TEXAS PACE AUTHORITY
There is an Austin-based business that serves San Marcos, helping people utilize government funding for new developments or property improvements that upgrade facility infrastructure. The Texas PACE Authority has even helped finance the San Marcos Premium Outlets and is hoping to assist more San Marcos customers.
“The Texas PACE authority is a third party PACE administrator for the PACE program,” said PACE Transactions Director Teresa Smith, Ph.D. “PACE, of course, stands for Property Assessed Clean Energy. It’s a program that was actually legislated by the federal government in 2008, and then adopted in the state of Texas in 2013. As part of that legislation, there is a requirement that you have a third-party administrator that oversees the program.”
The Texas Pace Authority is that third-party administrator, and Smith said the organization’s responsibilities are multipronged.
“We’re responsible for ensuring that any project that gets funded through this program actually meets the requirements of the legislation,” Smith said, adding that the program is new and the local governments must opt-in to it. “The second part of what we do is we provide education and outreach, so our role is to help make this program available to all cities and counties across the state. … We do a lot of seminars. We meet with local governments.”
The financing can be used for a plethora of development projects as well as improvements on properties.
“It can be used for standard building improvements.” Smith said. “It could be used by a building owner that maybe needs to replace their roof. Maybe it’s a manufacturing facility that needs a new roof and a new HVAC system, they can use it for a project like that. It can be used for what we call a deep retrofit, or a deep renovation, where maybe it was formerly it was an old hotel, and they want to make it into multifamily apartments; that’s a huge conversion, and it could be used in that instance. Also, it can be used for new construction. … Lastly, it can be used for refund of qualified expenses that have been done in the last two years.”
Smith said a building owner interested in utilizing the financing can contact one of the company’s approved lenders, and the Texas PACE authority will work with them to gather necessary documentation, review it and ensure the project is qualified for funding.
There are a couple of reasons that this type of financing is beneficial, including that it is a fixed rate financing. That means that the payments stay the same regardless of fluctuations in the economy.
“It’s different than any other financing that’s available primarily because it is securitized with a special assessment on the property,” Smith said. “Normally, when you take out a loan, you either have to sign for it personally, or it is securitized by a mortgage on the property. Well, with this financing tool, there is actually a voluntary assessment that gets tied to the property. It’s not tied to the owner, so the owner doesn’t have to personally sign for the debt. And if the building sells, the balance of the debt transfers with ownership.”
PACE can also do longterm loans.
“So by long term, I mean up to 30 years, and the way that we determine how long the amortization will be is based on the equipment that’s being funded,” Smith said. “If they’re doing a new roof that has a life that’s around 40 years, and they’re doing a new heating system that’s life is around 20 years — what happens is we do a calculation for all of the improvements, we figure out what’s the average life of these improvements and then that becomes the term. … This financing matches up the term with the useful life, so it makes it more beneficial to the building owner.”
The loan amount is based on the amount of energy savings that the upgrades provide, or with a new development, the cost savings of the energy- efficient features.
“Your annual payment cannot exceed the energy savings that you’re going to realize,” Smith said. “So the financing basically pays for itself. You’re paying for today’s improvements with tomorrow’s savings.”
San Marcos Premium Outlets utilized this program in 2017.
“It was a $1.8 million transaction, and what they used it for was to upgrade their lighting,” Smith said. “They did lighting, HVAC, a specialty irrigation system and low-flow fixtures. And their annual savings was almost $152,000 a year that they were able to save by making these improvements.”
One can inquire about the program by calling 855-738-7223 or visit the website to see if the project qualifies at texaspaceauthority. org/eligibility.
