New Jersey PACE Bill Moves Forward — Cautiously

Financing Alternatives for Commercial Clean Energy & Resiliency Improvements

New Jersey PACE Bill Moves Forward — Cautiously

Tuesday, May 29, 2018 Commercial PACE Financing Legislation New Jersey Renewables 0

Update:The new Property Assessed Clean Energy (PACE) legislation — Senate Bill S1611— has been approved unanimously by the Senate Environment & Energy Committee, and is now moving to the Senate  Appropriations Committee, which may recommend some technical changes. Based on Senator Bob Smith’s comments, the sponsors (which include Republican Senator Kip Bateman) hope to see the bill approved by the legislature in the June-July time frame, after the Assembly passes its companion Bill, A1902.

The importance of this legislation should not be underestimated. To begin with, it amends the existing PACE statute (PL 2011, ch. 187) to permit municipalities to proceed without ​State pre-approval, to offer direct private financing of PACE transactions, and to require important protections to municipalities, property owners, and lenders. Until now, the legal framework has been insufficient to enable communities to take advantage of PACE, which provides 100% off-balance-sheet financing for clean energy and resiliency improvements for commercial, multifamily, non-profit and mixed-use properties for up to 30 years at affordable rates.

Once PACE is available, it is expected to facilitate a large number of major improvements to private property, reducing carbon emissions, saving money, and increasing resiliency, all of which have major public benefits, as well as providing jobs and increasing local economic activity. One study we conducted of NJ’s eligible properties concluded that more than $129 billion worth of energy upgrades alone could be done. And based on the experience in other states, more than $100 million of additional economic activity could be generated every year, creating 15 jobs per $1 million of investment, and creating an additional $2.3 million worth of other economic benefits for every million dollars spent. And all this at zero cost to taxpayers or public entities.

Ironic footnote: It now appears that Pennsylvania will get PACE before New Jersey. Senate Bill 234, which sets out the conditions for establishing local PACE programs in Pennsylvania, is now awaiting Governor Tom Wolf’s signature. The bill can be downloaded here.

Our role:  New Jersey PACE (our flagship program) intends to provide an open-market platform available to any interested municipality, and to assist municipalities in implementing effective local programs. Our goal is to balance the interests of all stakeholders — municipalities, property owners, investors, and energy services providers — while further​ing​ the public-interest goals of the program: reducing energy waste, minimizing emissions, and increasing the resiliency of buildings in the commercial, industrial, agricultural, multifamily, and institutional / nonprofit sectors. The current legislation excludes one-to-four-family residences, but those may be added by statutory amendment at some point in the future, once the success of the commercial program has been demonstrated.

We see our role as serving the needs of communities, contractors, and building owners by:

  1. Educating and enrolling municipalities and County Improvement Authorities
  2. Assisting municipalities in creating open, effective, and competitive PACE programs
  3. Providing — in partnership with a national servicer — a state-wide open-market program that any municipality can adopt
  4.  Educating contractors
  5. Informing and educating property owners, managers, and developers
  6. Assisting contractors and property owners in securing financing for their projects
  7. Assisting communities with outreach efforts to maximize economic development goals

What’s Needed — and What’s Available — Now: Getting PACE signed into law, and correctly implemented at the local level, is critical, because PACE offers many features that simply don’t exist elsewhere in the marketplace: 100% long-term financing at attractive rates, by providing greater security to lenders. Loans of up to 30 years, at all-in costs significantly below leases, power-purchase agreements, and typical mezzanine financing, make major clean energy and resiliency improvements cashflow positive from day one — not only affordable but compelling. PACE lenders can do this because their loans are secured by a municipal special assessment that takes first priority in terms of current payments, though the loans cannot be called or accelerated and do not encumber the business owner’s credit.

But because making PACE a reality isn’t simple, current project developers need some alternatives, and we are offering two “PACE-like” models that we believe are ready for prime time:

  • New Inter-Creditor Clean Energy (NICCE) financing seeks to accomplish the same goals as PACE through an agreement with the existing mortgage lender (if any) and creating a special-priority mortgage instrument that is attached to the property. Like PACE, it is non-acceleratable, is transferable to a new owner, and can be converted to PACE when that is available.
  • Deed-registered Resiliency & Energy Efficiency Measures (DREEM) uses an Energy Services Agreement attached to the title of the property in a special way in order to create an off-balance sheet, transferable financial vehicle that spreads payments over the useful life of the improvements.

For more details, or to obtain an NDA, please contact us.

(Cross-posted at

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