Fraser Trebilcock Attorneys Participate in Closing $2.1 Million in PACE Financing for Energy Efficient Improvements
Fraser Trebilcock attorneys assisted a client in closing on $2.1 million in Property Assessed Clean Energy (PACE) funding for the renovation of the Detroit Metro Airport Radisson Hotel.
Fraser Trebilcock attorneys recently assisted a client in closing on $2.1 million in Property Assessed Clean Energy (PACE) funding for the renovation of the Detroit Metro Airport Radisson Hotel. Attorneys H. Kirby Albright, Paul V. McCord, and Brian T. Gallagher served as the owners' local counsel in securing the PACE funding, which will be used for achieving efficiency improvements in lighting systems, windows and heating and cooling equipment on the project. The property owner is projected to save more than $3 million during the life of the project in reduced utility costs.
The average business wastes up to a third of its annual utility costs consumed by inefficient energy systems. The problem, however, is that the upfront cost of energy efficient systems to eliminate that waste is difficult to justify when there are other demands on a company’s cash requirements.
PACE is an innovative mechanism for financing energy efficiency and renewable energy improvements. PACE financing allows a property owner to leverage the local government's taxing authority to the property owner's advantage. The property owner voluntarily enters into a special assessment agreement, which it pays off as part of its property tax bill for up to 25 years. In 2013, the elected Wayne County leaders joined the statewide Lean & Green Michigan PACE program, which is the only PACE program in Michigan. Since the County enforces PACE assessment agreements, similar to any other property tax obligations, the PACE loan is very secure for the lender.
By financing such projects through PACE, businesses can eliminate the need for upfront capital, generally paying nothing down as 100% of the project's costs are eligible for financing. Further, by spreading the costs over 15 or 20 years, the savings generated from the project are greater than the annual PACE loan repayment – generating immediate positive cash flow. In fact, under Michigan law, this savings to investment ratio must be positive on day one as a condition of project approval. Further, PACE special assessment financing "runs with the land" – the owner can sell the property and the new owner simply picks up the payments (and energy savings).
To see a case study on this project, click here. If you have questions related PACE financing, contact an attorney at Fraser Trebilcock.