New York City Accelerator PACE Financing: PACE Funding Available for New Construction

In 2017, New York State launched the Property Assessed Clean Energy (PACE) financing program for the state. However, it wasn’t until Local Law 97 passed in New York City in 2019, with an ambitious goal to cut 40% emissions from buildings by 2030, that the need to enfore energy financing solutions became heightened. 

Under the Climate Mobilization Act (CMA) of 2019, Local Laws 96 and 97 are notable legislations, that we’ll discuss in this article. 

Local Law 97 - Overview 

Local Law 97 is one of the key pieces of legislation in the CMA. It aims to drastically reduce greenhouse gas emissions from New York City’s largest buildings. The law, which kicks in this year, has placed carbon caps on buildings larger than 25,000 square feet, which would include more than 50,000 properties across NYC, according to the Urban Green Council’s factsheet on the law.

Local Law 96 - Overview 

Local Law 96, which was passed in November 2019, after Local Law 97, was designed to establish state financing instruments that could help people pay for energy efficiency or renewable energy improvements. The law works in tandem with local law 97 and creates the legal and financial means to help the city realize its sustainability goals in the building detector.  

What does NYC PACE financing stand for?

NYC Accelerator Property Assessed Clean Energy (PACE) is a novel financing instrument, geared towards improving the city’s sustainability in the built environment sector. The long-term, fixed-rate financing tool will help commercial and multifamily building owners, finance existing and new projects that prioritize energy efficiency and renewable energy use. The tool can cover up to 100% of project costs without needing up-front cash from the owner.

The financing instrument places a special assessment or special tax charge on the property’s annual tax bill allowing owners to make improvements over time without having to make a large upfront investment.

Benefits of NYC Accelerator PACE Financing

• Covers 100% of energy upgrade costs with no upfront cash requirements 
• Provides long-term fixed-rate financing - fully amortizing terms generally between 25-32 years.
• Owners get to retain all tax credits and incentives 
• Can be transferred if the building is sold
• Can finance other project costs needed for installation, like asbestos and lead mitigation of roof upgrades
• Drives energy savings and increases property value
• Ensures property is compliant with LL97, LL11, and more.

Who is offering PACE financing for New York City?

The New York City’s Mayor’s Office of Climate & Environmental Justice is offering PACE financing in partnership with the New York City Energy Efficiency Corporation (NYCEEC). 

Who is eligible for the PACE Program?

1. Commercial, industrial, and multifamily building owners
2. Buildings owned by non-profit institutions like hospitals, universities, or museums are typically exempt from property taxes

What kind of improvement can you use PACE funding for?

As we mentioned, PACE funding can only be used for Energy Efficiency Improvements and/or Renewable Energy Systems. All improvements have to be deemed “Eligible Improvements” post an energy audit of the property. Below we have explained what these two types of improvements entail:

• Energy Efficiency Improvement - This entails any improvement that is aimed at reducing energy consumption of the property. Some examples include window or door replacement, weatherstripping, air sealing, lighting, caulking, insulation, and heating and cooling system upgrades. The improvement can apply to either a component of a new construction or retrofitting of an existing building.
  
  
• Renewable Energy System -  This type of improvement primarily refers to the installation of energy-generating systems that generate electric or thermal energy. The system has to use renewable energy technology reliant on solar thermal, solar photovoltaic, geothermal, wind, anaerobic digester gas-to-electricity systems, fuel cell technology, or any other types of technology approved by NYSERDA.
  

Summary of PACE Loan Requirements

If you are interested in securing a PACE loan, you will need to fulfil the following eligibility criteria. 

What does the typical NYC PACE loan application process look like?

