A new financing tool coming to the Garden State could be a major source of funding for landlords and developers.
New Jersey Gov. Phil Murphy signed legislation last week to establish C-PACE financing in the state. C-PACE provides money upfront to pay for building upgrades that mitigate climate change, such as solar panels or LED lights. It offers lower rates than a traditional loan and can replace existing financing.
The action comes just weeks after the United Nations’ Climate Report delivered a stark warning about the impacts of climate change caused by humans.
New Jersey is following in the footsteps of New York City, whose C-PACE program went live in June.
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“Establishing a C-PACE program in New Jersey is a decision that will lead to more businesses and landlords embracing renewable energy, climate resiliency technology, and other clean energy measures,” said Murphy in a statement.
C-PACE, short for Commercial Property Assessed Clean Energy, sounds like a loan, but it’s not. Instead, it is recorded as a property tax assessment, which is why states and municipalities must pass legislation to enable it.
So far, 37 states have done so, according to PACE Nation, an industry advocacy group.
The legislation signed by Murphy requires the New Jersey Economic Development Authority to establish the state’s C-PACE program. It also allows certain local governments to establish their own such programs.
In New Jersey, a C-PACE project could be an acquisition, construction, capital lease, installation, or modification of an energy efficiency improvement or renewable energy system, according to the state.
The financing mechanism can be used by a variety of properties, including industrial, agricultural, or commercial properties; residential properties containing five or more dwelling units; and common areas of condominiums.
One roadblock for C-PACE has been getting senior lenders on board. Because C-PACE financing has priority, getting the senior lender’s consent has been a challenge. Another obstacle is that cities have been slow to finalize rules and regulations for PACE, leading to delays in getting the program off the ground.