Minnesota PACE Program (MinnPACE)

Note:  In 2010, the Federal Housing Finance Agency (FHFA), which has authority over mortgage underwriters Fannie Mae and Freddie Mac, directed these enterprises against purchasing mortgages of homes with a PACE lien due to its senior status above a mortgage. Most residential PACE activity subsided following this directive; however, some residential PACE programs are now operating with loan loss reserve funds, appropriate disclosures, or other protections meant to address FHFA's concerns. Commercial PACE programs were not directly affected by FHFA’s actions, as Fannie Mae and Freddie Mac do not underwrite commercial mortgages. Visit PACENation for more information about PACE financing and a comprehensive list of all PACE programs across the country.

Summary:
In Minnesota, most PACE loans are run through MinnPACE. MinnPACE is a fit for most industries including farms, commercial office buildings, nonprofit organizations (including places of worship), and multi-tenant buildings. Common investments include solar panels, HVAC systems, lighting, and motors. The MinnPACE structure offers a finance package with 100 percent financing, at a fixed rate, for up to a 20-year term. Going forward, payments are repaid through a special property tax assessment . A local government must establish a joint powers agreement with MinnPACE in order to use the program.

History:

MinnPACE officially started in 2010 with the Minnesota State Legislature approving Statute Sections 216C.435 and 216C.436. These statutes gave cities and counties the authorities to place voluntary assessments on commercial properties to cover the cost of energy-efficiency upgrades and renewable energy investments. The original statutes have been modified several times with recent modifications clarifying that new construction projects can use PACE.

Program Requirements:

• Commercial properties must be located in a Minnesota city, county or town that has entered into, or will enter into, a MinnPACE Joint Powers Agreement.

• Property owners may be associations, business entities, farm operations, cooperatives, or any other business payment property taxes. Nonprofit organizations may also leverage the program.
• Multifamily housing properties must have more than four units.
• MinnPACE financing is limited to 20 percent of the assessed or appraised value of the property. 
• The minimum assessment amount is $50,000. The interest rate is determined when the property owner enters into the contract.  

Qualifying businesses must also meet the following criteria: 

• No “Mechanics” or similar liens against the property 
• Current on all taxes 
• Current on mortgage payment(s) 
• Not involved in any bankruptcy proceedings 

For participating counties and municipalities, click here.