Using PACE Financing to Help NYC’s Green New Deal Succeed

Written by Rich Kassel, Executive Vice President, Capalino

It’s often said that our cities are the laboratories for policy-making.  This was never more true than on Earth Day this year, when Mayor Bill de Blasio capped off a week of climate legislation and announcements with an updated OneNYC strategy—New York City’s own Green New Deal.

Following months of engagement with input from more than 16,000 New Yorkers from across the city and a 39-member advisory board of community leaders, advocates, elected officials, and policy experts, the new strategy put more meat on the bones of the City’s prior commitment to reduce the greenhouse gas emissions that are linked to global warming by at least 40 percent by 2030—en route to meeting the Paris Climate Accord’s goal of reducing these emissions by 80 percent by 2050 (in climate jargon, 40×30 and 80×50).

Just a few highlights illustrate how ambitious the City’s new program will be:

• $14 Billion in new and committed investments to achieve 40×30
• $20 Billion in coastal resiliency investments to prepare for more intense coastal storms, sea level rise, and other climate impacts that are already happening
• NYC Government to be 100% carbon-free electricity by 2025—and all of NYC to be carbon-neutral by 2050
• Codifying the world’s first mandate to cut GHGs from all large buildings, which covers almost all buildings larger than 25,000 square feet—50,000 buildings in all five boroughs
• NYC to ban all-glass facades unless they meet strict performance guidelines
• 500 megawatts of energy storage by 2025, which will help ensure that New York City can use the 9,000 megawatts of offshore wind that New York is developing off our coast (which, in turn, should enable New York to be the epicenter of a rapidly emerging offshore wind supply chain that is developing from Virginia to Massachusetts)
• Mandatory organics recycling citywide
• Measures to reduce GHGs from transportation, including congestion pricing, improvements to the bus system, publicly-available charging for electric vehicles, citywide commitment to renewable diesel fuel for the City’s public fleet, and more street space reclaimed for pedestrians and bicyclists

In the months to come, each of the City’s commitments will be evaluated (and, since this is New York, critiqued) in great detail.  Undoubtedly, further proposals will be developed to ensure that the City meets its climate and energy goals in ever-more cost-effective and timely ways.  And, as time goes on, new energy-saving technologies will increasingly find their place in the City’s buildings. 

So far, much of the news coverage has focused on the requirement to retrofit the City’s largest buildings.  However, the package of measures includes carrots, as well as sticks. 

Recognizing the importance of including financial incentives in the City’s climate strategy, Intro. 1252-C was enacted by the City Council as part of the Climate Mobilization Act, in time to be part of the Mayor’s announcement.  This bill authorizes a Sustainable Energy Loan Program to incentivize building owners and developers to make their buildings as energy-efficient and resilient as possible.  The bill was championed by Councilmember Costa Constantinides and the Mayor’s Office of Sustainability, who led the charge for more than two years to pass this legislation.

The Sustainable Energy Loan Program follows the model of Property Assessed Clean Energy programs (PACE) used in cities and states around the country.  Here’s how this financing works: the program provides a financing option that uses property assessments to finance building retrofits that improve energy efficiency and resiliency. Using PACE, property owners can finance their building improvements with terms equal to the estimated useful life of the improvements, generally up to 30 years.  And, because the financing is linked to the building, owners do not have to resort to often-used personal guarantees to secure their financing. 

For many commercial building owners, PACE financing will be a more cost-effective route than more expensive private debt or other sources of capital that do not align well with the timing of the long-term cost savings that flow from retrofitting their buildings.  Owners who do not want to use personal guarantees to secure financing or who want their financing to run with their property will be especially attracted to PACE financing.  Owners of Class B and C buildings, who often can’t access the lowest cost private debt, may be especially attracted to PACE financing.  Judging from other urban markets that have PACE programs (most recently, Chicago has launched a commercial PACE program), there should be many owners who will want to take advantage of PACE as soon as possible to increase the energy efficiency and resiliency of their buildings, thereby helping to ensure the success of the City’s new climate commitments.

At Capalino, we are excited—and optimistic—to see what will come next.  In the months to come, we will be looking for ways to connect the City’s building owners with PACE capital providers that we work with, because we strongly believe that these linkages will be a critical component of ensuring the success of the City’s updated OneNYC strategy, towards helping the City meet its 40×30 and 80×50 goals, and more broadly, towards making the City a better place for generations to come.

Capalino’s Energy, Environment + Sustainability team works with companies and non-profit organizations to develop and implement low-emission, sustainable business strategies, and to facilitate the adoption of innovative building, energy, resiliency, solid waste, transportation, and water technologies, products, and projects.

To learn more about PACE financing or any of the components of the City’s Green New Deal announcement, contact Executive Vice President Rich Kassel at rkassel@nullcapalino.com or 212.616.5822, or visit www.capalino.com.