By Roy L Hales
What should commercial Property Assessed Clean Energy (PACE) financing look like in Texas? Hundreds of local PACE programs in California, are consolidating under several competing PACE models. On the other extreme, Connecticut’s new state run program was responsible for half the commercial PACE financing in the US last year. Thirty states and the district of Columbia currently have PACE programs. As Charlene Heydinger, Executive Director of “Keeping PACE in Texas” (KPT), explained, “We want state-wide model specifically designed for Texas’ needs.”
There are more than 1,200 municipalities in Texas, which has led to concerns that local governments needed a model program with uniform, user-friendly, sustainable and scalable best-practices, or Texas would lose the opportunity to start with the state-wide standardization that is the trend in California and the success in Connecticut. .
Yet Property owners want PACE because it enables them to obtain low-cost, long-term loans for up to 100% of all costs associated with the design and installation of water conservation, energy efficiency, renewable and distributed generation retrofits. These improvements can be structured to generate an immediate positive cash flow and are automatically transferred to successive owners when the property is sold. Consequently, each owner only pays the portion of the assessment that accrues during its period of ownership.
Lenders want to take part in PACE programs because they take priority over other loans.
Tradesmen and the business community want to see PACE loans because they stimulate the economy.
KPT came into being after Governor Rick Perry signed Texas’ Property Assessed Clean Energy Act (SB 385), on June 14, 2013. Over 100 stakeholder/volunteers came forward from the private and public sectors. There are businessmen, clean energy specialists, conservationists, mortgage specialists and bankers.
They came up with a statewide application called “PACE in a Box.”
“This toolkit is designed to enable property owners to negotiate their own agreements with lenders and contractors of their choosing,” Heydinger explained.
Out of state companies like Figtree, Hero and Ygreen will be allowed to compete. So will banks, other financial institutions and private entities with a minimum net worth of $5 million and at least three years of experience in business, or industrial lending, or commercial real estate lending.
“Local governments will perform only those functions that are necessary to ensure a sustainable, high quality program and to address matters that cannot be resolved within the context of private sector negotiations,” she said.
Unlike California, where individual PACE companies have their own programs, PACE in a Box will supply Texas with standards that can be applied in both rural areas and cities.
This program is not yet finalized. The comment period for PACE in a Box ends on May 15 and KPT hopes to release the final version at the end of the month.
(Image at top of page: Texas Hill Country, on Route 187 heading North, just north of Garner State Park.- Zereshk, cc by 3.0, en wikipedia)