Pub. 3 2021 Issue 4

J U L Y / A U G U S T 2 0 2 1 18 nebraska cpas PACE HELPS NONPROFITS FINANCE ENERGY IMPROVEMENTS BY BOB DAILEY, MCGRATH NORTH Non-profit entities, like churches, often have difficulty finding real estate financing, particularly for energy savings projects. Commercial construction loans typically have a three- to five-year maturity period, making the repayment terms difficult when it comes to energy savings projects. PACE (an acronym for Property Assessed Clean Energy) changes all of this by allowing a non-profit to finance energy efficiency projects using loans with a longer term (as much as 25 years). Nebraska’s PACE program was passed in 2016, but it is underutilized by non-profit entities. In fact, unlike national PACE loans, no Omaha PACE loans have been made for churches or other non-profits. This may be because non-profits (and their advisors) are unaware of how the PACE program can be used for their benefit. PACE gives non-profits a tool to obtain loans with a longer term (as much as 25 years) since the loan is repaid through a voluntary assessment, levied by the local government, on the property that runs with the land. This super-priority lien allows for a lower interest rate and lets borrowers finance improvements that ordinarily wouldn’t be economical. Since the county will enforce the PACE voluntary assessment like any other delinquent tax obligation, lenders feel secure in providing loans with terms of up to 25 years. This often results in a positive cash f low for the non-profit since the savings generated by the energy project are greater than the loan repayment obligation. Non-Profits Are Not Using PACE Loans What kind of owners are likely candidates for a PACE loan? Figure 1 shows the type of PACE loans that have already been made in Omaha. This is heavily weighted in favor of hotels. No non-profit entity loans exist. FIGURE 1 Figure 2 shows the distribution of PACE loans nationwide. As you can see, PACE loans have been completed for religious institutions nationally, even though none have been done in Nebraska. FIGURE 2 Given the potential benefits of PACE loans for non-profit entities, this tool is being underutilized.