Displayed below is a list of Frequently Asked Questions (FAQs). Click on the “>” icon associated with each question to view the answer.
Arlington C-PACE is a program that helps building owners access private-sector financing to upgrade their building with energy efficiency, clean energy, and water efficiency improvements. With C-PACE, building owners receive up to 100 percent financing with attractive repayment terms consistent with the useful life of the improvements (up to 25 years). This typically enables them to undertake large building modernization projects that addresses multiple deficiencies.
In well-designed C-PACE projects, the energy cost savings exceed the PACE payments, creating a cash-flow-positive project. By using C-PACE, building owners can reduce their operating costs, improve the value and competitiveness of their building, meet energy performance goals, and increase their cash flow. C-PACE is also available to developers with new construction projects if they design their building to exceed current energy codes.
Repayment is secured by a voluntary special assessment, similar to a sewer assessment, that is recorded on the improved property and repaid to the private capital provider over the financing term (up to 25 years). In most cases, the energy cost savings exceed the assessment payment, thereby enabling capital-intensive equipment upgrades and cash-flow-positive projects. Because the C-PACE assessment obligation remains with the property, the assessment can transfer to the next owner when the property is sold.
After a competitive bidding process, Arlington County selected Sustainable Real Estate Solutions, Inc. (SRS) to serve as the Arlington C-PACE program administrator.
The Arlington County Department of Environmental Services’ Arlington Initiative to Rethink Energy (AIRE) team is spearheading the C-PACE program.
Arlington County’s C-PACE program benefits multiple stakeholders.
- Building owners reduce their energy costs, increase their cash flow, and improve the value of their building—all with no upfront, out-of-pocket costs
- Contractors grow their business by closing more projects
- Capital providers receive more opportunities to fund attractive, finance-ready projects
- Developers can reduce their equity contribution or other forms of high-cost capital with no upfront, out-of-pocket expense
- Mortgage holders benefit from an improved asset; plus, the increased cash flow strengthens the owner’s repayment ability and reduces mortgage default risk
- Communities enjoy local job growth, improved building stock, and reduced greenhouse gas emissions—all financed with private capital, and not taxpayer dollars.
Arlington County is responsible for program oversight in collaboration with the program administrator, SRS.
Because the Arlington C-PACE assessment has priority lien status, similar to a water or sewer district assessment, mortgage holders are required to provide consent to the financing. Consent is voluntary.
There are multiple steps that involve the mortgage holder:
- Once a building owner determines that a modernization project may enhance the building’s asset value (collateral) and cash flow (improved mortgage repayment ability), he or she will seek a preliminary meeting with the mortgage holder to review the opportunity.
- At this first meeting, the owner and a representative of the C-PACE program administrator will describe the program’s requirements and answer any questions. In particular, they will discuss the independent technical review process to validate the projected energy savings and related key financial metrics associated with the project.
- With mortgage holder authorization, the Arlington C-PACE program administrator will collaborate with the owner and the owner’s C-PACE-registered contractor to develop and optimize the project to ensure it meets program requirements. See the User Guide for more information.
- The project development and optimization process includes the creation of an Arlington C-PACE PACEworx™ Report. This data-driven report is the culmination of a comprehensive due diligence process that includes input and reviews by the owner, the contractor, and the program administrator. The end product is a carefully designed, optimized project that meets the requirements of the program, while summarizing the key financial and technical metrics of the project. Most important for mortgage holders, it provides a framework for reducing your borrower’s default risk and improving the value of the collateral.
- At a second meeting with the mortgage holder, the PACEwork™ Report will be reviewed in detail and a formal request for consent will be made.
C-PACE projects are designed to generate positive cash flow based on the energy savings that result from the energy efficiency upgrades that have been installed at the building. C-PACE projects are attractive to mortgage holders because they:
- Improve the borrower’s repayment ability (thanks to the improved cash flow),
- Increase the value of the collateral (thanks to the energy efficiency upgrades), and
- Have non-accelerating repayment obligations that can transfer to a new owner upon sale.
