New finance tool will jump-start commercial development in Mat-Su

The Matanuska-Susitna Borough has approved a new tool to aid commercial and industrial property development in the borough. Called C-

PACE, for Commercial Property Assessed Clean Energy, the program would allow property developers to work with banks or other lenders to finance improvements through an assessment paid along with municipal property taxes.

Local municipalities must approve the assessment procedures, which Mat-Su’s borough assembly did last Tuesday, Sept. 27.

Jenny Willardson, a local commercial real estate broker, said the plan will jump-start commercial development in Mat-Su by making financing easier, which will help diversify the tax base away from residential property owners.

Stephanie Nowers, who is on the assembly, sponsored the proposal. No public funding is involved.

“The great thing about this program is that it’s completely voluntary and the financing is all private,” Nowers said. “The only thing the borough provides is the opportunity for businesses to take advantage of it,” she said.

Anchorage now has a C-PACE program up and running which has allowed the redevelopment of a major downtown property. Similar programs are now operating in 30 states, Nowers said.

Willardson told the assembly that, “I work with business owners who are looking to buy or lease space and one of the most common problems in our site selection is that it’s difficult to find quality buildings that are well- maintained. Many of the (Mat-Su) Valley’s commercial buildings need improvements both structurally and aesthetically.

“C-PACE retrofits could facilitate some of these improvements, and because of the long amortization period of 20 to 30 years the costs to the owner becomes much more manageable,” Willardson said Tuesday.

The focus of the program is on energy retrofits that reduce heating and lighting costs, but state legislation passed earlier this year, in House Bill 227, expanded the types of projects to include resiliency, or strengthening buildings to withstand natural hazards like windstorms.

The bill also provided that new construction could be financed through C-PACE (an existing version of program, in 2017 legislation, allowed only retrofits to existing buildings) and that refinancing can also be done though C-PACE.

The program will be particularly important to small businesses in Mat-Su.

“Many of these are local mom and pop investors or building owners, for whom raising capital can be more difficult than for an institutional investor,” she said.

The energy improvements typically lower operating costs while resiliency projects would lower insurance costs. “In theory, the low payments for the retrofit improvements would be offset by the savings in operating costs,” Willardson told the assembly.

Operating costs become more predictable, particularly through the energy retrofits. As energy costs rise the burden of increased utility costs is felt to a greater magnitude by owners of less efficient buildings, she said. Lower payments can occur when a loan is paid off over a longer time- period as compared with a shorter period, much like a 30-year home financing compared with a 15-year financing.

Interest rates on loans tend to be lower too, based on experience in other states. Payments are made as a part of a municipal assessment similar to the way a sewer and water improvements are done, and because these have very low default rates they are considered less risky by banks and usually enjoy lower interest rates.

Lower operating and insurance costs tend to add value to a building for the owner but another feature of C-PACE is that the loan is tied to the building rather than the owner. If the property is sold the C-PACE loan goes with it, so that the new owner enjoys the same advantageous terms.

Financing for the Anchorage C-PACE project, by Connecticut-based Nuveen Green Capital and Northrim Bank, of Alaska, was concluded August 29. It involved a $680,000 project to retrofit the “RIM Building” in downtown Anchorage, according to an announcement by Anchorage Mayor Dave Bronson.

Included in the retrofits are heating system updates, new LED lighting, a new hot water heater and installation of a new combined heat and power system that will reduce the building’s reliance on the local electric grid.

The building owner, RIM Investments LLC, is projecting an estimated 42 percent reduction in energy costs, according to the announcement by the Anchorage mayor.