PACE

PACE is an acronym for Property Assessed Clean Energy. PACE legislation allows building improvements that result in utility savings to be funded by private capital and repaid via long-term tax assessments.

The mechanism for funding PACE is similar to the way public items such as firehouses and sewers are funded. The costs of those items are passed on to the public and repaid via tax assessments.

With PACE, property owners finance the up-front cost of energy or other eligible improvements on a property and then pay the costs back over time through a voluntary assessment. Eligible improvements include energy efficient improvements such as HVAC, elevators, lighting, solar, plumbing, windows, building insulation and roofing. In some states, PACE can be used to fund a portion of new construction projects if the building owner agrees to build the new structure to exceed the local energy code. PACE can be used to finance nearly all property types, including industrial, retail, office, hospitality and multifamily projects.

Property owners that participate in PACE programs repay their improvement costs over a set period, typically 10 to 20 years.

Typically, the PACE funding is disbursed to the property owner. The property owner then pays contractors to perform the work. Later, the property owner pays the money back via annual assessments on their tax bills. The local taxing jurisdiction then remits the payments that they receive to the PACE equity investors that provided the initial capital. PACE is only available in certain locations where state and local laws have approved PACE financing.