When it comes to energy efficiency, is it worth the money? It may be able to save condos as well as co-ops some cash, but it might also taking some expensive investments along the way.
So when it comes to high efficiency boiler installations, new systems of lighting, energy regenerative elevators, and more, is it beyond the budget of your building? When it comes to this area, however, the bill introduced in November by City Council becoming law might just change that.
The bill is Intro 1252 and regards building an energy loan program that is sustainable. It would let NYC have a type of the same energy loan program that is already used in 33 states (and D.C. too). The bill is referred to as PACE and that stands for Property Assessed Clean Energy.
This is a municipally-sponsored program of financing that is voluntary. It lets building owners to get the same type of long term and inexpensive financing that would let them do qualifying renovation project types that may have a benefit to the public. That would specifically be greenhouse emissions going down by the building. The project would normally be qualified by having to prove that energy savings are present and get the PACE financing as a result.
This could create the mechanism for funding for the types of landlords that would let them make upgrades. They’ll be required to go ahead and cut back on carbon emissions. They want to ensure that landlords are able to make some upgrades needed without having high costs that are essentially just passed right on to the residents locally.
PACE loans and the money is sourced from the governments locally. They issue bonds and then raise the lending capital. Each municipality has to individually pass their own statute to allow the PACE loans. That is also why it is available through NY state but not yet in NYC.
A lending institution with partners will then make the loans that help finance improvements that will reduce the existing costs for energy for any given building. But instead of giving the money back to the lender in repayment, the building will make the payments through a property tax assessment that combines with the tax lien corresponding to the property.
That may make things difficult for condos because each unit would pay its own property tax, making it tough to get a PACE loan. The loan length would be tied to an improvement’s useful life– about 20 years. This means that higher costs of interest will occur but annual payments will shrink due to a longer loan term.
Energy costs saved from improvements may cover repayment costs and then some because project cost is amortized over a period that’s longer. Thus energy saved will outweigh the cost when it comes to servicing a debt.
The savings will also be projected into a loan for so lenders can size bigger loans to allow larger projects and debt service will be offset through operational savings. Other benefits may include better property value, lower costs for building maintenance and even lower insurance premiums for the building.