Introduction
Upgrading commercial HVAC systems to energy-efficient models is a significant investment. Property Assessed Clean Energy (PACE) financing offers a solution by providing upfront capital for these improvements, repaid over time through property tax assessments. This guide explores how PACE financing can support energy-efficient commercial HVAC projects in 2025.
What is PACE Financing?
PACE financing is a mechanism that enables property owners to fund energy efficiency, renewable energy, and water conservation projects. The financing is repaid over a period of up to 30 years through a voluntary assessment added to the property’s tax bill. This structure allows for the funding of 100% of project costs, including equipment, installation, and related expenses.
Benefits of PACE Financing for Commercial HVAC Projects
- No Upfront Costs: Covers 100% of project costs, eliminating the need for initial capital outlay.
- Long-Term Repayment: Offers extended repayment terms, aligning payments with the lifespan of HVAC equipment.
- Transferable Assessments: If the property is sold, the repayment obligation transfers to the new owner.
- Enhanced Property Value: Energy-efficient upgrades can increase property value and appeal to tenants.
- Positive Cash Flow: Energy savings often exceed repayment amounts, leading to net positive cash flow.
Eligibility Criteria
To qualify for PACE financing:
- Property Type: Commercial, industrial, agricultural, non-profit, and multifamily properties are typically eligible.
- Project Scope: Projects must involve energy efficiency, renewable energy, or water conservation improvements.
- Savings-to-Investment Ratio (SIR): Some programs require a demonstration that projected savings exceed investment costs.
- Mortgage Holder Consent: Consent from existing mortgage lenders may be necessary.
Application Process
- Project Assessment: Evaluate the property’s needs and identify eligible improvements.
- Select a PACE Program: Choose a local or state PACE program that aligns with your project’s location and scope.
- Obtain Approvals: Secure necessary consents from mortgage holders and meet program requirements.
- Implement Improvements: Proceed with the installation of energy-efficient HVAC systems.
- Repayment: Repay the financing through the agreed-upon property tax assessments.
Conclusion
PACE financing presents a viable option for commercial property owners seeking to upgrade HVAC systems without the burden of upfront costs. By aligning repayment with energy savings and property tax assessments, PACE facilitates sustainable improvements that can enhance property value and reduce operational expenses.
FAQs
1. What types of HVAC improvements are eligible for PACE financing?
Eligible improvements include high-efficiency HVAC systems, chillers, boilers, control systems, and related energy-saving technologies.
2. Can PACE financing be combined with other incentives?
Yes, PACE financing can often be combined with utility rebates, tax credits, and other incentive programs to maximize benefits.
3. How does PACE financing affect property taxes?
Repayment is made through a special assessment added to the property’s tax bill, which may increase the total tax payment during the repayment period.
4. Is PACE financing available in all states?
PACE programs are authorized at the state level, and availability varies. It’s essential to check with local authorities to determine program availability.
5. What happens to the PACE assessment if the property is sold?
The PACE assessment typically remains with the property, transferring to the new owner upon sale.