Here's a more detailed breakdown of the PACE application process as described in the NYC Accelerator PACE Program Guidelines:
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Phase 1: Intake

In the first phase of the application, the lender initiates a new project by completing the “Intake” fields in the Program App. It is to be noted that only designated lenders can give out PACE loans so you should refer to the PACE Lenders List to shortlist the lenders you would like to apply to. The intake fields in the program application will usually capture data on the project, to ensure the borrower qualifies for the loan and the property they are trying to upgrade is eligible. The lender submits a preliminary application, which includes a brief project narrative. The administrator then assesses the information to verify the eligibility of both the property and the borrower. If the project meets the initial criteria, it is granted the status of "Proposed Project," and the lender is notified to proceed to the full application phase.
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Phase 2: Data Gathering

During the data gathering phase, the lender is responsible for compiling and submitting all the required documentation and information to meet the program’s criteria. This includes detailed project documentation and adherence to the loan requirements outlined in the program guidelines. If the project satisfies all the requirements, the administrator will notify the lender, and the project is upgraded to "Approved Project" status.
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Phase 3: Documentation

In the final phase, all necessary agreements are executed, including the Collection Agreement, which is signed by the borrower, lender, administrator, and the City. A Notice of the PACE loan is then recorded in the land records, which officially documents the property’s participation in the program. At this stage, the project is considered "Effective," allowing for the disbursement of funds as per the financing agreement.

You can find more details regarding this process in the NYC Accelerator PACE Financing program guidelines.

How can the PACE application process be made more streamlined?

The PACE application workflow currently relies on a lot of back and forth conversations, document sharing, data input and due diligence between the lender and the borrower. The application intake form which captures all the data about the applicant's firm and the project's eligibility, should have a streamlined workflow set-up, that can allow for the data to be organized and analyzed quickly. This is a crucial part of the puzzle that Builders Patch has improved for our customers.

• Digital application intake form captures all necessary data points - We set up a digital application intake form for PACE lenders that is easily shareable via a link or embedded on the lender's website. This form allows lenders to capture all the data points they require the borrower to fill out. The borrower will only have to fill this information once, and as soon as the data flows into the Builders Patch system, it will be automatically organized to move through the loan lifecycle without requiring any manual data inputs.
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• Streamlined due diligence process saves time and effort: Lenders can easily store, organize and share all their due diligence documents received from the borrower, in a secure digital environment. The Builders Patch platform allows lenders to streamline all communications with the borrower. Lenders can chat with the borrowers, collect documents and data from them and send them reminders about what is yet to be uploaded - all while never leaving the platform. Transitioning from fragmented communications scattered across email threads and drive folders, to a streamlined system where everything stays in one place and can be immediately located, is game changing. By consolidating communication and document management, Builders Patch significantly reduces the time and effort required for due diligence, improving efficiency and response times.
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• Collaborating with internal and external teams: Builders Patch offers a secure, collaborative digital platform tailored for lending teams. From application to underwriting, your team can work seamlessly together, setting tasks, chatting, and sending reminders. Our role-based permissions ensure data privacy and control, allowing you to invite third-party partners with limited access to relevant checklists. This streamlined workflow streamlines the loan lifecycle and enhances team productivity.

The Role of NYCEEC in PACE Financing

The New York City Energy Efficiency Corporation (NYCEEC) is the designated administrator of NYC Accelerator PACE Financing for the City of New York'. They play a pivotal role in the implementation of PACE financing. As a non-profit lender dedicated to advancing energy efficiency and clean energy solutions, NYCEEC provides the necessary expertise and financial support to ensure the success of the PACE program. NYCEEC will help property owners navigate the application process, assess project eligibility, and structure financing that meets both the requirements of the PACE program and the specific needs of the building owner.

Potential Impact of PACE Financing

The introduction of PACE financing in New York City is expected to drive significant investments in energy efficiency and climate resilience. By offering long-term financing that is repaid through property taxes, PACE reduces the financial barriers that have traditionally hindered the adoption of green technologies. This program is particularly beneficial for older buildings that require substantial retrofits to comply with Local Law 97 and other regulations.

Furthermore, PACE financing supports job creation in the green building sector, as increased demand for energy efficiency upgrades and renewable energy installations will require skilled labor. This not only contributes to the city’s environmental goals but also to its economic recovery and growth.

By integrating this innovative financing mechanism with recent environmental legislations, the city is providing property owners with the tools they need to meet stringent climate goals while also enhancing the resilience of New York's building stock. As the city continues to confront the challenges posed by climate change, PACE financing will be a crucial component in achieving a greener, more sustainable urban environment.

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