Californias legendary entrepreneurial spirit is inspiring a trend that emphasizes competition in commercial and residential PACE (Property Assessed Clean Energy) markets to accelerate PACE adoption and spur local economic development. Californias number one solar city San Diego — is leading the trend with the unanimous approval this week of the citys second commercial PACE provider, San Diego-based FIGTREE Energy Financing.
PACE is an economic development tool that empowers local property owners to improve property values, stimulate cash-flow, create local jobs and reduce emissions using no public dollars, said San Diego Mayor Jerry Sanders. Our role is to maximize financing options for property owners and to create a robust, competitive marketplace to drive innovation and help reduce capital costs.
PACE (Property Assessed Clean Energy) financing is a municipal funding mechanism that provides commercial and residential property owners with 100% up-front, long-term financing to improve their properties with cost-cutting energy efficiency, renewable energy and water conservation upgrades. Financing can be provided for up to 10% of an assessed propertys value; in some instances, double that. Because PACE financing allows property owners to realize these improvements off balance sheet, it does not encumber their ability to borrow from conventional sources to fund other business needs.
PACE financing does not impact a property owners ability to qualify for federal, state and local tax credits, rebates or other efficiency incentives. Weve seen time and again how competition drives marketplace excellence in San Diego, said San Diego City Councilman Carl DeMaio. Adding FIGTREE to the Citys mix of PACE providers helps San Diegos small business community by dropping the minimum project size from $50,000 to $5,000. This puts sustainable, property-improving energy and water upgrades within reach of most any property owner, DeMaio added.
FIGTREE arranges financing (and lender consent) for property owners by aggregating and selling the projects as municipal bonds. FIGTREE was the first in California to successfully initiate this new mode of financing in multiple markets. The next bond issue is slated for as early as December 2012. Property owners can also bring their own lenders to the table. PACE inspires new projects and gives contractors a unique funding vehicle to jumpstart projects that may have stalled because of a property owners aversion to additional debt or a credit rating concern.
And PACEs off balance sheet financing is a compelling consideration for commercial property owners and energy-intensive industry sectors across the state, whether theyre in agriculture, industrial, manufacturing, hospitality, or they own commercial office space or multi-tenant structures.
All PACE providers are not created equal, said FIGTREE CEO Mahesh Shah. We are a flexible, full service PACE provider whose expert finance teams help property owners with everything from financial analysis to lender consent to engaging capital markets for PACE bond sales in order to lower capital costs, Shah said. Were now accepting applications to drive PACE success in San Diego and in 23 additional jurisdictions across California.
PACE requires no minimum FICO score for property owners and no money down. And PACE financing can be amortized for periods of up to 20 years via property tax bills. The City of San Diegos offering of FIGTREE will help finance improvements ranging from $5,000 in value to those in the millions of dollars. Qualifying energy and water-saving improvements include heating and air conditioning (HVAC), energy efficient lighting, energy management systems, solar photovoltaics (PV), wind, solar thermal, boilers and chillers, fuel cells, geothermal, insulation, windows and exterior doors, water efficient fixtures, xeriscaping, pool and other water treatment systems, grey water management systems, cool roofs, window film, electric vehicle charging stations, solar groves and more.
Financing terms are based on the warrantees commensurate with the type of improvement a property owner wishes to incorporate, i.e. 10 years for HVAC upgrades or 20 years for solar PV. PACE also provides commercial property owners with a useful vehicle to address the provisions of California Assembly Bill 1103, which requires benchmarking and disclosure of energy usage for nonresidential buildings involved in financial transactions, i.e. those being leased or sold.
When administered properly, PACE can be a terrific economic development tool, noted Gurbax Sahota, President and CEO of the California Association for Local Economic Development (CALED). We commend Mayor Sanders and the San Diego City Council for bringing multiple PACE programs to San Diego and for embracing the principle that a competitive PACE marketplace will drive more adoption, create more jobs, lessen risk and provide property owners (and quality contractors) with funding options to spur economic development, Sahota said. This is a best practice municipalities across the state should consider embracing.
