Downtown Omaha, Nebraska. Credit: Pat Hawks / Flickr / Creative Commons

Lincoln, Nebraska, is expected to follow Omaha in establishing a PACE program under the state’s 2015 law.

A 105-year-old building being renovated into an upscale hotel in downtown Omaha is Nebraska’s first Property Assessed Clean Energy project.

Property Assessed Clean Energy, also known as PACE, is a financing tool that lets building owners pay for renewable and energy efficiency projects through an add-on to their property tax bills.

The Nebraska Legislature passed a law in 2015 allowing municipalities to create PACE programs. Omaha recently created an administrative structure for approving PACE projects, and Lincoln is expected to do so shortly.

The first project is the conversion of a seven-story office building into a 90-room hotel that will carry Hilton’s higher-end Curio brand. A $3.4 million PACE loan will be used to add insulation, efficient lighting, electrical improvements, water-saving bathroom fixtures and efficient heating and cooling systems. The Peregrine Hotel, as it’s been named, is expected to open next spring in time for the Berkshire Hathaway shareholder convention.

PACE is “a fantastic tool for a project like that,” said Kevin Anderson, Omaha’s deputy chief of staff of economic development and development services.

A lender provides upfront funds and is repaid over a couple decades via property tax bills. One advantage is that the repayment obligation is assigned to a property, not any particular owner. That means building owners can make longer-term investments without worrying whether they will own the property for the entire payback period.

PACE programs have been authorized in 34 states and the District of Columbia. However, lending programs are active in only 20 states and the District, according to PACE Nation, a nonprofit that advocates for the financing method.

Getting a program up and running can be time consuming and messy, according to David Gabrielson, PACE Nation’s executive director. It takes two different units of government – and often two contrasting personality types – one to authorize the programs and another to set up and administer them.

“Sometimes it all happens at once,” Gabrielson said, but sometimes people “get excited and get legislation passed, and then don’t have the capacity to get a program started.”

Creating Omaha’s administrative structure was a laborious and time-consuming ordeal, even more difficult than getting a state law passed, according to Rob Shear, chief executive officer of PACE Sage Capital. He was instrumental in moving PACE forward in Nebraska but credits a local councilwoman, Aimee Melton, with making it happen.

“It if wasn’t for her, it wouldn’t have gotten passed,” Shear said.

Now that Omaha can approve PACE loans, Shear expects momentum to build in Nebraska. Lincoln has drafted an ordinance that Shear said is likely to go to a city council vote this month. And several Omaha suburbs have expressed interest in using Omaha’s process for projects in their communities. Nebraska’s law was written to allow that. It was also amended in 2017 to extend the use of PACE funding to rural counties and for agricultural projects.

PACE works especially well for hotels, Shear said, because the owners can put a charge for PACE repayment on guests’ bills. Because borrowers pay for PACE as an addition to their property tax, it’s considered an assessment they can charge to customers.

“When (hotel owners) know they can get this capital to help them do a redevelopment, and can get some or all of it back from their guests, it’s a no-brainer,” said Shear. “Hotels have become an important asset class of real estate now using PACE.”

And PACE model is establishingbuilding a broader track record, too, however. NSo far, nearly 1,500 energy projects worth $588 million are completed or underway nationwide. Gabrielson estimates that nearly 9,000 jobs have been created as a result.

“They all report strong and growing interest, and the pipeline of potential projects keeps growing,” he said. “Commercial PACE is slow to build out, but steady. It’s like a big long freight train that takes a long time to get up to speed.”

Karen spent most of her career reporting for the Kansas City Star, focusing at various times on local and regional news, and features. More recently, she was employed as a researcher and writer for a bioethics center at a children’s hospital in Kansas City. Karen covers Iowa, Missouri, Kansas, Nebraska, North Dakota and South Dakota.