March 13, 2022.— NJ developers and property owners are already lining up C-PACE projects in anticipation of the New Jersey Economic Development Authority’s Garden State C-PACE program later this year.
Timing: The proposed guidelines and regulations are expected from NJEDA this summer, with the retrofit program opening first, followed by the rules for new construction and refinancing or “recapitalization” soon thereafter. Municipalities will then need to establish local programs through an ordinance, which normally takes a couple of months and two scheduled public hearings. Part of the rules package will include a standard ordinance authorizing the state program so that municipalities won’t be delayed by a local attorney review, but towns and cities will still need to understand and discuss the program before they can approve it.
What’s covered: While all the details are being worked out, the broad outlines of the program are laid out in the statute. As the legislation states, C-PACE can finance:
(1) the acquisition, construction, capital lease, installation, or modification of an energy efficiency improvement, renewable energy system including energy storage, microgrid, water conservation improvement, stormwater management system, electric vehicle charging infrastructure, flood resistant construction improvement, or hurricane resistant construction improvement, in each case affixed to a property, including new construction of such improvements, within a participating municipality; (2) a microgrid or district heating and cooling system in which a property owner within the municipality participates for the duration of the C-PACE assessment; or (3) a power purchase agreement with respect to a renewable energy system affixed to a property.
Eligible properties include:
industrial, agricultural, or commercial property; residential property containing five or more dwelling units; common areas of condominiums and other planned real estate developments; and property owned by a tax-exempt or nonprofit entity, including, but not limited to, schools, hospitals, institutions of higher education, or religious institutions.
Local programs: When the guidelines do come out, they will also specify how the top one-third of municipalities by population can also apply to establish their own programs—which must conform to the same requirements as the state program but may permit projects to be approved faster.
Towns and counties can promote the adoption of C-PACE, and county improvement authorities can issue non-recourse bonds to finance C-PACE projects. Private capital providers will be able to finance C-PACE projects directly, or issue bonds themselves or through a conduit bond issuer. Local governments are not liable for the obligations to the capital providers or bondholders, but they do collect the repayments and enforce the provisions in the event of default through the normal tax lien process.
Special Conditions: C-PACE projects must be approved by mortgage holders, and when combined with mortgages and other lien obligations cannot exceed 90% of the appraised value of the property, after including the value created by the C-PACE project. While the term of the financing can be up to 30 years, the actual duration of the assessment will be determined by the weighted average useful life of the improvements. Properties with delinquent taxes do not qualify.
Some other provisions cover the transition from the structures provided by the existing statute, P.L.2011, c.187, to the new program, which is P.L.2021, c.201. The new program will be called the Garden State C-PACE Program to distinguish it from the work of our 501(c)(3) nonprofit advocacy organization, which has used the name New Jersey PACE since 2013.
We will continue to offer consulting, support, and educational services to local governments, as well as being able to assist private property owners and developers in securing financing for their C-PACE projects. Interested property owners and developers may contact us at any time for further information or assistance in identifying the most appropriate capital provider(s). Here’s how to contact us.