New C-PACE Legislation Proves Successful in Minnesota
Thanks to new C-PACE legislation, 2019 was a big year for MinnPACE. The reason? New laws, which took effect in August, removed barriers to C-PACE financing for new construction. Although we had built one of the most successful PACE programs in the country, we lagged behind other states in our ability to stimulate renewable energy and energy efficiency investments with new construction projects.
Benefits of New C-PACE Legislation
The reason is simple. Our C-PACE loans are limited to 20 percent of a property’s value. With new construction, loan size was determined by assessed value, which tends to be significantly lower than appraised value. The difference can literally mean millions of dollars. Thanks to new state legislation, loan decisions can now be based on appraised value. And, as a result, MinnPACE saw an immediate boost in activity. Five months in and we’ve gotten involved with 10 new construction projects. Consequently, this could lead to $19 million in energy saving investments.
Finding Our Niche
As it stands, we have seen two key industries take the lead as early adopters. According to Pete Klein, vice president of finance for MinnPACE, “From the beginning, hotels and senior living facilities quickly caught on to the benefits of C-PACE for new construction projects. Flexibility and low payments make investments affordable. Building owners can now add energy saving items such as HVAC systems, boilers, and LED lighting for no up-front cost. The same is true for rooftop solar panels. But the best part is these investments are cash positive, with energy savings exceeding payments due each year.”
Impacting the Bottom Line
Matt Ellers, owner of Ellers Enterprises and a franchisee with My Place Hotels, echoed these thoughts when talking about the C-PACE loan he secured for his newest hotel, scheduled to open in Shakopee in early 2020. “There is nothing about PACE that doesn’t make sense for a project like this,” Ellers explained. He partnered with the PACE Loan Group to secure financing and then worked with MinnPACE to facilitate the tax assessment with Scott County. In the end, Ellers should realize a $112,000 boost to his bottom line in 2020 alone. And let’s not lose sight of the fact that this in addition to the environmental impact of reducing energy usage by 23 percent.
Rafi Golberstein, president of the Pace Loan Group adds, “For the project as a whole, I think our payback for this one is about nineteen years, but that includes the roof and insulation. If you strip those out, you’d be looking at a 10-year payback.” Paybacks like these can be credited to the flexibility and affordability MinnPACE financing. More importantly, MinnPACE protects sustainability enhancements throughout the value engineering process.