How is PACE financing being used in Stark?
Two developments in Canton and one in Jackson Township are using an innovative way to finance energy-efficient projects.
The DoubleTree by Hilton, the Greens at Belden, and the Hall of Fame Village's Constellation Center for Excellence all use property assessed clean energy (PACE) financing. It was first used by DoubleTree in 2020 and could be increasingly used by future developments.
"I believe the Stark Metro Housing Authority is looking into using PACE on their City View project," Canton's Deputy Mayor Fonda Williams said in an email about renovations at the former McKinley Park Apartments.
The property owner typically receives a fixed, low-interest loan to pay for energy-saving projects — such as high-efficiency HVAC and LED lighting. The owner then repays the loan in installments as part of its property tax payments.
The financing arrangement does not decrease or defer property taxes and "is strictly a loan," Williams said.
Randy Gonzalez, economic development director and fiscal officer for Jackson Township, said it's a beneficial tool in tough times.
"It helps development in the area because it helps get financing for the companies that are coming in, especially during and what took place with the pandemic," he said. "Financing got froze up in some areas."
The PACE framework originated with a 2009 White House initiative to encourage renewable and efficient energy use. A number of states have adopted PACE programs, as Ohio did soon after.
How does it work?
State law requires a property owner and local government to first create an energy special improvement district (ESID), which encompasses the property or properties with improvement projects.
Canton and the Hall of Fame Village, which owns the DoubleTree and Center for Excellence properties, established the Canton Regional Special Energy Improvement District in the summer of 2020 for the hotel. They added the Center for Excellence to the ESID in November 2021.
In June 2021, Jackson Township established the Stark County Energy Special Improvement District with ABC Gardens to redevelop the former Tam O'Shanter Golf Course into the Greens at Belden.
Each ESID is governed by a nonprofit corporation with a board of directors that administers PACE financing. The board must have at least five members — various representatives for the property owners and two representatives from the local government or governments.
The relevant ESID and local government approve PACE financing requests, said Michael Vaccaro, administrator and law director for Jackson Township. Only property owners who voluntarily participate have a special assessment levied on their property.
"The amount of the special assessments and their payment terms are determined by the property owner and the PACE capital provider and presented to the local government for approval," Vaccaro said in an email.
The assessments, which account for interest, help secure and repay up-front capital for energy-efficient improvements. The money can come from municipal bonds, a bond-issuing organization like port authorities, or a bank or lender.
Property owners also pay the ESID board an administrative fee, which is determined by the lender and takes into consideration the funds needed, creditworthiness and overall project, Williams said.
"Oftentimes if the project is $1 million or less, it is not worth utilizing PACE financing because the fees are high," he said. "It really depends on who is providing the funding."
Stark County's existing ESID projects consist of:
A maximum assessment of $6.18 million for the DoubleTree by Hilton. The Hall of Fame Village is expected to make semi-annual payments for up to 20 years.
A $16.2 million assessment for an estimated $7.5 million in energy improvement projects at the Hall of Fame Village's Constellation Center for Excellence. The owners will make semi-annual payments for 25 years.
A maximum assessment of $16.4 million for the Greens at Belden. ABC Gardens is expected to make semi-annual payments for up to 20 years.
What upgrades are eligible?
Canton and Jackson Township's ESID legislation is commercial in nature.
In some places, residential projects are permitted. However, residential programs have faced reports of predatory lending and other issues.
The Ohio Revised Code describes a "special energy improvement project" as the means and methods to create solar, geothermal and customer-generated projects or an energy-efficiency improvement.
"Customer-generated projects" involve generating electricity with wind, organic material or the process of gasification. "Energy-efficiency improvements" are permanently installed technologies, products and activities that reduce the demand or consumption of energy or produce "clean" renewable energy, according to state law.
Some of the improvements authorized for the DoubleTree, Greens at Belden and Center for Excellence include:
New LED lighting
New hot water boilers
Occupancy sensors connected to a light dimmer switch
Programmable smart thermostats
Insulation improvements to windows, exterior walls and roofs
HVAC components with higher energy-efficiency ratings
Why use PACE financing?
According to the articles of incorporation for Canton and Jackson Township ESIDs, the aim is to enhance "public health, safety, peace, convenience and welfare" by assisting with the development of projects that "reduce the territory's carbon footprint, promote the district as a location for green technology job creation, benefit property within the district and improve the environment."
Gonzalez said he hopes more developments, such as the planned Costco Wholesale on Frank Avenue NW, consider using PACE financing.
"It seems to be a really good program. I think energy conservation is going to be, obviously, ... bigger and bigger every year just because of the cost of energy," he said.
Vaccaro said it's often a "winning solution" for all involved. Property owners receive low-interest rates, the ability to transfer the assessment with a property sale, and the option to pass costs on to tenants, who benefit from "improved building environment and lower utility bills."
"PACE capital providers benefit from the strong security that comes with assessment financing. Senior lenders benefit from investment in their collateral, the more diversified capital stack, and the fact that PACE assessments cannot be accelerated," Vaccaro stated. "And local governments benefit from the ability to facilitate sustainable investment and economic development without pledging any governmental resources or abating or diverting any existing taxes."
This article originally appeared on The Repository: How is PACE financing being used in Stark?
