C-PACE Financing Maryland: A Guide for Business Owners
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Commercial Property Assessed Clean Energy (C-PACE) financing is a growing financial mechanism in Maryland that enables property owners to access private capital for energy efficiency and renewable energy projects.
Property owners can secure long-term, lower-cost financing tied to their property taxes through C-PACE. This innovative financing structure has gained significant traction in Maryland, benefiting property owners and participating local governments.
Maryland’s C-PACE landscape continues to evolve, with an increasing number of counties adopting the program. This growth has increased awareness and interest among stakeholders, including property owners, developers, and financial institutions. As the program becomes more widely recognized, its potential to contribute to Maryland’s overall energy efficiency and sustainability goals becomes even more apparent.
- C-PACE financing in Maryland helps property owners access capital for energy efficiency and renewable energy projects.
- The program is gaining traction nationwide, with more counties adopting this financial mechanism.
- It has the potential to significantly contribute to Maryland’s energy efficiency and sustainability objectives.
Maryland’s C-PACE Landscape
Role of Local Governments and Jurisdictions
C-PACE (Commercial Property Assessed Clean Energy) financing in Maryland was enabled in 2014, and most jurisdictions have opted into the statewide program. The state legislation allows local governments and municipalities to provide C-PACE financing through property tax assessments, with each jurisdiction having the flexibility to design its program within the statewide structure. This approach allows for coordination and collaboration between property owners, capital providers, contractors, and local governments.
Montgomery County and Statewide Program Growth
Montgomery County became the first jurisdiction in Maryland to launch its own C-PACE program in 2015. Since then, other jurisdictions, notably Baltimore City, have followed suit. Currently, the MD-PACE program offers standardized services throughout the state, such as turn-key, low-cost C-PACE program services, helping accelerate statewide program growth.
As C-PACE financing gains traction, significant projects are being developed. For example, Greenworks Lending closed Maryland’s largest C-PACE project in 2021, which saw nearly $9M of C-PACE financing fund several energy improvement measures.
Through these programs and projects, local governments and jurisdictions in Maryland demonstrate the potential for C-PACE financing to drive energy efficiency and renewable energy projects across the state.
Understanding C-PACE Financing
Definition and Scope
C-PACE (Commercial Property Assessed Clean Energy) is a financing structure that allows commercial property owners to obtain low-cost, long-term funding for energy efficiency, water conservation, and renewable energy projects.
C-PACE programs are enabled by state and/or local legislation and facilitated by public organizations leveraging public and private dollars. The C-PACE program has been allowed in 36 states, including Maryland and the District of Columbia.
Benefits for Property Owners
Using C-PACE, property owners can make energy-related improvements to their existing buildings without the burden of upfront costs. Here are some key advantages:
- Cost-effective: Low-cost, long-term loans enable significant savings on energy and water expenses
- Increased asset value: Efficiency and sustainability upgrades lead to higher property values
- Flexible repayment: Repayment terms can be up to 20 years, reducing the debt service
Key Components of C-PACE
C-PACE financing involves several essential components that make it an attractive financing option for commercial property owners:
- Long-term funding: C-PACE loans typically have terms between 15 and 20 years, resulting in lower annual payments
- Voluntary Participation: Property owners can opt into a C-PACE program based on their unique needs and objectives
- Transfers upon sale: In case of a property sale, the C-PACE assessment can transfer to the new owner, minimizing financial risks
Eligibility and Application Process
C-PACE financing is available for commercial properties in Maryland. A property must be located within a jurisdiction that has opted into the state’s C-PACE program to be eligible. The improvements financed should be energy-related, supporting renewable energy sources or increasing energy efficiency.
Steps to Apply for C-PACE
- Identify Project: Property owners should identify their desired energy improvement project and potential contractors.
- Contractor Evaluation: Obtain bids from qualified contractors and select the best option based on project scope and budget.
- Application Submission: Property owners will submit the C-PACE financing application to the Maryland Clean Energy Center in collaboration with the contractor.
To apply for C-PACE financing, property owners will need to provide a range of documentation, including:
- Property Information: Property address, property type, and parcel identification number.
- Project Details: A detailed scope of work, contractor bids, and expected energy savings.
- Financial Information: Proof of property ownership, mortgage lender acknowledgment, and disclosure of outstanding obligations.
Financial Advantages and Considerations
Long-Term Financing and Interest Rates
C-PACE financing offers long-term loans to property owners interested in installing energy-efficient improvements. These loans provide an extended repayment period and attractive interest rates, making the cost of projects more appealing. The more extended repayment period also contributes to the advantage of improved project economics.
Impact on Cash Flow and Property Value
By utilizing C-PACE financing, property owners can experience improved cash flow due to the savings from energy-efficient upgrades. These savings may surpass the annual repayment amount, leading to an increase in annual cash flow. Furthermore, investing in sustainable improvements can enhance the property’s overall value.
Comparison With Other Financing Options
Considering different financing methods, C-PACE loan programs stand out for their flexibility and the benefits they provide:
- Funding: C-PACE can finance up to 100% of the improvement cost, requiring no down payment from the property owner.
- Lien position: A C-PACE lien is generally placed in a non-senior position, assuring lenders that their primary loan is secured.
- Off-balance sheet financing: Since C-PACE loans are attached to the property, they may qualify as off-balance sheet financing.
- Sustainability focus: C-PACE programs encourage the adoption of energy-efficient and renewable energy improvements, contributing to a more sustainable environment.
By engaging in C-PACE financing, property owners can take advantage of these unique features, which might not be present in traditional financing options.
Implementation and Project Execution
Working with Capital Providers and Contractors
C-PACE financing in Maryland involves collaboration between capital providers, contractors, and building owners to secure funding and ensure successful project execution. Building owners must select qualified contractors who effectively implement energy-efficient improvements or new construction projects. Furthermore, working with experienced capital providers can provide funding, proper project evaluation, and documentation.
Understanding the Billing Process
The billing process for C-PACE financing in Maryland is managed by PACE Financial Servicing (PFS), which administers the MDPACE program. Property owners will see an annual C-PACE charge as part of their property tax bills, remaining until the assessment is fully paid off. Building owners and tenants must understand the billing process, their responsibilities, and how the charge is allocated among stakeholders.
After completing a C-PACE project, there may be additional considerations for building owners and tenants. These may include monitoring and reporting energy savings, coordinating the proper maintenance of the newly installed equipment, and ensuring the project goals are met. By adequately addressing these post-installation considerations, stakeholders can enjoy the benefits of C-PACE-financed energy efficiency upgrades and renewable energy projects.
Regulations and Future Outlook
Current C-PACE Law and Regulations
C-PACE, or Commercial Property Assessed Clean Energy, is a financing method for energy capital improvements in Maryland. Enabled by state and local legislation, C-PACE provides a mechanism for public organizations to leverage public and private funds for clean energy projects. The statewide MDPACE program offers standardized program guidelines, allowing property owners, capital providers, contractors, and local governments to use C-PACE effectively.
Anticipated Changes and Trends
Effective October 1, 2021, a recent legislative change expands the MD-PACE program to include resilience measures. Another expansion allows HUD-insured properties in Maryland to apply for consent to levy a C-PACE assessment. With these adjustments, C-PACE is expected to grow, enabling more businesses and property owners to access long-term financing for energy-related projects.