HOW PACE WORKS
Commercial property assessed clean energy (C-PACE) programs exist in several states, regions, and local governments. Programs vary across several dimensions including the level of organization (statewide vs. local programs), financing structures, and eligible measures. As of early 2017, more than 30 states plus the District of Columbia have commercial PACE enabling legislation and approximately $400 million in projects have been financed with commercial PACE.
What buildings are eligible?
Eligible buildings include commercial, industrial, agricultural, and non-profit* properties. The only ineligible buildings are state and local government buildings. *Though non-profits don’t pay property taxes they can choose to assess themselves; assessments are billed at the same time as property taxes.
How is repayment managed? Why is the county involved?
In South Dakota, property assessments are conducted at the county level who send out property tax bills. When you receive and pay your property taxes plus PACE assessment, the PACE assessment portion will be remitted by the county to the lender.
Counties participate because it's a win-win for their economic development goals. When property owners reduce their utility costs, they have more disposable income and recirculate that money in the community. Moreover, the upgrades put local contractors and installers to work.
To enable these economic benefits, the county creates a county-wide district and places voluntary assessments on individual parcels of property, and facilitates repayment between private property owners and private capital providers on property taxes, similar to other types of special assessments and Special Improvement Districts. This is a tried-and-true financing method.
Do I have to pay for my neighbor’s upgrades?
No, you would not be responsible for a PACE assessment if you choose not to participate. This is one key difference from Special Improvement Districts.
What is a property assessment?
A property assessment and other special assessments place a lien against a property, meaning the lender has the right to foreclose if you don’t repay. The property assessment mechanism, with the state and county’s involvement, is critical to PACE because they are stable and low-risk investments.
Banks and private investors are more willing to invest in a special assessment and finance at low interest rates than they might be in giving a loan to an individual or business. The investor is not loaning to you based on your assets, they are financing improvements to the property because the property is their collateral.