Published June 30, 2021
By MARK SARDELLA
WAKEFIELD — The town has opted into the “Property Assessed Clean Energy” (PACE) program administered by MassDevelopment. The PACE program allows commercial property owners to finance energy improvements via special betterment assessments on their property tax bills.
The Town Council voted this week to adopt the program, making Wakefield commercial property owners eligible to participate. Wendy Lee O’Malley, vice president and PACE program director at MassDevelopment, appeared before the board to explain the program.
MassDevelopment works with businesses, nonprofits, financial institutions and communities to stimulate economic growth throughout Massachusetts, promoting capital investment and economic development by providing financing and development solutions.
According to O’Malley, in FY 2020, MassDevelopment financed or managed 341 projects generating investment of more than $2.6 billion in the Massachusetts economy. These projects are projected to create or support more than 10,871 jobs and build or preserve more than 1,787 housing units.
Under the PACE program, private capital providers extend financing and are repaid via betterment assessments collected by the municipality, O’Malley explained.
Municipalities benefit from the creation of jobs, by attracting new businesses, retaining existing business and from the environmental benefits associated with reducing energy consumption.
For property owners, O’Malley said, the advantages include no new debt on their balance sheet, no pay-off upon sale of property (assessments run to new owner), long term financing (20 year max) and no new mortgage lien.
Lenders and mortgage holders benefit from improved cash flow and reduced credit risk from lower operating costs via financing that cannot be accelerated, she said. Capital improvements could also increase collateral property value.
O’Malley said that 23 States (plus Washington, DC) have active commercial PACE programs and 37 states have PACE enabling legislation. Approximately $2.07 billion had been financed for 2,560 projects nationwide as of January 2021.
She noted that in Massachusetts, commercial PACE was passed by the legislature and signed by Governor Baker in August of 2016 and the program launched July 28, 2020. MassDevelopment administers the PACE Massachusetts program in consultation with the Massachusetts Department of Energy Resources (DOER).
Eligible properties include Commercial/Industrial, such as office buildings, malls, hotels, restaurants and manufacturers, O’Malley said. Nonprofits like YMCAs, schools and health care institutions are also eligible, as well as multifamily (five units or more) apartment complexes.
Eligible for financing are energy management systems, insulation and air sealing, HVAC systems, boilers and furnaces, lighting, energy recovery and redistribution systems, solar panels, solar hot water, geothermal heating and gas line extension.
O’Malley noted that the maximum financing term allowed by statute is 20 years and energy cost savings must exceed the cost of the improvements (including any financing costs and associated fees). Third party direct private financing is used and no public funds are involved.
Existing mortgage holders must provide written consent to a PACE financing and lien, O’Malley said. Municipal liens are senior to PACE liens; unpaid PACE assessments are senior to all other private mortgage liens in a foreclosure. PACE assessments cannot be accelerated (only unpaid amount can be collected)
If a property is sold, the remaining PACE assessment and PACE lien stays with the property and transfers to the new owner.
Wakefield’s Director of Assessments Victor Santaniello told the Town Council that the PACE program gives commercial property owners the opportunity to increase their energy efficiency. He said that it would impose no additional burden on his department.
Councilor Edward Dombroski wanted to make sure that there was no scenario under which the town could be financially liable. O’Malley confirmed that the town would never be responsible for paying a PACE assessment on behalf of a property owner.