Revisions to C-PACE Program Broaden Efficiency, Resiliency Financing
From the governor’s office in the Atwood Building, Mark Begich (left) gestures toward the Aviator Hotel in the background. His company, Alaska Hotel Group, is upgrading the building with financing enabled by House Bill 227, sponsored by Representative Calvin Schrage (right).
Expand the Scope
C-PACE stands for Commercial Property Assessed Clean Energy. The model has been used in most other states, and Alaska’s version arrived in 2017. The legislature enacted a law, sponsored by Representative Adam Wool of Fairbanks, to let local governments create and manage C-PACE programs, but it wasn’t until April 2021 that the first one began, backed by the Municipality of Anchorage.
The original statute had design flaws, however, which Representative Calvin Schrage learned about at an Anchorage Chamber of Commerce luncheon.
“We had some issues,” he says. “A little too narrow in scope, a little too many strings attached, a little too much red tape. So we worked together to clean that up, expand the scope.”
Schrage, whose district covers the Abbott Loop neighborhood, shepherded a package of amendments to the original C-PACE statute. Those changes allow C-PACE loans for new construction and for resiliency projects; extend the maximum loan term from twenty years to thirty; add a provision for refinancing; base eligibility on the property’s market value instead of assessed value; and eliminate savings-to-investment ratio as a criterion for loans.
The program works by lowering the cost of financing so that commercial property owners can invest in upgrades that save energy. Loan payments are tacked on to property tax assessments, which remain attached to the property even if the owner sells it. As Schrage explains, “The municipality works as a middleman to set up a lien on the property, getting that property owner a lower interest rate and a longer term on that loan.”
The loans themselves are serviced by commercial banks, as usual. For example, Northrim Bank supports C-PACE loans for “local commercial building owners, nonprofits, industrial and manufacturing centers, and multifamily property owners,” says Phillip Reid, vice president of commercial loans.
One business taking advantage of C-PACE to replace decades-old fixtures is the Aviator Hotel, formerly the Holiday Inn in downtown Anchorage. The current owner is Alaska Hotel Group, a venture led by former US senator and Anchorage mayor Mark Begich and his partner, Sheldon Fisher.
Governor Mike Dunleavy signs House Bill 227 into law, with the lead sponsor, Representative Calvin Schrage, looking over his shoulder.
Begich says the renovation, now underway, is “taking ‘80s technology of energy and converting it into new technology using co-generation, which will help us take surplus heat to heat our sidewalks and use it also for generation of energy in our facility.” He says the project already has $6.5 million committed, and HB227 expands the capacity for C-PACE financing to as much as $12 million.
“This money comes from other investors from around the country that partner with local banks here, so it brings more money into this economy,” Begich says. “For every dollar we’re paying in debt, we’re saving that in energy costs.”
Senator Shelley Hughes of Palmer, who sponsored Schrage’s bill in the Senate, noted at the time of its passage that HB227 enables developers to confidently choose more efficient designs without the traditional economic burden.
Recognizing the potential to help his own project, Begich actively urged passage of the bill. In the Alaska House, it had only four votes against, and it passed the Senate with no opposition. When the House concurred with the Senate’s changes, Kenai Peninsula Representatives Ben Carpenter and Ron Gillham switched to “yes” while Wasilla Representatives David Eastman and Christopher Kurka remained opposed.
One of Begich’s successors as mayor, Dave Bronson, welcomes the C-PACE revisions as a way for government buildings, too, to take advantage of efficiencies that save taxpayer money.
As an example, Mike Robbins, executive director of the Anchorage Community Development Authority, cites the 38 percent drop in electricity costs for city-owned parking garages after installing new and better lighting. “We went through our garages, starting late last year, and we upgraded all of our garages. We changed out all of our fixtures,” Robbins says. “It’s not often in government that you look at a line item on your budget every month and you’re spending less.”
Mayor Bronson also notes that C-PACE improvements make facilities more secure and disaster ready. The resiliency provision opens up financing for seismic retrofits, utility microgrids, or other measures that can reduce damage from earthquakes, fires, or windstorms.
Such things were covered by the 2017 bill, in part, but Shrage says real-world experience showed room for a better law. “When we came back and talked to developers and commercial property owners, it made sense to make these changes,” he says. “We all learn as we work through the system, and I think there were some lessons learned from that original bill.”
Calling the new law a “win/win,” Begich says, “The best part is it won’t cost the state government a dime. It doesn’t cost the local government a dime. It’s just creating the vehicle so we can make sure we can do this efficiently.”