Property Assessed Clean Energy (PACE) financing has emerged as a powerful tool that’s changing the way developers pay for commercial energy-efficiency improvements. PACE allows building owners to invest in energy efficiency without upfront costs. Central Ohio has seen more PACE financing than all but one U.S. market.
A leading local advocate for PACE is Colin Kalvas, a partner with the Columbus office of law firm Bricker Graydon. A specialist in public finance and economic development law, Kalvas has supported the statewide PACE program since 2013 and the Columbus PACE program since it was established in 2015. He’s also counseled the Columbus Regional Energy Special Improvement District since inception and has assisted the Finance Authority on a variety of successful PACE-financed projects. In June he was honored for his efforts locally, across Ohio, and nationally: He was named PACE Champion of the Year by industry group PACENation during its annual meeting in New York.
“Colin is a delight to work with and we truly value his partnership,” says Finance Authority President Patty Huddle. “His knowledge of PACE programs throughout the U.S. is incredibly helpful as we learn from best practices.”
We spoke with Colin recently about the ins and outs of the Central Ohio PACE program and what makes it so effective.
How did you get involved in PACE financing?
Kalvas: Coming out of law school, I was interested in public finance as a practice area. I liked the transactional nature and financing aspects, but also the public policy component.
What is PACE financing and how does it work?
PACE financing sits in an interesting market segment. It’s commercial financing for commercial building owners, but it uses a public financing mechanism of special assessments, charges on property that are a bit like real property taxes but aren’t taxes.
PACE is similar to other public finance mechanisms that use special charges to fund public improvements. The big innovation of PACE is that those mechanisms are used for privately owned improvements that serve a public purpose of improving energy efficiency or promoting clean-energy technologies.
How does the special assessment structure work?
With PACE, the charges are 100% voluntary. That means the private property owner elects to request to have the special assessment imposed upon their parcel of property to repay the PACE loan. Let’s say a commercial building owner finds an opportunity to increase energy efficiency through HVAC and lighting system upgrades or window replacements. Rather than getting a traditional loan, they arrange upfront funding from a PACE capital provider and repay through a special charge on their property.
That charge is then imposed by local government because, again, it’s a property tax-like assessment. The local government has the power to put that charge on the property to repay the loan, but it’s completely voluntary and used specifically for paying the costs of those improvements.
What’s the Finance Authority’s role in local use of the PACE program?
The Finance Authority oversees the PACE program for Central Ohio and serves as the administrator. They guide businesses and developers through the entire PACE project process, from pre-qualification to project close. But the power to impose those charges rests with individual cities. Columbus is the biggest, but most Central Ohio cities, villages, and townships have participated at some point.
Is PACE used for both renovations and new construction?
Yes! Historically, PACE started mostly for renovation projects, but over time people began to appreciate its use for new construction as well. Central Ohio has been consistent with that national trend – we started mostly with renovations and now it’s a healthy mix of both renovation and new construction projects.
How has Columbus innovated in the PACE space?
Central Ohio has been a market leader in PACE, disproportionate to our relative economic size compared to other places around the country. We had significant activity in the early days of using it for new construction projects. It’s been widely adopted here.
You were recently named PACE Champion of the Year by PACENation. What does that recognition represent?
It’s an award that PACENation gives each year to people who have done a lot of work in this area and helped increase the availability of PACE and grow the overall market. From what I understand, colleagues from different organizations nominated me because I’ve been doing PACE financing about as long as anyone in the country and have completed a lot of transactions. PACE has been widely adopted by developers and property owners in Central Ohio. The award is nice recognition for a lot of work in this area over time and really a testament to the collaborative and effective team of people working on PACE in Central Ohio.
What’s the typical size of a PACE deal?
That’s changed over time. In the earlier days, deals ranged from maybe a couple hundred thousand dollars to low single-digit millions. That has crept up. Now a smaller PACE deal is probably $600,000 to a million. On the high side, there’s really no limit anymore, as some larger markets have shown us with multi-hundred million dollar transactions.
