it comes to efficiency projects, they also enjoy energy savings that typically exceed assessment payments. Ultimately, PACE participants reap higher-value buildings with improvements that lower the cost of living and/or doing business. For the Seton Medical Center project, long-term financing through CaliforniaFIRST PACE (C-PACE) covered 100% of the cost for the owner, Verity Health Systems. Payback will take place over 30 years, with a fixed interest rate, as part of the structure's property tax bill.

 

WHAT'S GONNA WORK? TEAM WORK! The Seton Medical Center retrofit was notable for more than its price tag. While Renew Financial acted as administrator for the project, CleanFund Commercial PACE Capital and Petros PACE Finance each provided $20 million, marking the first time two competitors co-financed such a deal. The hope is that such a relationship can set precedence for more ambitious projects by breaking down barriers and encouraging group efforts to promote a green economy and protect our environment.

 

SETTING THE PACE. While PACE is a nation-wide initiative, programs are grown at the local level where financing structures vary, with many privately funded. PACE programs have...

 

Scientific American named PACE one of the "top 20 ideas that can change the world." And why not? Currently, 19 states throughout the U.S. hold functioning programs, with PACE-enabling legislation active in 33 states. That's a lot of opportunity to create jobs, promote economic development, and protect the environment via meeting emissions-reduction goals. At its core, PACE is all about promoting a green economy and its bi-partisan popularity has only grown. Unfortunately, a bill has been introduced that would require PACE financing to be subject to, among other criteria, restrictions on how local governments use property tax assessments and municipal bonds for PACE programs. PACE financing would be treated as a mortgage loan and local contractors would have to become mortgage brokers. Those supporting this bill, The PACE Act of 2017, claim it's all in the name of consumer protection, except that PACE backers have already acknowledged the need for more protective legislation and have moved forward in securing it. According to PACENation, the attack on this innovative tool for growing a green economy would, in effect, kill PACE. For more information, visit PACENation's page on stopping the bill. 

At BPE, we would love to see PACE flourish, rather than succumb to new rules that seem geared to appeasing the mortgage industry, which must be incensed over being bypassed for energy-efficient home improvements. It's understandable for an industry to want to protect itself financially. However, PACE offers the opportunity to strengthen the green economy, and that will benefit us all. Sometimes, you've got to shake things up to make big things happen. We believe that, in many cases, the only thing stopping people from upgrading to less expensive, more efficient, and healthier building tech is know-how and finances. At BPE, we've got the know-how, but PACE offers fiscal solutions for getting it done. To discover the status of PACE in your neck of the woods, visit the map at PACENation. Help pass PACE legislation in your state or start a program in a PACE-enabled state.