Following a spirited hearing on whether Bloomfield Township should “opt in” as a jurisdiction offering Property Assessed Clean Energy Financing, the Board of Trustees voted 5-2 tonight to become the newest PACE Financing District in Michigan. Michigan Lean & Green worked hard to bring this great economic development opportunity to the businesses and developers of Bloomfield Township and it appears the first project may very well be the internationally renowned Detroit Skating Club. So why should the residents and business owners care if their township becomes a PACE District ? Let us count the ways:
* Any building owner interested in saving money on energy and water now has the opportunity to apply for private financing for 20 years or longer which will be paid back from those same energy & water savings over the finance term;
* It’s very rare to find market rate, fixed term, NON-RECOURSE, extraordinary long term financing for energy related projects, which allows the property owner or developer to enjoy positive cash flow on such transactions;
* The Township incurs no expense or costs by opting in as a PACE District and simply administers the program for a fee, much like it would collect the taxes for a sewer or sidewalk assessment; In return, its building stock has the potential to be improved, more construction to occur, thereby adding jobs and increasing economic development in their township, along with having a more competitive buildings for all residents, tenants and others to enjoy with a smaller carbon footprint;
* Banks or Financial Institutions holding mortgages on buildings considering a PACE financed upgrade must provide “Lender Consent” for such transactions to occur, which should be granted as their collateral (ie. the building) on which they have loaned out money is being improved, they are only at risk on default for a few possible tax payments since there is no acceleration clause associated with this transaction, their debt service ratios should not suffer and they have already agreed to and understand property taxes have priority over their mortgage, not a very unique idea.
PACE transactions are happening in several other states throughout the country and with Michigan’s aged and progressively aging building stock in most cities and towns, this provides the capital and equity to building owners to improve their properties “without breaking the bank”. Developers also can instantly access up to 20% of their capital stack by simply implementing some energy conservation measures on their projects. Time will tell if PACE becomes a “go to” economic development tool but notwithstanding that future answer, it never hurts to have more options to choose from when facing a deep infrastructure retrofit or a new development in need of capital.
ROBERT E. MATTLER, Attorney and LEED AP BD+C, is Market Director for PACE-Equity, Michigan. He speaks and writes about emerging green real estate and development issues in Michigan and elsewhere. Bob is also the senior news correspondent for www.greeningdetroit.com For more information, contact Bob at PACE-Equity, (248) 762-4370; or by e-mail: firstname.lastname@example.org