PACE (Property Assessed Clean Energy) is an innovative financing tool that utilizes private capital to finance energy efficiency and renewable energy projects. PACE is a public/private initiative, whereby a local taxing authority utilizes its special assessment and tax lien powers to provide security to private funders. This mechanism provides senior lien status so that some private funders will make financing available for efficiency and renewable projects (when they otherwise would not) for longer amortization periods of up to 20 years. This means lower annual payments and greater affordability. Underwriting is tied to the value of the real estate, not the credit of the developer/owner. Amortization payments are made via the tax bill collected by the local taxing authority, which then passes them along to the private financing source.
In New York, PACE is administered by the Energy Improvement Corporation, a New York state nonprofit development corporation, sponsored in part by the New York State Energy Research and Development Authority (NYSERDA). PACE financing is available for use in buildings owned by both commercial and nonprofit entities, including multifamily properties. Improvements eligible for PACE financing also comprise, to some degree, various work done in most building rehabilitations. Utilizing PACE as a part of the capital stack in these projects would provide a developer with a source of gap financing at approximately 4 percent to 6.5 percent. A special program currently exists in much of Westchester County, whereby nonprofit and/or affordable housing developers can qualify for rates in the 2 percent to 3 percent range.