Displayed below is a list of Frequently Asked Questions (FAQs). Click on the “>” icon associated with each question to view the answer.

What is C-PACE?

RI Commercial Property Assessed Clean Energy (C-PACE) is a financing program for commercial, industrial, agricultural, non-profit and multifamily (with 5 or more units) properties. C-PACE enables building owners to finance 100% of eligible energy efficiency, renewable energy, water conservation, environmental health and environmental safety improvements with repayment terms consistent with the useful life of the improvements, generally of up to 25 years.

Repayment is facilitated through the municipal property tax assessment process. A voluntary assessment (similar to a sewer district assessment) is placed on the building owner’s property tax or other municipal bill. The assessment is repaid over the financing term (up to 25 years, project dependent) and the annual energy cost savings will, in most cases, exceed the annual assessment payment. As a result such projects are typically cash flow positive in the first year. Because the C-PACE assessment obligation runs with the property, the assessment automatically transfers to the next owner when the property is sold.

What is the role of the Mortgage Holder?

C-PACE project financing is repaid via a voluntary assessment (lien) placed on the property by the municipal tax assessor and assigned to the financial institution that provides financing for the energy efficiency improvement project.  Since the C-PACE assessment has priority lien status, similar to a sewer assessment, the existing mortgage holder will be asked to provide its consent to the C-PACE financing. Such consent is entirely voluntary on the part of the mortgage holder.

How does the mortgage holder participate in the C-PACE project development process?

There are multiple steps that will involve the mortgage holder:

  1. Once a building owner determines that a building modernization project may enhance their building’s asset value (collateral) and cash flow (improved mortgage repayment ability), he or she will seek a preliminary meeting with the mortgage holder to review the opportunity.
  1. At this first meeting, the owner and a representative of the C-PACE program administrator, will describe the program’s requirements and answer any questions. In particular they will discuss the 3rd party technical review process to validate the projected energy savings and related key financial metrics associated with the project.
  1. Assuming the mortgage holder does not object, the C-PACE program administrator will collaborate with the owner and the owner’s C-PACE registered contractor to develop and optimize the project to ensure it meets program requirements. See C-PACE Program Guidelines for more information.
  1. The project development and optimization process includes the creation of a C-PACE Project Finance Report. This report is the culmination of a comprehensive process that includes input and reviews by the owner, contractor and the program administrator. The end product is a carefully designed, optimized project that meets all the requirements of the program.
  1. At a second meeting with the mortgage holder this Project Finance Report will be reviewed in detail and a formal request for consent will be made by the owner.
Why have Mortgage Holders embraced well-designed C-PACE projects?

The majority of C-PACE projects generate positive cash flow based on the energy savings. For this reason C-PACE projects typically have a positive impact to a mortgage holder’s key questions – What is the project’s impact to:

  • Borrower’s repayment ability?
  • Collateral value?

To support mortgage holder project evaluations, the C-PACE program administration team provides an independent 3rd party review of the technical and financial projections. Such review is consistent with industry best-practice methodology as defined in the Environmental Defense Fund’s Investor Confidence Project protocol. Moreover, the C-PACE team leverages its proven project optimization tools and extensive “project experience” databases to facilitate quality assurance across the project development life cycle.

Given the cash flow generating characteristics of C-PACE projects, over one hundred mortgage lenders nationwide have consented to C-PACE projects as of October 2015.  See a list of consenting lenders from a PACENow December 2016 Lender Consent Study.

What happens if the building owner defaults on a C-PACE payment?

Under the RI C-PACE Statute, the C-PACE special assessment is subject to the same penalties and the same procedures in the case of delinquency as is provided for through ad valorem (i.e. property) taxes. The C-PACE assessment has priority over all private liens on the property, is of equal priority to other special assessments, and is junior in priority to general property taxes.

Who administers C-PACE?

After a competitive bidding process, the RIIB selected Sustainable Real Estate Solutions, Inc. (SRS) to be the RI C-PACE program administrator.

What are the benefits of long-term C-PACE financing to building owners?

While many building owners need to upgrade their buildings, too often financial constraints get in the way.  C-PACE financing solves the financial issues by providing: 100% financing for a term consistent with the useful life of the improvements, generally up to 25 years. The benefits include:

  • Competitive, fixed interest rates
  • Zero out of pocket expense
  • Qualification for financing is based on the building’s financial health, not the owner’s personal credit or personal guarantees
  • Decreased utility expenses from reduced electricity, fuel and water usage produce cash flow positive projects
  • C-PACE assessment payment obligation transfers to the new owner when the property is sold

Given the extraordinary benefits of C-PACE financing, owners and contractors can expand any energy related plan to include renewable energy equipment, water conservation measures, asbestos abatement and other related environmental health and safety improvements.

 

Does C-PACE use taxpayer dollars to fund projects?

No. C-PACE uses private capital to fund every project.  Visit the Capital Providers page of this website for a current list of capital providers participating in the C-PACE program. The cost to administer the program is paid by program participants through a Program Administration fee that is included in the total cost of each project.

Are C-PACE assessments considered “off balance sheet”? Is there clarity on the treatment of C-PACE as an operating expense from the perspective of the accounting industry?

Building owners are encouraged to consult their accountants on this matter.

From an accounting perspective, have any auditing firms concluded that the tax lien (which supports the financing) is not a liability of the owner or the building?

There has been no specific ruling by the Financial Accounting Standards Board on this issue.

When is the C-PACE assessment placed on the property?

Upon closing of C-PACE financing, the program administrator instructs the municipal tax assessor to record an assessment (lien) on the municipality’s land records

Is this a voluntary program?

Yes. Using a C-PACE financing is completely voluntary.  Owners that choose not to participate remain unaffected.

How do building owners qualify for financing?

Qualifying for C-PACE financing is primarily based on:

  • The property’s estimated market value (assessed or appraised)
  • The amount of the property owner’s equity in the property, e.g. loan-to-value %
  • The property owner’s recent mortgage and property tax payment history
  • The dollar value of the proposed energy and/or water-saving improvements.
Which municipalities are participating in C-PACE?

Visit the Participating Municipalities page of this website for a current list of municipalities participating in the C-PACE program. The program administrator can accept applications only from owners with properties located in a municipality that has opted in to the C-PACE program. If you have questions about getting any municipality to join C-PACE email us at info@RI-CPACE.com

How much can a building owner borrow using C-PACE financing?

C-PACE projects typically range from $200,000 to over $1.0 million.  Constraints on the amount of C-PACE financing is driven by the financial health of the building and include:

  • Building financial statement review
  • Loan-to-value percentage (<80% LTV is preferred)
  • Other considerations of the mortgage holder.
What are typical C-PACE financing interest rates?

To ensure the best possible terms, including interest rate and other fees, the building owner will typically review term sheets from multiple C-PACE participating private capital providers.  Upon review of financing term sheets the owner will select “best-fit” financing for their project.

How is the length of the repayment period determined?

Repayment periods can be 10, 15, 20, or 25 years, depending on the owner’s preference, and are limited by the weighted average effective useful life (EUL) of the financed improvements.

How are tax credits, rebates and utility incentives incorporated into C-PACE financing?

Property owners are encouraged to pursue available Federal Investment Tax Credits (ITC), utility rebates and any other incentives. All or a portion of total incentives may be subtracted from the amount financed under the C-PACE Program.

Are there any fees associated with pre-payment of a C-PACE assessment?

Each C-PACE participating private capital provider will set their own terms, including pre-payment, in their financing agreement with the building owner.  It is common for most C-PACE capital providers to include a pre-payment fee schedule.