PACE (Property Assessed Clean Energy), a new way to finance energy conservation measures in commercial buildings, came to Michigan just four short years ago. Like most new ventures, it took a while for it to gain traction among property owners and building managers.
Now that more projects are ramping up, more building owners are looking to PACE to improve energy efficiency and comfort in their stores, offices and facilities. Along the way to helping property owners and facility managers navigate the deep and sometimes rough waters of PACE financing we’ve seen some actions by building owners that could lead to certain project failure. Read about our latest PACE success here.
If you want your PACE project to fail – or never even get off the ground, here are the sure-fire steps to disaster – and how to avoid them:
1. Talk to the bank without support, before you know what you’re doing.
Because you repay it as a tax assessment, PACE financing requires approval from the bank that holds your mortgage. They will be second-in-line to get paid if anything happens. Your bank may not have heard of PACE or understand how it works, which means they will probably turn you down.
Solution: Let your PACE consultant or PACE project developer contact your bank first or at least go with you. They will explain the benefits and help the bank understand that PACE involves no risk for them.
2. Don’t provide utility bills.
PACE financing stipulates that the energy conservation measures reduce energy bills. You must provide at least 12-months’ worth of utility bills so your PACE consultant can make the proper calculations to determine how much you will save. This determination is critical to obtaining the financing.
Solution: Many utility bills are available online. Ask your utility provider how to access them and share them with your PACE project developer. Electronic versions of the bills can be e-mailed or even shared via a document sharing site.
3. Don’t disclose all requested information about tax liens.
PACE financing won’t work on a property with a tax lien. Share this information up front so no one spends a lot of time making bank appointments or looking up bills for an ineligible project.
Solution: Let your PACE consultant know about tax liens. In some cases, there may be a work-around.
4. Don’t hide prior bankruptcies from your PACE provider.
If the building owner is currently undergoing bankruptcy or has had a bankruptcy issue in the past several years, the building typically is not eligible for PACE financing (note: the amount of time varies from state to state). Also, the property may not be listed as an asset in a current bankruptcy.
Solution: Let your PACE consultant know about any current or recent bankruptcy proceedings.
5. DON’T return information in a timely manner or respond timely to your service provider.
While PACE doesn’t necessarily have a time limit, no one likes a foot dragger. Face it, the sooner you get your information together, the quicker you should have your money to start getting things done.
Solution: Don’t dawdle. Answer inquiries promptly (whether by phone, text or email), or assign them to a team member if you are not available.
Hiding information won’t help you get the necessary funding. Be up front with any outstanding issues like liens and bankruptcies.
Construction projects are seldom easy and financing through PACE adds another layer of complexity. Getting started with PACE takes time and dedication. It’s a group effort between the building owner, PACE project developer, PACE administrator and the various lending institutions involved. If your building meets the qualifications, timely and open communication will help ensure a successful project.