Alabama Senate Bill 220 passed the House and Senate on June 4th, 2015 and became law when Gov. Robert Bentley signed it on June 12th, 2015. Sounds great! Right??? Here’s what it means.
What is SB220?
Quite simply SB220 allows any improvement district (think downtown redevelopment authority) and municipalities (think counties and cities) to create a property assessed clean energy (PACE) program. SB220 primarily focuses on upgrades to existing real property (non-residential) to improve its resilience to storm-related events such as high winds and flooding. Energy efficiency and renewable energy are included in this definition.
What is PACE?
PACE is a simple and effective way to finance energy efficiency and renewable energy upgrades to buildings that are repaid through a small increase in property taxes. PACE can pay for new heating and cooling systems, lighting improvements, solar panels, water pumps, insulation, and many other efficiency and resiliency improvements for almost any property – homes, commercial, industrial, non-profit, and agricultural.
Why is PACE a good thing?
PACE is effective because the money for an improvement project is typically borrowed from a governmental authority and comes with a low interest rate and a long payback period. These two things taken in concert allow many more projects to become good economic deals.
Think about this hypothetical example. You run a small local restaurant and your heating and cooling system dies. Even your cheapest quotes come in at over $6,000 and those units aren’t even energy-efficient! That’s a ton of money and you may not have the cash to pay for it. In a normal world you’d go to your bank to get a loan or put it on your company credit card.
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Without PACE – Bank Loan
- $6,000 loan
- 5 year repayment period
- 6% interest
- = $116.00 monthly payment
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Without PACE – Credit Card
- $6,000 loan
- 5 year repayment period
- 17% interest
- =$149.00 monthly payment
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With PACE
- $7,500 loan
- 15 year repayment period
- 3% interest
- =$51.79 monthly payment
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Under this example you’d be able to buy the much more efficient heating and cooling unit for at least half the monthly payment! You might be able to even add air sealing, insulation, solar or other upgrades and still have a cheaper monthly payment. We’d guess that you think PACE is a good idea!
Keep in mind that SB220 only authorizes this type of program for commercial buildings; but, hopefully future legislation will bring this option to residential property owners as well. The more Alabama businesses that complete upgrades through a PACE program, the more money they can reinvest in their business further stimulating the local economy. Also, these business are likely to experience less down-time or disruption should a natural disaster hit.
When will PACE come to Alabama?
Well…. that’s a good question. SB220 is only what is considered ‘enabling legislation’. It doesn’t actually create a PACE program but simply allows local governments and improvement districts to do so. Now we wait for the first municipality in Alabama to jump on it AND a state agency to be given oversight authority. Since the legislation was born out of South Alabama and originally intended for natural disaster resiliency, we’d put our bet on a city like Mobile. Of course we could be wrong! If you would like us to work with your city to implement PACE, let us know!
