Hastings became the latest Nebraska city to adopt the Property Assessed Clean Energy program when the Hastings City Council approved the program’s manual, application and contract form at its regular meeting Jan. 13.
Participation in PACE promotes energy efficiency and the use of renewable energy as an economic development tool.
PACE financing is for commercial real estate and finances energy efficiency, water conservation and renewable energy systems. PACE loans serve as gap financing, so the developer would not have to spend as much of its capital to undertake an energy efficiency component of a project.
PACE can be for anything involving energy usage, water conservation and systems that involve renewable energy, such as solar panels. It can be used for renovations or new construction.
Because of the fees involved, PACE loans are for larger projects.
The application fee is $1,000, which is collected at the time of application and isn’t refundable.
There is an administrative fee of 1% of loan — not to exceed $40,000 — that is due upon approval of the PACE project and must be paid before or at the same time funds are distributed at closing on the PACE loan.
There is also a $500 annual administrative to be collected throughout the life of the loan.
The council established $250,000 as the minimum amount of PACE financing to be extended to projects in Hastings.
PACE can fund 100% of the energy efficiency-, water conservation- and renewable energy system-related improvements of a project, up to a maximum of 20-30% of the property’s “value at completion.”
It is a long-term loan, 20-30 years in length with a fixed interest rate. It is non-recourse financing, so it sticks with the property even when the borrower sells the property.
There are no public funds at risk, with no taxpayer liability because it’s not the city making the loan. Lenders in the marketplace provide the capital for the loans.
Nationwide, PACE started about 10 years ago. It was introduced in Nebraska in 2016 following the passage of the PACE Act, LB 1012.
Omaha was the first Nebraska city to adopt PACE, in 2017. Omaha’s first PACE loan was funded in 2018, with Lincoln adopting a PACE ordinance that same year.
Lincoln’s first PACE loan was funded in April 2019.
In addition to Hastings, Columbus, North Platte, Fremont, Papillion, Norfolk and Waverly were looking at PACE programs in late 2019.
La Vista, Beatrice and Grand Island adopted PACE ordinances earlier in 2019.
As of Oct. 21, 2019, there were 14 PACE loans approved in Nebraska — 12 in Omaha and two in Lincoln, totaling about $50 million.
Chris Peterson, managing partner for PACE Sage Capital in Lincoln, said during the council’s Nov. 4, 2019, work session the largest loan was $24.9 million for a hotel and apartment complex in Omaha. The smallest is $900,000 for a car wash in Omaha.
Peterson said the car wash used its PACE loan to install a water reclamation system that would reuse 70-80% of its water.
Councilman Scott Snell thanked city staff members for their work on the Hastings PACE program.
“This is a neat project,” he said. “I’m so thankful we’re exploring opportunities like this to position our community against other communities.”
He said establishing a PACE program is among actions the city has taken to be competitive and environmentally friendly.
“We definitely need to address environmental changes,” he said. “This is another piece of the puzzle that helps us get in the direction we need to go environmentally.”