PACE Financing

PACE is a property tax based financing system, with a PACE funder providing 100% of the upfront capital for a qualifying project and repayment over 20 to 30 years from an increase in property tax.

Commercial "Property Assessed Clean Energy" or PACE financing has been approved by 34 states and is active in 21 of them so far. Many expect that this expansion will continue and within five years, PACE will be a preferred financing option for both renewable energy and energy efficiency projects anywhere the USA.


PACE is a property tax based financing system, with a PACE funder providing 100% of the upfront capital for a qualifying project and repayment over 20 to 30 years from an increase in property tax. Funds are advanced into an escrow account and drawn on as equipment is installed or a project is otherwise completed.

For improvements such solar PV or a more efficient HVAC system, PACE monies can typically pay for the entire amount, plus soft costs like engineering. For new construction, PACE can usually pay for any building system which saves energy, produces energy or saves water. For a new commercial building that meets some basic efficiency criteria, PACE can often pay for 10% to 20% of the project's total cost.
For building improvements, an owner is usually happiest when the result is positive cash flow; i.e. the value of the energy produced or saved exceeds the debt service. The longer the financing term, the more likely that positive cash flow will result. Since PACE payments are stretched over 20 to 30 years, this goal can usually be met. By way of summary:

1) PACE is an option in 21 states and more are active each year.

2) For additions or improvements, 100% of costs can be paid for using PACE.

3) For new construction, assume 15% to 20% of the total building cost can be PACE funded, which significantly reduces the owner's equity requirement net of the mortgage.

4) The building owner keeps ALL tax benefits, credits, rebates or other incentives.

5) PACE can be used by NON-PROFIT entities, even those who are not paying other property taxes.

6) Repayment doesn't start until the next property tax billing cycle, so the building owner typically has 12 to 18 months of energy savings before they start to pay for their PACE funded improvements.

7) Due to underwriting costs, PACE investments should be at least $100,000 but the bigger the better, as the largest commercial PACE funding to date was $40 million.

8) PACE underwriting criteria is based primarily on the value of the property, not the credit worthiness of the borrower. No personal or third party guarantees are required.

9) If a real estate is sold which has a PACE assessment, the new owner will assume the property tax payments to the PACE funder. If a new buyer prefers not to do this, the PACE assessment can be prepaid, although penalties usually apply during the first five years of the PACE term.

10) The interest rates for a PACE funding are usually a bit higher than those for a first mortgage. Therefore, PACE Equity is not meant to replace, but rather to augment, mortgage debt.

To discuss PACE in general or specific projects, please contact Rob Aldridge at PACE Equity. His email is raldridge@pace-equity.com or phone is 971-301-2525 (Oregon). Rob is working in all areas of the USA with commercial PACE programs, primarily focused on renewable energy and energy efficiency improvements.

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