The New York City Department of Finance (DOF) announced the adoption of a final rule regarding New York City's Commercial Property Assessed Clean Energy (C-PACE) financing program. Under the final rule, commercial property owners and developers may obtain C-PACE financing for new construction projects, including renovations and retrofits of existing buildings, as well as funding for improvements to buildings under long-term ground leases.

C-PACE financing programs provide long-term, low-cost loans to commercial property owners and developers to fund renewable energy systems and energy efficiency improvements that will be permanently affixed to the real property. In New York City, C-PACE loans are:

In 2009, the New York State Legislature authorized municipalities to create and administer PACE financing programs under General Municipal Law Article 5-L (N.Y. Gen. Mun. Law §§ 119-ee to 119-gg). Over 60 municipalities in New York State have adopted local laws establishing C-PACE financing programs for commercial properties since the enactment of Article 5-L.

New York City established its own C-PACE financing program, the Sustainable Energy Loan Program, in 2019 under Local Law 96. The New York City Council passed Local Law 96 as part of a larger slate of climate laws, known as the Climate Mobilization Act (CMA), which are designed to drastically reduce the City's carbon emissions. The CMA also includes Local Law 97, which:

New York City's C-PACE financing program helps owners of commercial and multifamily buildings pay for improvements required to comply with the CMA's emissions limits. The DOF later promulgated rules to implement the City's C-PACE financing program under Local Law 96, but the rules did not apply to new construction.

In 2020, the New York State Legislature revised Article 5-L of the General Municipal Law to:

(N.Y. Gen. Mun. § 119-ff.)

The New York City Council passed Local Law 42 in April of 2021 to incorporate the State's amendments to Article 5-L.

To implement the revisions under Local Law 42, the DOF adopted amendments to the City's C-PACE financing rules. The rule amendments:

The DOF also amended the rules to require the fee owner's consent when the borrower of C-PACE financing is an owner of a leasehold interest.

The NYC Accelerator PACE Financing website provides additional information on the City's C-PACE program, including program guidelines, frequently asked questions, and a list of pre-qualified lenders.

Owners and developers have been patiently waiting for the launch of New York City's C-PACE financing program since its adoption in 2019. The original rules implementing the program did not apply to new construction, so owners and developers interested in seeking C-PACE financing for new construction projects were stalled waiting for additional guidance. Following the onset of the COVID-19 pandemic, the first pilot phase of the City's C-PACE financing program finally opened in summer 2021 and has financed two C-PACE loans to date.

The recently adopted amendments to New York City's C-PACE financing rules, therefore, have significant implications for prospective C-PACE borrowers. Owners and developers, including leasehold owners under long-term ground leases, may now access C-PACE financing to construct new buildings or renovate or retrofit existing buildings with energy efficient improvements. These improvements will allow the owner or developer to avoid potentially significant penalties for noncompliance under the CMA, while also benefitting the surrounding community and environment.

Although it remains unclear how quickly New York City and the NYCEEC will implement the newly adopted rules for new construction and ground leases, any additional delays may cause owners and developers to opt for traditional financing over C-PACE financing.

For a collection of resources to assist owners and developers at every stage of a commercial real estate development project, see Commercial Real Estate Development Project Toolkit.