We’ve updated the original blog post to reflect that Commerce and the EDP and published their program description and model documents.
For years people have advocated for North Carolina to establish a program to give local governments another tool to help businesses finance energy and sustainability improvements. Last summer, the General Assembly adopted authorizing legislation, and the North Carolina Economic Development Partnership hopes to roll out the program documents shortly.
“C-PACE financing” stands for “commercial property assessed clean energy financing.” Under our new law, local governments can agree with a local business, and the lender to the business, to help secure a private commercial loan by imposing a property assessment on the business. So as you might impose an assessment to help pay for a sidewalk project, you’ll impose an assessment to secure a private loan to the business for “qualifying improvement,” including energy efficiency, water conservation, renewable energy, and resilience projects.
Why would you want to do this?
To help the business get better financing than it might otherwise qualify for – “better” in terms of a longer term and lower rate because of the enhanced security. You will also get improvements to a local building that will add to its usefulness and value. As a local government, you’ll get your expenses covered and up to $25,000 as an “administration fee,” but this is not a program for making money.
What are the key things I need to know?
Eligible projects include HVAC upgrades, installations of new toilets and faucets, installations of high efficiency heat pumps, and new solar panels, water efficiency upgrades . . . the list in the statute is pretty broad.
Eligible buildings include privately owned commercial, industrial or agricultural property (including that owned by nonprofit or charitable organizations), and privately owned residential property with five or more units.
The NCEDP has published “program documents.” These are, essentially, forms to use in setting up an assessment. The statute called on NCDEP to devise the documents, subject to approval from Commerce, and we now have the “toolkit” in hand. The documents assign the burdens of administering an assessment to the Partnership, and we think they are nicely short and to the point. There are still some resolutions and a public hearing to come from the local governing board, but the bulk of the process will be among the property owner, its lender and the Partnership.
You are not making any financial commitment. You have no obligation to the business lender, other than to pass along collected assessments to the lender to help pay the loan. If there isn’t enough money from the assessments, or the borrower is otherwise in some kind of default, then that’s the lender’s problem.
The business (or property owner) needs the consent of the mortgage lender. Because assessments will take a priority lien position over the mortgage, the mortgage lenders need to consent. We don’t really know how easy or hard it will be to get this consent. That’s likely to be very much a case-by-case basis.
The property owner finds its own lender. It’s not your responsibility to identify a financing source or to negotiate any terms. The “financing agreement” for the property improvements and repayment is separate from the “assessment agreement” by which you allow the lender to have the assessment as security, so you need not even look at the financing agreement if you are not so inclined.
If you’re a municipality, you’ll need to get the County’s consent. For similar reasons. It’s a one-time consent, not for each time you want to make an assessment.
How do I get started?
Make sure your economic development folks know this program exists – especially those who work with your existing industries or your building owners.
Make sure your housing folks know about this. Because this program applies to residential buildings with 5 or more dwelling units, it might be even more useful to them than to owners of commercial buildings.
Contact us if you want to know more. Send us an email.
There is a nice summary of the legislation from the NC Sustainable Energy Association, which you can find here. You can find more general info from the C-PACE Alliance here.
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