Using PACE Loans To Finance Solar Power For Schools & Non-Profits

Solar energy projects require substantial investments in order to receive substantial savings on energy costs. While local, state, and federal governments offer many different tax benefits for individuals and companies that install solar panels to save money on their utility bills, non-profit organizations can be left out of the process. Tax credits and tax deductions are not as valuable to non-profits because they don’t normally pay taxes the way other corporations would. Solar power for schools & non-profits has to be financed in other ways.

Many Non-Profits Can’t Borrow Money Easily

Non-profit organizations can have other hurdles that make financing a solar project more difficult than for other businesses. Their endowments and charters make it impossible to borrow funds using any part of the non-profit’s assets as collateral on a loan. In any case, traditional lending institutions can be reluctant to lend to non-profits because they do not feel comfortable foreclosing on a civic organization like a church or school if a loan is not repaid. Most non-profit organizations are not able to raise large sums of money in the same way that other organizations can.

PACE Loans Can Fill the Gap

Luckily for many non-profit organizations, there’s a financial instrument called PACE loans that can finance solar installations for any type of organization. PACE stands for Property Assessed Clean Energy. It is designed as a way to encourage renewable energy adoption and energy-saving improvements to buildings of all kinds. Solar energy consulting and installation companies like use PACE financing as one of the many ways for their customers to finance their energy-saving projects.

PACE financing is a way for property owners to entirely remove the upfront costs of installing a solar energy installation. Property owners engage competent engineering firms to assess the suitability and cost of an installation at their location. The price tag and scope of work is submitted to a local governing authority, and the low-cost working capital is made available to fund the project in its entirety. This money is repaid by way of increases in the borrower’s property tax assessment of a period of up to 20 years. Because the upfront cost is entirely borne through the local source of PACE funding, and the instant savings on energy bills when the installation goes online, it is usually easy for the borrower to handle the additional property tax burden.

PACE Can Help Non-Profits, Too

PACE is especially useful to non-profits if they can take advantage of it for solar projects. PACE is administered locally, and it keeps money in the community where it is borrowed. Non-profits often have a high profile in their communities, and the ability to borrow funds for building improvement projects and then spend them with local firms keeps money in their immediate area. Local economies are often intertwined, and money spent in a non-profit’s community often partially comes back in the form of donations and other forms of support.

Designed to Reduce Fossil Fuel Use

PACE was devised because about half of all energy use in the United States is used to light, heat, and cool buildings. By financing solar and other renewable projects in local communities, the government is lowering the amount of fossil fuels consumed in order to produce electricity. Because solar energy is produced locally, it is not subject to disruptions and price spikes like imported oil and natural gas are. PACE is designed to allow building owners to undertake improvements by providing a financing mechanism that would not be available to them otherwise. Only property owners with deep pockets can afford to pay for solar conversions without some form of help, and non-profits can find it especially difficult because of an inability to finance their projects privately.

The first PACE program was instituted in 2008, and it has since spread to 31 states, and more are expected to follow. PACE is unusual because it applies equally to residential and commercial building owners in the same way. Non-profits can benefit from PACE financing under certain circumstances as well.

Depending on where it’s located, a non-profit may or may not be subject to property taxes. The particular type of non-profit organization involved can also determine if property tax is collected. In some states, churches are exempt, but private schools would pay property tax. Each non-profit organization would have to look into their particular situation to see if they qualify for PACE financing. In some cases, if the organization submits any form of payment to local taxing authorities, it can be extended to include PACE financing repayments.

PACE Has Four Steps

Here’s how PACE works. To begin, the local government begins a PACE program for local residents. This is less complicated than it might sound. Almost any size community has a great deal of experience in land-secured financing for pubic projects. Municipal financing pays for capital improvements like public parks, water delivery systems, sewer projects, streetlights, road paving, and other similar projects. PACE is simply another financial instrument that allows a town or city to make improvements and spread the cost out of a long term to make them more affordable.

Once a PACE program is in place, any eligible property owner is allowed to make an energy evaluation of their buildings to determine their eligibility and suitability for a project to reduce their energy costs. The companies that engineer and install solar projects are usually quite well versed in every method used to defray the cost of solar projects, and they also are familiar with many financing options like PACE. They can guide property owners through the process of applying for PACE funding for their project.

Once the proposal is accepted, the local government provides the financing for the project, and then adds the cost in the form of a tax assessment on the building where the solar installation is made. Like many public works projects, this can have quite a long repayment period, and it’s not unusual for solar projects to have a 20-year payback term to keep the increases in the tax bill low.

Once the installation is in place and working, the property owner slowly pays off the PACE loan by simply paying their tax assessment. Because of the substantial saving on energy costs that solar power installations provide, the combination of an increased tax bill and the newly lowered utility bills can add up to much less for solar power for schools & non-profits than the former utility costs alone.
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