MinnPACE: A Financing Resource for Energy Improvements
Monday, April 02, 2018
Making improvements to enhance a building’s energy efficiency has a variety of proven benefits. First, there’s the economic impact of dollars saved on utilities and added value to the property. Additionally, in saving energy, we also reduce carbon emissions and lessen our dependence on foreign oil.
Despite all these positive outcomes, the main deterrent to making energy efficiency upgrades or investing in renewable energy is the cost. The Property Assessed Clean Energy Program (PACE) finance option is helping eliminate that barrier for building owners.
PACE is a national initiative. The St. Paul Port Authority (SPPA) manages Minnesota’s funding, which became available to Red Wing building owners in 2016 when the city approved and signed a PACE Joint Powers Agreement with the Saint Paul Port Authority. Through the program, building owners can get up to 100 percent financing in the form of a low interest loan for up to 20 years.
Loans are paid back through a special assessment on property taxes, which allows a property owner to file taxes and get the credit and accelerated depreciation before their first payment is due on May 15.
“That makes it an immediately positive cash flow investment,” says Peter Klein, senior vice president of finance for SPPA.
MinnPACE has funded 120 projects since its inception. Klein notes the majority of projects are aimed at efficiency improvements and are being funded for a 10-year term at a 5 percent fixed interest rate.
The program started with a handful of projects in 2015 and continues to snowball, according to Klein. There were 30 projects in 2016, 70 in 2017 and Klein expects more than 100 projects in 2018.
PACE is available for upgrades to a range of properties, including commercial, industrial, nonprofit and multifamily housing. Financing can help pay for a range of upgrades, such as heating and cooling systems, lighting upgrades, solar panels, water pumps, insulation and more.
MinnPACE’s most ambitious project so far provided efficiency upgrades for two iconic St. Paul skyscrapers. As part of the project, three buildings, including the historic First National Bank, the U.S. Bank building and 375 Jackson had new lighting, heating and cooling systems installed.
In total, the project covered 2 million square feet and cost $12 million. It resulted in an incredible 40 percent reduction in energy consumption and is expected to save nearly $1.4 million in annual energy costs.
MinnPACE funding can also help small businesses that want to invest in renewable forms of energy, such as solar, wind and geothermal.
“For renewables, PACE is the best way to go,” says Klein. He gives the example of a $100,000 solar array project, noting that about 60 percent of the cost of the system can be recouped before the first payment is due, through tax credits (30 percent) and depreciation (30 percent).
Hanisch Bakery in Red Wing has already taken advantage of this funding. It accessed $70,000 in MinnPACE financing to help fund a 20-Kilowatt rooftop solar array that will soon be operational. Owner Bill Hanisch says the process of applying for the loan was simple.
The bakery owner currently pays $3000 a month in utility bills. “Any dent I can make in that is much appreciated,” says Hanisch, adding that the incentives currently available made the decision easy. “It almost pays for itself if you’re able to put in a decent enough system.”
Building owners interested in PACE funding can find more information and an application on the MinnPACE website.