What new developments are emerging in PACE financing?
The biggest trend we saw at PACENation was that traditional banks are starting to become PACE lenders. For a long time, PACE was primarily funded by local governmental conduit issuers like the Finance Authority or specific PACE capital providers pulling money from insurance companies and broader capital markets. In the last two or three years, many traditional banks have become very interested in PACE financing. PACENation was actually held at Citibank’s headquarters in New York, and they’ve become a big sponsor of PACE financing.
What are the advantages of Property-Assessed Clean Energy loans over traditional lending?
PACE really doesn’t compete with traditional senior lending. If you want to acquire property or build a new project, you’ll do better getting a regular mortgage from a bank for 70% of your costs. But PACE helps solve the remaining 30% of costs. Sometimes you can do that as equity, but when you need other junior financing – partnership equity, mezzanine debt – PACE is typically much more advantageous.
The property tax-like charge carries a senior lien position, just like property taxes. PACE capital providers can use that security position to offer long-term fixed-rate financing at rates much better than other junior financing, though typically higher than traditional mortgage financing.
How do senior lenders view PACE in the senior lien position?
There’s an interesting feature that addresses lender concerns. Future PACE charges cannot be accelerated. Like no one can force you to pay your 2026 property taxes in 2025, you can only ever enforce payments that have become due and unpaid. So for a senior lender looking at a $2 million PACE financing, they see the property value improving from the energy upgrades, and only about $100,000 in annual payments sitting senior to them, not the full $2 million amount.
What should developers and commercial property owners (prospective borrowers) know about PACE eligibility and getting started?
PACE needs to be used for qualifying improvements. You can’t get a PACE loan to finance land purchase – that’s not about energy efficiency. But HVAC systems, building envelope insulation, solar or geothermal systems, even EV charging stations – those all qualify. Patty Huddle and Rose Roman at the Finance Authority are excellent resources for understanding what qualifies and the financial aspects like interest rates and terms.
What additional advantages does PACE offer property owners?
For property owners leasing their buildings, charges can often be passed through to tenants under lease terms. Tenants are typically okay with this because there’s usually utility bill savings from the energy efficiency improvements. It’s a win-win. Hospitality property owners can add a portion of the assessment as a charge on room rates. And PACE typically offers long terms – you can get financing that extends to the useful life of improvements, often 15 or 20 years, creating lower annual payments than a five-year bank loan. PACE can typically be prepaid at any time, giving property owners flexibility.
What would you tell developers who haven’t tried PACE yet?
Beyond the attractive cost versus other junior financing, PACE offers unique advantages. The long-term nature helps spread payments over the life of improvements, and the prepayment flexibility gives property owners options. The fact that it doesn’t appear as traditional debt on balance sheets can be valuable for existing financing agreements.
The Finance Authority has been very effective at creating collaborative relationships with local governments and serving the developer community with a business mindset. It’s worth exploring whether PACE fits your project – the consultation process helps determine if it makes sense for your specific situation.
How else has the Finance Authority contributed to the success of PACE in Central Ohio?
Patty and Rose have strong collaborative relationships with Franklin County and all the individual cities, townships, and villages within the county. They’ve leveraged these relationships to create an energy-efficiency financing program that works for those local governments in a way that isn’t burdensome and helps get desirable projects done in their jurisdictions. Because the Finance Authority sits at the intersection of public and private, they also have excellent relationships with the developer community and property owners, along with a business mindset that helps them serve that clientele effectively. They apply all their strengths to facilitate a highly effective program.
Is PACE the same as C-PACE?
Yes, they’re the same thing. The “C” in C-PACE stands for commercial. PACE started in California primarily as a residential program, and then people began to see its potential for commercial buildings as well. For a long time, there was this distinction between C-PACE (Commercial PACE) and R-PACE (Residential PACE). R-PACE had a lot of activity in the early days but has tailed off, while C-PACE started more slowly but has accelerated over time.
To learn whether your next project qualifies for PACE financing, please contact Patty Huddle at 614.427.0394 or learn more about our PACE program here.