Commercial Property Assessment Capital Expenditure (C-PACE) is a financing mechanism that allows commercial property owners the opportunity to access low-cost, long-term financing for qualifying energy efficiency, water conservation, renewable energy, and resiliency improvements to their properties. Financing for improvements comes from lenders but is repaid through a special tax assessment over time. C-PACE can make financing more affordable.
This financing tool has been available in 40 states (including Virginia) and is now being activated in North Carolina. Economic developers should learn about the program and how it can be used to support existing business expansions and new company locations.
We had a Q&A session with strategic ally Bob Jessup with Sanford Holshouser Lawyers and Advisors to learn more about C-PACE. You can reach Bob with your questions at [email protected].
Why should economic developers be interested in C-PACE?
Economic developers should be interested because C-PACE will provide their clients with new financing opportunities designed for projects that can be hard to finance otherwise – specifically, for energy efficiency and sustainability improvements – and do so on terms that may well be more attractive to the business than conventional financing. Whether a client is renovating a building for a new use, or just wants to upgrade an existing facility, C-PACE financing can make that process easier and more affordable. This can enhance the viability of an existing business or facilitate a new business location, or will at least add taxable value to an existing building.
What needs to happen for economic developers to be able to use this tool in their community?
The first step is to identify a project that could benefit, whether you find one on your own or one comes to you. The tool doesn’t stand alone, it only works with a project. Once you have a project, then your County Board and the elected board of any involved municipality has to adopt a resolution stating a willingness to participate and approving the particular financing. From there, the Economic Development Partnership of North Carolina has prepared a very useful “toolkit” of document forms that will take the local governments through the process. EDPNC ultimately has to approve a project for C-PACE financing. The toolkit does not, however, include any agreement between the benefiting business and the business’s lender. The business must find its own source of funding – this isn’t financing provided by the local government. Then, the particular terms of the financing – the amount, the term, the interest rate and other terms – are strictly between the business and the lender.
What types of projects will qualify?
You have buildings that qualify, and then improvements that qualify. As for buildings, it’s any privately owned commercial, industrial or agricultural real property, or any privately owned residential real property with five or more dwelling units. “Privately owned” includes ownership by nonprofit, charitable or religious organizations. Then the law includes a broad list of qualifying improvements. These include energy efficiency measures, resiliency measures, renewable energy measures and water conservation measures. Think of HVAC upgrades, installations of new water efficient toilets and faucets, new solar panels, installations of new high efficiency heat pumps, and the list goes on. In each case, EDPNC has to approve the planned improvements as within the terms of the statute.
Can you give a couple of examples of how the program has been used in other states?
C-PACE has been used effectively by both large corporate businesses and small local business alike, for over $9 billion in investment and thousands of individual cases across the country. Ingham County, Michigan, for example, has used C-PACE financing to successfully bring in multiple large Hyatt hotels. Hotel retrofits are especially suitable for C-PACE financing since so many of the different components are eligible. C-PACE financing can cover up to 35% of the post-improvement value of the property. In Missouri, local developers were able to retrofit a vacant, dilapidated office building. Using C-PACE financing, they will fund over $3 million in improvements over a 20-year financing term while also bringing the building well past the current energy efficiency legal requirements.
If you were an economic developer, what are the key points you would communicate to elected officials to gain support for C-PACE?
C-PACE, first and foremost, makes investment in your community more attractive. The ability for more projects to be undertaken benefits everyone involved. Many eligible projects will also lead to improved air quality and increased building resilience against natural disasters, protecting the involved communities. Finally, there’s no downside. Since no taxpayer dollars are used at any point in the process, there’s no risk to the local government if anything goes wrong.
In addition to you and your firm, where can economic developers go to learn more?
While we’d love to answer any questions you may have, the C-PACE Alliance and PACE Nation have tons of great information and resources for developers and local government decision makers alike.
You can reach Bob with your C-PACE questions at [email protected], 919-933-9891, shlawgroup.com.