Local senator proposes commercial lending program bill for energy improvements, state treasurer opposes

A local elected official is pushing to provide a new financing mechanism for commercial property improvements. Several renewable energy groups support the program, but the state treasurer is concerned it would be unconstitutional and exploited by predatory lenders. (Courtesy of North Carolina General Assembly)

NORTH CAROLINA — A local elected official is pushing to provide a new financing mechanism for commercial property improvements. Several renewable energy groups support the program, but the state treasurer is concerned it would be unconstitutional and exploited by predatory lenders. 

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Sen. Michael Lee (R-New Hanover) co-introduced S.B. 802 — the Commercial Property Assessed Capital Expenditure Program, or C-PACE — and discussed it in the Senate Judiciary Committee Tuesday. 

“Essentially, it’s part of a capital stack,” Sen. Michael Lazarra (R-Onslow), who presented the bill, said in the committee meeting. “It’s a tool in the tool box.”

The bill provides a method for commercial property owners to receive long-term financing from private lenders to pay for improvements, such as renewable energy and water conservation. C-PACE facilitates investment through an assessment on the property owner’s tax bill, which is paid back over a long period of time. Its financing would be administered by the Economic Development Partnership of North Carolina and overseen by the Department of Commerce.

State Treasurer Dale Folwell has strongly opposed efforts to introduce a state C-PACE program in recent years, citing examples of predatory PACE lending in other states. Last year, a Consumer Financial Protection Bureau report found homeowners using PACE faced around a 35% higher risk of mortgage delinquency.

The treasurer’s office sent PCD a statement Tuesday arguing the program was unconstitutional by creating excessive public intervention in private lending transactions. He also argued it contradicted HB 750, limiting government involvement in Environmental, Social, Governance (ESG) investment:

“CPACE is a form of predatory lending. It manipulates the free market to incentivize small businesses to be offered loans that will have higher interest rates and a higher rate of default. It’s also particularly concerning that when used for so-called green energy projects, that by the time the borrower has a problem, the lender is far removed from the transaction and has no liability if the project never meets its cost savings targets, leaving small business owners holding the bag to keep paying for something that isn’t working.”

Lee argued the treasurer’s concerns apply more to PACE issues in the residential sector; PACE lenders in Florida and California have faced lawsuits for predatory financing to households. He said he would not support a PACE residential program at this time in NC due to past controversies and emphasized financing through the program is entirely private.

At least two prominent environmentalist groups, the North Carolina Sustainable Energy Association and the Southern Environmental Law Center, support the bill. 

The senator also said the bill’s language intentionally does not include environmental requirements, allowing energy efficiency projects to include non-renewables such as natural gas.

“C-PACE offers a helpful financing mechanism that can enable businesses to more easily invest in water and energy efficiency, storm resiliency and other economic improvements,” NCSEA policy director Cassie Gavin said. “It just makes sense as a tool that 35 other states are already using.”

Lee and Gavin cited financial services organization Teachers Insurance and Annuity Association of America as a stakeholder in support of North Carolina’s C-PACE program. TIAA owns global investment manager Nuveen LLC, one of the nation’s top investors in the program.

“I think this program is really for the banking institutions who work with C-PACE to really operate in the state,” Gavin said. “I don’t think they would be comfortable without it.”

Lee disagreed with Gavin’s assessment, viewing commercial developers, manufacturers, and property owners as the primary beneficiary of the program. He argued it was an “economic development” bill increasing NC’s attractiveness to businesses who may need to fill financing gaps on development projects.

“Most people think developers are trying to make as much as they can, but they’re usually doing a target return,” he said. “And what this helps them do, hopefully, is to fall within their target return number. So they do a project in North Carolina versus South Carolina or Virginia or Tennessee.”

Gavin argued big developers and commercial property owners wouldn’t be vulnerable to lending abuses due to their capacity to retain legal counsel with expertise in the program.

Lee said he’d worked with the North Carolina Association of County Commissioners to amend the legislation to require counties and municipalities have approval of individualized variations of the program, as a check to ensure protections for small businesses.

Upon asking if area developers lobbied for the bill, Lee said no.

Port City Daily reached out to Cape Fear Development — a group in town behind projects including The Proximity and Project Grace — to ask if it had a position. Brian Eckel, the president, answered no. 

Cape Fear Solar COO Robert Parker expressed excitement over the prospect, calling it “beneficial” and effective for “greater clean energy accessibility.”

Lee was unaware if other major state lobbying groups had thoughts for or against the bill; a Duke Energy spokesperson told PCD the utility is reviewing the legislation and supports energy efficiency improvements.

Tips or comments? Email journalist Peter Castagno at [email protected].

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