As we discussed in our October blogpost “Advances in New York City PACE programs,” the New York City Department of Finance (“NYCDOF”) has published for comment proposed rules that would establish criteria and program guidelines for the New York City Commercial Property Assessment Clean Energy (“C-PACE”) Program. The proposed rules establish eligibility criteria for obtaining C-PACE loans for the purpose of retrofitting or renovating properties for energy efficiency or for the purpose of installing renewable energy systems for on-site use, and details the process of collecting and remitting of such loan payments.
The C-PACE Alliance, a network of industry stakeholders, provided comments and questions to NYCDOF in November. NYCDOF’s recent responses to these questions explains the agency’s thinking and lays out some of the program parameters and requirements.
- Co-ops will be eligible to participate.
- Ground lessees will not be eligible to participate.
- New construction will not be eligible for PACE financing under the current proposed rule. A separate rule-making would be required if the City Council passes a proposed amendment to include such new construction.
- Any energy efficiency improvement must be confirmed as likely to result energy savings in an energy audit. Any renewable energy system must be determined as feasible through a feasibility study.
- Indirect expenses, such as capitalized interest and interest reserves, will be eligible for financing.
- Retroactive financing/refinancing will be allowed. The NYCDOF expects to use a 3-year retroactive financing period, as long as the project was completed after April 19, 2019.
PACE Liens. The NYCDOF sought to clarify some of the confusion around the “PACE Loan Lien” and “PACE Charge Lien” under the proposed rules:
- The PACE Loan Lien is created by the law, but its priority is not established by law or rule and “it should have no real effect.”
- The PACE Charge Lien, which arises when a PACE Charge is not paid, is akin to a New York City tax lien. Lenders may choose to enforce the PACE Charge Lien on their own, or if the building owner has other delinquent liens that are eligible for transfer into the tax lien securitization trust, lenders may opt into using the City enforcement mechanism (details are forthcoming).
- The PACE Charge Lien has a priority above all other liens except for city taxes, assessments, and charges. Therefore the NYCDOF will require consent of all other lienholders prior to financing.
- Because of such priority, it is possible that the City could levy new special assessments after a financing that would have a higher priority than any PACE Charge Lien
- Buildings must benchmark their buildings using Energy Star Portfolio Manager and share reports with the program.
- Local Law 84 benchmarking requirements is required for all participating buildings (25K+ SF buildings are already subject to this requirement).
More information is expected to be available on the program’s website, www.cpace.nyc, when it goes live in the next several weeks.