Sourced from the Living Architecture Monitor
In the past, the higher upfront costs of green roofs over conventional roofing often stopped projects before they started. But no longer. Green roofs can now effectively compete with conventional roofing through a new type of financing that covers the cost of eligible energy efficiency, sustainability and resiliency projects.
Through a public-private partnership, Property Assessed Clean Energy (PACE) incentivizes owners to make energy efficiency upgrades by providing 100% financing that is long term, fixed rate and preserves the property owner’s capital. Owners may even elect to defer the first payments by including capitalized interest in the financing - allowing rental income to stabilize before repayment begins and aligning the ongoing utility savings with repayment costs for the improvements. Prepaid service and warranty contracts may be included, lowering maintenance costs as well. By including irrigation, elevators, stairs and related roofing work in the financing, green roofs can now be installed with no upfront capital and have become economically attractive.
Since 1736, when Benjamin Franklin proposed the idea of property tax to pay for the Philadelphia fire department, tax assessment financing has funded public service projects – from new sidewalks to schools. Today, PACE is the nation’s first voluntary property tax assessment applied to individual buildings. It’s an innovative way to pay for reducing the environmental footprint of America’s building stock by helping owners reduce their upfront costs through property tax assessment financing. For projects that typically can’t calculate energy savings or offer payback periods that are too long for conservative investors, PACE transforms the standard return on investment (ROI) model and provides a unique set of positive economic incentives that make environmental upgrades such as green roofs very attractive.
The PACE financing mechanism begins when funds are transferred from a capital provider to a government agency. Funding is then secured through a tax assessment placed on the building and repaid through the property tax bill. As a result, the repayment of the financing is treated as a tax on the property rather a loan expense, greatly improving a project’s economics.