Utah Relaunches Statewide Commercial PACE Program
The state has updated its building modernization program to follow nationwide best practices to maximize opportunities for energy efficient upgrades.
Utah launched its statewide C-PACE program in 2015 after passing legislation enabling commercial PACE in March 2013. Senate Bill 221 authorized local governments to adopt C-PACE financing programs, which offered commercial and industrial property owners a unique mechanism to finance energy efficiency, renewable energy, and water efficiency improvements to their buildings.
Senate Bill 273, enacted in March 2017, amends the earlier legislation by* expanding the scope of eligible projects, establishing a statewide C-PACE District, and more clearly defining the process of developing and closing projects.
In this updated program, financing is provided by private capital providers in an open market and repaid through a voluntary assessment on the owner's property tax bill over a period of up to 30 years. Because the affordable, long-term financing covers 100 percent of a building modernization project's cost and requires no money down, C-PACE enables building owners to make substantial upgrades to their buildings.
Typically, the project's energy savings outweigh the PACE payments, creating positive cash flow for the building owner, whose modernized building is also more valuable after a C-PACE project.
Brian McCarter, chief executive officer of Sustainable Real Estate Solutions, announced that the company will serve as program administrator for Utah's updated commercial property assessed clean energy (C-PACE) program. The Utah Governor's Office of Energy Development (OED), which manages the program, selected SRS after conducting a competitive search process for a third-party firm to provide program administration services.
In Utah, and in many other states, C-PACE is also available to real estate developers who design and construct buildings that are more energy efficient than what is required by building code; the financing can reduce an owner's equity contribution or replace other high-cost financing required to develop commercial buildings.
"We are pleased that Utah will continue to realize the economic benefits of C-PACE through new investment and job opportunities, energy savings, and improved air quality," said Laura Nelson, PhD, the governor's energy advisor and executive director of OED. "With SRS's extensive success in administering C-PACE programs nationwide, we are confident that our partnership will create a robust program locally that leverages market-based approaches to energy financing, and capitalizes on best practices throughout the country."
"SRS is thrilled to partner with OED to bring the state's relaunched C-PACE program to Utahns," said Brian McCarter, CEO of SRS. "Now that the state's legislation has been right-structured to meet C-PACE program best practices, Utah's second-generation program, like other successful programs nationwide, will enjoy a robust pipeline of projects. This means more valuable building stock and more local jobs—all benefits that will come about without taxpayer dollars."
C-PACE is an attractive option for building owners seeking to upgrade their buildings with new, energy-efficient equipment. For developers planning new buildings, C-PACE provides a major financial incentive to design buildings "above code," which leads to significant operational cost savings as well as improved thermal comfort and indoor air quality. In a C-PACE transaction, local banks or specialty private capital firms provide long-term, fixed-rate financing that covers 100 percent of the project cost.
Eligible properties include commercial, industrial, manufacturing, mining, professional, private/public club, agriculture, lodging, retail, non-profit, and residential housing properties with more than four units. In well-designed projects, the energy cost savings exceed the finance payments. For new buildings that are designed to exceed the current building code, C-PACE generally finances 15–20 percent of the total construction cost. C-PACE financings do not require personal guarantees from the building owner.
Repayment of the C-PACE assessment can be managed by the county's property tax billing and collection system, similar to a sewer assessment. Alternatively, in Utah, the building owner can repay the capital provider directly. When a property is sold, the C-PACE assessment can transfer to the new owner.
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