C-PACE Assessments and Their Impact on Property Tax Bills
C-PACE (Commercial Property Assessed Clean Energy) assessments are a financing mechanism that allows property owners to invest in energy efficiency and renewable energy projects by adding a long-term assessment to their property tax bill. Here’s how C-PACE assessments affect property tax bills:
Impact on Property Tax Bills
- Additional Charges: C-PACE assessments appear as separate charges on the property tax bill, distinct from regular property taxes. These charges reflect the fixed annual payment of principal and interest on the original C-PACE financing amount.
- Payment Structure: Repayment terms typically match the useful life of the improvements, often spanning 10 to 30 years. The assessment is paid alongside regular property taxes, usually once or twice annually.
- Transferability: The C-PACE assessment transfers with property ownership, meaning that any new owner must take on this obligation. This can impact property sales, as buyers consider these added costs when purchasing.
- Cost Allocation in Leases: In triple net leases, tenants often cover property taxes, which includes the C-PACE assessment. This means that tenants indirectly pay for the C-PACE financing, although they may benefit from reduced utility bills due to energy efficiency upgrades.
Financial Implications
- Increased Costs: While C-PACE offers benefits like energy savings and improved property valuation, it adds a layer of expense that property owners (or their tenants, in the case of triple net leases) must consider in their financial planning.
- Potential Risks: Unpaid C-PACE assessments can lead to liens on the property, and the assessment typically has senior priority over existing mortgages, except for unpaid property taxes. This can complicate refinancing and mortgage arrangements.
Overall, C-PACE assessments provide a unique opportunity for property owners to invest in sustainability while spreading the costs over time through property tax bills. However, these assessments can also add complexity and costs that must be carefully managed and communicated to all parties involved in property transactions.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-do-c-pace-assessments-affect-property-tax-bills/
