Own a commercial property sorely in need of energy efficiency upgrades?
How about fully automated building controls, a better furnace, new windows, high efficiency lighting, HVAC upgrades and even a new roof?
After running the numbers, it seems clear that these improvements will more than pay for themselves. But what about financing them?
What’s needed is long-term financing that matches improved cash flow from the property, preserves any tax credits and can be paired easily with other financing.
That’s where an innovative state-supported financial tool being offered through the Colorado Energy Office comes into play. It’s available now to property owners in Pueblo County, and may come to El Paso County.
“Commercial Property Assessed Clean Energy (C-PACE) enables building owners to fund 100 [percent] of the cost of energy efficiency and water conservation improvements,” according to the program’s website.
“C-PACE long-term financing (up to 20 years) enables cash flow positive projects with no upfront capital outlay. Owners repay the cost of eligible improvements over a period of up to 20 years through an additional charge (‘assessment’) on their property tax bill (similar to a sewer assessment).
“The resulting energy savings typically outweigh the annual assessment payment thereby enabling cash flow positive projects. Because the assessment is tied to the property, the repayment obligation automatically transfers to the next owner if the property is sold.”
In other words, business owners get long-term fully assumable 100 percent financing with no personal guarantees, and retain all tax incentives.
The catch: The energy retrofit has to be cash-flow positive.
Eligible properties include office, retail, hotel, industrial, health care, nonprofit and multifamily (at least five units).
Such programs have been successful in many states, but Colorado’s is unique because it can also be used for energy efficiency upgrades in new construction. Funding for individual projects comes from private investors such as PACE Equity, a Milwaukee company that has financed projects nationwide.
In January, the company announced that it had provided $2.8 million in financing for a $16.8 million multifamily apartment building in the Denver Sloan’s Lake neighborhood.
Since the funding is secured only by a special lien on the property taxes generated by the complex, it should have little impact upon the availability of conventional financing for the project.
So far, it’s the biggest PACE project to be done in Colorado.
Boulder and Adams County were the first two counties to opt into the Colorado C-PACE program, followed by Broomfield, Denver, Eagle, Jefferson, Arapahoe and Pueblo counties.
Pueblo announced its participation in the program on March 3.
“This wonderful innovative financing tool is giving businesses the opportunity to reduce energy costs and consumption with no out of pocket costs,” said Pueblo County Commissioner Terry Hart.
“We are thrilled to be one of the first communities making this tool available to businesses in southern Colorado and hopefully soon this tool will be available for residential property owners as well.”
Paul Scharfenberger, director of finance at Colorado Energy Office, expects that El Paso County also will eventually opt in to the program.
“The timing depends on the El Paso Board of County Commissioners,” he said. “The BoCC must first pass a resolution opting in to C-PACE before El Paso County commercial property owners can participate in the program.
“I have engaged with El Paso County staff about the program, but I do not have a sense for if/when they will decide to opt in to the program.”
Three projects totaling approximately $3.8 million have been funded to date in the state. In addition, 200 have been pre-screened and five more are expected to close by May. n CSBJ