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How to Pay for Looming Energy-Efficiency Upgrades?

Frank Lovece in Green Ideas on April 1, 2019

New York City

PACE Financing IV
April 1, 2019

A trio of bills now before the New York City Council, all introduced by Queens Democrat Costa Constantides, seek to help buildings, including co-ops, pay for costly retrofits that will significantly reduce their carbon emissions. It’s part of the city’s campaign to trim overall greenhouse gas output by 40 percent of 2005 levels by the year 2030

One of the bills, Intro. 1252, would allow New York City to have a type of energy-loan program available in the Districts of Columbia and 33 states, including New York. It’s called PACE, an acronym for Property Assessed Clean Energy

“PACE is a voluntary, municipally sponsored financing program that allows building owners to get long-term, inexpensive financing to do qualifying types of renovation projects that have a public benefit, which is reduced greenhouse emissions by the building,” says Peter Erwin, an associate at the New York City Energy Efficiency Corp. (NYCEEC), a nonprofit specialty finance company. Instead of repaying the lender, the co-op makes payments through an assessment on its property taxes, with a corresponding tax lien on the property. 

PACE financing is intended to help boards pay for the requirements of another of Constantides’s three bills, Intro. 1253, which would set stringent targets for buildings over 25,000 square feet to reduce their greenhouse gas emissions. But there may be a gigantic loophole.

People who testified at a city council hearing noted that buildings with even a single rent-regulated unit are exempt from Intro. 1253’s emission requirements. The Real Estate Board of New York estimates this means that more than a third of all buildings over 25,000 square feet will not be forced to limit their greenhouse-gas emissions. And according to the Natural Resources Defense Council, that means the city would be unable to achieve its greenhouse-gas reduction goal by 2030. 

Help may be on the way. A bill now before the state legislature would eliminate the Major Capital Improvement (MCI) pass-along, in which landlords making capital improvements can raise rents by a certain percentage of the improvement’s cost. The existing MCI program was enacted in the 1970s as a way to incentivize landlords to perform repairs on rent-regulated apartments. 

In the meantime, where do Intros. 1252 and 1253 stand? “We’re still examining how PACE is going to work on the nitty-gritty throughout the city” says Terence Cullen, a spokesman for Constantides. He reiterates that the program runs smoothly statewide and in many parts of the country. 

“I’m hoping there will be modifications” to the bills, says Mary Ann Rothman, executive director of the Council of New York Cooperatives & Condominiums. While strongly supportive of reducing greenhouse gases and of Constantides’s efforts, she calls requirements in the bills’ initial drafts “very, very onerous. I’m hoping they’ll be toned down in the final versions.” 

“Co-op and condo owners and boards are all for taking necessary green measures and improving the environment,” says attorney Geoffrey Mazel, a partner at Hankin & Mazel. “But legislation this profound needs to be looked at carefully, and we all need to take a deep breath and figure out how to move ahead.”

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