PACE-ing Energy Conservation

With all of the environmental issues currently facing our world, many property owners are looking for ways to reduce their carbon footprint. One way to do that is through the Property Assessed Clean Energy (PACE) program. It is a relatively new and innovative way for property owners to fund energy efficiency upgrades, on-site renewable energy projects, and water conservation measures.

Making a building more energy efficient increases its value. PACE funding in Arkansas is facilitated by private capital for 100 percent of a project’s costs, and is repaid with a property assessment over a term of up to 20 years. PACE financing is available for all types of commercial and industrial properties, large and small, and may be available to non-profits and government facilities as well. PACE helps commercial building owners increase their bottom line by lowering energy costs. The process is transparent and most stakeholders are committed to making the process as easy as possible.

In 2013, Arkansas passed legislation authorizing local governments to create PACE districts. In Central Arkansas, the Pulaski County Energy Improvement District was created in 2015 by the Pulaski County Quorum Court to help create jobs, retain wealth, and grow Pulaski County’s economy by enabling PACE Financing. The program, Pulaski PACE, provides commercial property owners the opportunity to realize energy and cost savings through facility improvements. PACE financing can be used to upgrade lighting, heating and cooling, add insulation, motors, water pumps, solar panels, fuel cells, and other technologies that produce energy.

In a 2017 presentation by then Pulaski County Attorney, Arkansas Legal Department, Will Gruber discussed brownfields, former industrial or commercial sites where future use is affected by real or perceived environmental contamination, in the context of PACE. He said, “If you’re a property owner and you have a building that has environmental hazards that necessitate remediation, then there are likely going to be outdated systems that need to be updated, i.e., HVAC, windows, roof, water conservation – if land is contaminated, [it could be cleaned] and then install solar panels.”

To date, Arkansas’ programs have attracted a few takers but the number is far below the activity anticipated at the program’s adoption in 2013 with 18 total projects in Little Rock, Fayetteville, and Rogers. Multiple reasons for this include relatively inexpensive energy, an abundance of other funding sources for improvements, and utility-based incentives that possibly distract potential participants. Add this to the dramatic increase in solar installations and net metering and the PACE program has difficulty gaining traction. But, in reality a well thought out, well researched PACE project can include all of the utility incentives, plus a solar or net metering system, coupled with other energy related facility upgrades.

For PACE participants, updating a building not only helps the environment, but also helps business. Energy savings each year could more than offset assessment payments. Owners achieve lower operating costs due to increased energy efficiency, improved asset value from new equipment, and a better indoor air quality and comfort for tenants, among other things. And, like other property taxes, PACE assessments transfer to the new owner if the property owner sells the building. Under most leases, the costs can be shared with tenants.

The impact of PACE can be great. PACE helps communities increase resilience to natural disasters, reduce carbon emissions, and meet climate change goals. PACE also generates significant local economic activity and job creation.