Making Green Work: Nonprofit Finance Program Enables Capital Improvements and Lower Operating Expenses

Key Takeaways:

• Energy infrastructure finance program supports capital improvements by providing 100 percent upfront funding, reducing fundraising burden and improving cash flows.
• Program can be applied to new construction, retrofits and adaptive reuse projects.
  • Baltimore-based human services organization, Volunteers of America Chesapeake, builds out unused space with C-PACE financed energy efficiency measures.
  • Connecticut based animal shelter, The Simon Foundation reduces operational expenses with 20-year Commercial PACE financing for solar.
  • Many property types and capital improvements qualify for the program (available in 16 states).$1.3 million in private funding to two charities by Greenworks Lending demonstrates utility of financial tool:

Reducing the fundraising burden against operational expenses or minimizing the scale required of a capital campaign for physical improvements is possible. A new financial tool, recently deployed by both Volunteers of America Chesapeake and The Simon Foundation, demonstrates a capital conservation technique that can be utilized by countless nonprofit organizations throughout the U.S.: Commercial PACE Financing.

Commercial PACE financing (C-PACE) allows for commercial property owners, including charitable organizations, to finance 100 percent of energy-saving capital improvements for their properties. A wide range of energy-saving “measures” can be covered as part of new construction, expansions and retrofits. In other words, if you are replacing an end-of-life air conditioning system in your administrative offices or raising capital for a newly constructed program facility, C-PACE should be considered as part of your capital planning.

Mark Greenberg, founder of The Simon Foundation, Connecticut’s largest no-kill animal shelter, explained his use of C-PACE financing from Greenworks Lending at the foundation’s 36,000-square-foot animal rescue and adoption center.

Mark Greenberg, founder of The Simon Foundation with Alexandra Cooley, co-founder of Greenworks Lending and (in arms) Graham, who is available for adoption.

“With such a large roof and high electric expenses, the idea of solar made sense, but it is capital intensive; and that typically doesn’t work well for charities,” stated Greenberg. “Greenworks Lending’s C-PACE financing offers a term that matches the useful life of the panels which allows our savings from day one to exceed the cost of financing.”

The project is projected to be cash flow positive from day one. Long-term operational expenses related to electricity will be lower, meaning development efforts can more closely align with mission.
“It is very hard to raise funding for an electric bill, but for the services we provide, that’s something our donors can get behind,” suggested Greenberg.

The 100 percent funding is especially beneficial to younger organizations without facility or maintenance endowments, particularly when equipment fails or infrastructure is nearing end of life.

“The C-PACE program is designed for far more than solar installations,” explained Greenworks Lending co-founder and COO, Alexandra Cooley. “The program is the result of years of effort to develop an effective public-private policy that removes the financial barriers to energy efficient and renewable energy property improvements.”

The state legislated program allows for the finance of energy-saving property improvements through property tax assessments. Repayment occurs through the property tax bill as a special assessment, which typically allows for 15 to 20 year fixed-rate financing. The financing option allows charitable organizations to own, rather than lease energy-saving infrastructure, such as solar panels and thus benefit from the full energy savings, utility incentives and potential income. Permanent equipment that can also be financed includes furnaces, boilers, HVAC, building controls and building envelope, which can cover windows, roofing, insulation to name a few.

New construction, additions and adaptive reuse project developers can benefit from working C-PACE into their capital planning.

In Baltimore, Volunteers of America Chesapeake continued its re-development of a facility acquired in 2012 by building out a final 5,000 square feet of its space into offices and a community resource center in support of returning citizens. Greenworks Lending provided $785,000 in long-term capital to fund energy efficiency and water conservation aspects of building improvements.

“By utilizing this space, and doing so with energy efficiency in mind, we are able to accomplish a number of goals including adding value to our property, increasing our ability to serve residents and the East Baltimore community, as well as leasing space to third party service providers,” explained Russell Snyder, Volunteers of America, Chesapeake’s CEO. “By financing the energy saving components of our construction through C-PACE, we can maximize our working capital for this expansion.”

Solomon Hejirika, executive program director at Volunteers of America Chesapeake in Baltimore discusses construction plans with Russell Snyder, President of VOAC.

Alexandra Cooley concluded, “We founded Greenworks Lending to scale the success of C-PACE programs nationally by providing a common capital resource to commercial properties. The benefits to property owners and communities of energy saving projects are significant; but for me, it’s even more satisfying when we can apply the program to meet the needs of a charitable organization.”

Cooley cautioned, however, that not all properties or projects can fit the program or Greenworks Lending’s current coverage area. Properties such as schools and churches sometimes prove difficult based on their revenue models and available alternative uses for the commercial property, which like a mortgage guarantees the loan.

Credit: Greenworks Lending