Property Assessed Clean Energy (or “PACE”) programs have been established in various jurisdictions to allow a property owner to finance the up-front cost of energy or other eligible improvements on a property and then pay the costs back over time through a voluntary assessment. The financing is unique in that amounts due in connection with the PACE program attach to the property rather than to the individual owner of a property.
In 2019, New York City established its PACE program under Local Law 96 as part of the Climate Mobilization Act. New York City’s PACE program is designed to provide property owners with an opportunity to make energy efficient improvements to their property through loans from qualified private lenders that are repaid via the property tax bill. These loans can be used to finance improvements in existing buildings that reduce energy consumption, such as sealing or replacing a door or window or HVAC system upgrades and/or the installation of an alternative energy generating system such as solar panels. The program to date has been limited in scope, for example it is limited to existing buildings.
There were encouraging signs from the City for the future expansion of this program when on March 4, 2022, new guidelines were released. These new guidelines included the expansion of the program to allow ground lessees and projects classified as new construction or major renovations to be eligible for the loan program. These encouraging signs turned out to be short lived. In a surprising move, this month the City reversed itself and retracted the issuance of the revised guidelines and replaced it with a further revised version. The further revised version does not address ground leases, major renovations or new construction. This means that developers of new construction or major renovation projects will still not be able to participate in New York City’s PACE program. We do not know when or if New York City will further revise the program’s guidelines, but we intend to monitor this area and provide any relevant updates.