To support the mortgage holder in evaluating the project, the Arlington C-PACE program administrator provides an independent review of the technical and financial projections. Such review is consistent with industry best-practice methodology as defined in the Investor Confidence Project protocol. Moreover, the team leverages its proven project optimization tools and extensive project experience databases to facilitate quality assurance across the entire project development life cycle.
View a list of banks that have provided mortgage holder consent nationwide.
Defaults on C-PACE project repayment obligations do not impose any direct liabilities on the county. Rather, the private capital provider financing the project has the responsibility and right, per the Finance Agreement with the building owner, to initiate collection efforts to recover delinquent payments from the owner and, if necessary, to initiate foreclosure proceedings. A capital provider can foreclose on the special assessment lien without accelerating the future unpaid amounts. It may also consider, as a contractual matter, declaring due all unpaid principal and accrued interest, as contemplated in Section 6.2 of the Financing Agreement template. Moreover, if a capital provider possesses other collateral, it may pursue remedies against that collateral in accordance with the terms of any document governing such collateral. Note that, as reflected in the County’s C-PACE documents, no capital provider inherits any special enforcement powers of the County by virtue of the special assessment lien.
The program recommends that every capital provider review the applicable laws of the Commonwealth of Virginia.
Read more on this topic here.
Arlington C-PACE solves many of the financial hurdles that property owners who want to install energy and water efficiency improvements face by providing:
- 100 percent financing, so there are no upfront, out-of-pocket costs
- Up to 25-year terms, making projects affordable
- Competitive, fixed interest rates
In addition, since the financing is property-based, the owner is not required to sign a personal guarantee, and the assessment payment obligation can transfer to the new owner if the property is sold. Best of all, decreased utility expenses from reduced electricity, fuel, and water usage produce cash-flow-positive projects, putting money in the building owner’s pocket.
No. Arlington C-PACE uses private capital to fund projects. Visit the Capital Providers page to see a list of qualified capital providers that participate in the program.
Yes. Arlington C-PACE financing is completely voluntary. Owners who choose not to participate in the program remain unaffected.
Qualifying for C-PACE financing is based on the property, and not the owner. The C-PACE program administrator will look at:
- The property’s estimated market value (assessed or appraised)
- The amount of the property owner’s equity in the property
- The owner’s recent mortgage and property tax payment history
- The dollar value of the proposed energy and/or water-saving improvements.
After finance closing, at which time the capital provider, as authorized by the county, will request that the county record a voluntary special assessment in the county land records. The capital provider, as authorized by the county, will then request that the county assign the special assessment to the capital provider to secure the loan repayment.
Building owners are encouraged to consult their accountants or CPA on this matter.
There has been no specific ruling by the Financial Accounting Standards Board on this issue.
Arlington C-PACE projects can range from $50,000 to $25 million. Constraints on the amount are driven by the financial health of the building and include the building’s financials, the loan-to-value percentage, and other considerations of the mortgage holder.
Interest rates are commensurate with term length. To ensure the best possible terms, including interest rate and other fees, the building owner will typically review term sheets from multiple participating private capital providers. After reviewing the term sheets, the building owner can select the capital provider that offers the best fit for his or her project.
Repayment periods can span up to 25 years, depending on the owner’s preference, and are limited by the weighted average effective useful life (EUL) of the financed improvements.
Property owners are encouraged to pursue available federal investment tax credits (ITC), utility rebates, and other available incentives. All or a portion of the total incentives may be subtracted from the amount financed under the Arlington C-PACE program. Click here for Washington Gas rebates and here for Dominion programs.
Each private capital provider participating in C-PACE sets its own terms, including pre-payment, in its financing agreement with the building owner. It is common for C-PACE capital providers to include a pre-payment fee schedule.