Frequently Asked Questions
Why should the county be involved with facilitating private financing for private property?
C-PACE utilizes property assessments for repayment, based on the belief that energy efficiency and water conservation upgrades are in the public interest. The property assessment is a critical aspect of making C-PACE work as it reduces the risk for lenders.
Counties participate because it's a win-win for their economic development goals. When property owners reduce their utility costs, they have more income to recirculate into the community. Moreover, the upgrades put local contractors and installers to work.
To enable these economic benefits, the county creates a county-wide district and places voluntary assessments on individual parcels of commercial property, and facilitates repayment between private property owners and private capital providers on property taxes, similar to other types of special assessments and Special Improvement Districts. Many people are familiar with seeing a line-item for sewer or sidewalk upgrades on their property taxes. C-PACE would work the same way. It is a tried-and-true financing method.
Does the county have any other role?
If there is a statewide program administrator, the county’s only task will be to place the voluntary tax assessment on individual parcels of commercial property, facilitate repayment on property taxes once a year, and remit payment to the private financier or statewide program administrator.
How is the program administration at the state or county level paid for? Will this require appropriations by the state or my county?
The most efficient way to implement C-PACE in Montana would be through a single, statewide program administrator like the Montana Facilities Finance Authority for counties to opt into. No matter how it's administered, the C-PACE program administration pays for itself with a 1-2% economic development fee on each project. If there is a statewide program administrator, they would get a percent, and the county could get a percent as well.
How does C-PACE ensure that my annual utility savings will be greater than my annual assessment payment?
To ensure that C-PACE projects guarantee future energy savings for property owners, C-PACE legislation requires that a licensed architect or engineer must complete a baseline energy audit before the project is approved. This informs how specific measures will perform in your building. After the energy project is completed, the unit of local government must obtain verification that the renewable energy system or energy efficiency improvement was properly installed and is operating as intended.
What happens if I want to sell the property while there is still an outstanding C-PACE assessment?
If a commercial property owner sells their C-PACE-assessed property, the assessment transfers to the new owner as it was an investment in the property. The property assessment must be disclosed to potential buyers, who should be assured by the fact that their annual utility bill savings are designed to be greater than C-PACE payments.
What happens in the case of foreclosure?
The best way to think about it is: "Why is foreclosure taking place?" and "Who holds the deed to the property?"
1. If the property owner is delinquent on mortgage payments to the lender
If the mortgage holder is foreclosing on the property, they take claim to the deed once they gain ownership. As they foreclose, the C-PACE lien is the senior lien so any delinquent C-PACE payments will be paid off first and the remaining C-PACE lien remains with the property. The mortgage holder will make the C-PACE assessment payments, along with the rest of the property taxes, as long as they hold the deed so they don't lose the property.
Because of the impact to existing mortgage lenders, Montana C-PACE legislation will require “mortgage lender consent” before any C-PACE application is approved. This means the current mortgage lender must be notified and approve the C-PACE assessment.
2. If the property owner is delinquent on property taxes and C-PACE assessment to the county
The county will deal with the situation as they always do-- place a tax lien on the property and collect or ultimately foreclose. If the municipality is the entity foreclosing (which is VERY RARE), the responsibility for the remaining CPACE assessment depends on their tax codes.
In some areas the municipality is still responsible for making assessment payments to schools, fire houses, etc. on behalf of the property while they have the deed to the property. However, when this is the case, the municipality is usually made whole at the time of the sale of the property to a new owner. So there is a possibility for a cash flow "loss" but not a permanent loss since they will recover what was paid at the time of sale of the property. We are doing further research into this question in the Montana tax code.
How are contractors chosen and vetted?
This will be determined in the implementation of C-PACE by counties or a statewide program administrator. However, we envision the C-PACE program administrator creating and maintaining a list of qualified contractors based on customer reviews, updated certifications and qualifications, and those who complete required C-PACE trainings.
Is the interest on C-PACE assessments tax-deductible?
The IRS released guidance in June that said subject to various restrictions, the interest portion of a PACE payment can be treated as a deduction to personal income taxes:
For business taxes, there has been no official statement from the IRS, so please consult your tax professional.
Who provides the financing for C-PACE projects?
In other states nationwide, private financing (banks, credit unions, investment funds, etc) has been the primary source of capital for C-PACE projects. An open system is maintained, enabling a variety of private capital providers to participate on a project-specific basis.
Still have questions?
Your question will be sent to a lead organizer on clean energy for Northern Plains Resource Council. We try to respond to all inquiries in a timely fashion but if you would like immediate assistance, please call (406) 248-1154.