Texas Property Assessed Clean Energy Program

Texas Property Assessed Clean Energy Program

Commercial property owners are using Texas Property Assessed Clean Energy (PACE) to go “Green” and lower utility bills while increasing property values. PACE remedies the challenge of delayed maintenance by allowing efficiency retrofits to the property using recurring utility cost savings realized to pay for the upgrades over time. Depending on accounting practices, PACE can be used without adding debt to balance sheet and combined with MACRS accelerated depreciation benefits.

PACE does not have any upfront costs, thus protecting the building owner’s capital.

PACE allows for up to 30 years of loan amortization, reducing annual payments and supporting projects that have longer useful lives.

Projected utility and maintenance savings are typically greater than the annual PACE assessment, generating positive cash flow.

Commercial leases generally classify property assessments as an operating expense that is reimbursed by tenants. PACE assessments are line items on the property tax bill.

The PACE assessment and “Green” improvements are attached to the property and may be transferred to new owner or paid off in the event of a sale. Building owners are no longer at a loss if the building is sold before an ROI is realized.

What types of projects are eligible for PACE?

Texas PACE legislation authorizes PACE funding for the installation of Qualified Improvements. Qualified Improvements must:

  • Be permanently fixed to the real property;
  • Have a demonstrated capacity to decrease
    • Water consumption or demand; and/or
    • Energy consumption or demand (Includes renewables and distributed generation products or devices on the customer’s side of the meter that use energy technology to generate electricity, provide thermal energy, or regulate temperature); and
  • Have a useful life that exceeds the term of the PACE financing agreement.

What type of properties do not qualify for PACE?

Properties that are statutorily ineligible for PACE assessments include:

  • Facilities for undeveloped lots or lots undergoing development at the time of the assessment; and
  • Government owned real property.

What types of properties qualify for PACE?

The PACE Act permits PACE assessments to be placed on property that is:

  • Privately owned commercial real property – including not-for-profit real property such as private schools, medical facilities, churches, etc.;
  • Privately owned industrial real property; or
  • Privately owned residential real property with five or more dwelling units.

Any of these properties must also:

  • Be located within the jurisdiction of the PACE program;
  • Have a title that is not in dispute; and

Where there is a preexisting mortgage lien on the property: the mortgagee must be given written notice of the owner’s intention to participate in the PACE program at least 30 days before the owner enters into a contract with the PACE program; and, the mortgagee must provide written consent to participation in the PACE program.