New York City Council’s Passage of Climate Mobilization Act Makes Headway for C-PACE Financing Suffolk County, New York and its more than 150,000 businesses operating across a wide breadth of commercial property types will soon join Saratoga Springs and Bedford in utilizing the Energize NY Open C-PACE (Commercial Property Assessed Clean Energy) Program.
Momentum in the state’s PACE program follows the New York City Council’s passage of the Climate Mobilization Act and its companion legislation, which made headway for C-PACE financing in the nation’s largest commercial real estate market.
C-PACE is a method of providing 100% long-term, fixed-rate financing for energy efficiency, renewable energy upgrades, and sustainability measures such as green roofs to buildings through a voluntary property tax assessment.
The funding is provided by private capital providers, such as Hannon Armstrong Sustainable Real Estate, which lends in each of 16-plus U.S. states that have active PACE programs.
In New York City, a C-PACE program will alleviate the financial burden placed for the nearly 50,000 plus commercial properties with greater than 25,000 square feet that will face penalties as part of the Climate Mobilization Act if they cannot reduce their greenhouse gas emissions by 40% by 2030, and 80% by 2050. Such reductions will primarily be achieved by retrofitting buildings with new energy efficient technologies and building materials.
During his remarks at the recent 2019 Urban Green Conference, John Mandyck, President and CEO of Urban Green, focused the conversation on retrofits vs. alternatives such as carbon credits.
Mandyck estimated that the commercial real estate market potential for energy saving retrofits is $2.2 billion over the next five years and $24 billion through 2030, the year of the required 40% reduction in the city.
He introduced a sense of urgency relative to manpower, materials and logistics, such as permitting, by suggesting that the NYC Department of Buildings won’t be able to approve 37,500 building permits if everyone waited until the final year allowed by the act.
Beyond the boroughs, the Energize NY’s Open C-PACE program, operated by Energy Improvement Corporation (EIC), represents a significant opportunity for commercial property owners to finance energy efficiency and renewable energy projects.
“Even though there is no state mandate, there are significant economic incentives for energy efficiency and renewable projects,” stated Susan Morth, Co-Executive Director of Energize NY.
In conjunction with their new Bond counsel, Norton Rose Fulbright, Energize NY recently completed an overhaul of their commercial PACE program to make it easier for commercial property owners to access third-party capital financing on favorable terms.
The PACE assessment is billed directly by EIC, on behalf of the Municipality, rather than through the tax bill, thereby reducing the administrative burden on Municipalities of collection and enforcement of the PACE assessment. Energize NY has already seen an increase in participation by municipalities, capital providers and property owners in the new program and expects to close the first C-PACE financing under the new program this summer.
The opportunity for energy efficiency retrofits varies by region. Urban Green cites more than 50,000 properties as immediately affected by NYC’s legislation; the majority of these are offices and multifamily properties. In the remainder of the state, there are more than 50,000 multifamily properties and 25,000 office buildings that are greater than 30 years old.
“The 30-year mark is significant in that it indicates a building is pretty much going to have a clear-cut path to savings through energy efficiency measures ranging from a new boiler in the basement to a green roof,” states Eric Alini, Managing Partner of Hannon Armstrong Sustainable Real Estate. “We are going to hear from owners of such buildings affected by the mandate in New York City and that’s exciting, but the work that EnergizeNY has undertaken to advance the commercial PACE program across New York State is equally important in that both programs provide access to private capital that will fuel a more sustainable future and better economics for each building.”
While increasing the energy efficiency and attractiveness of a commercial property, 100% financing is available for the installation, service and maintenance of a green roof through HASRE (Hannon Armstrong Sustainable Real Estate).