Fayetteville-area PACE board weighs pause or closure as two cities consider withdrawal

The PACE (Property Assessed Clean Energy) district’s board heard on Sept. 12 that two founding cities are considering withdrawal and that the board will review whether to pause or close the district at a December meeting. Chris (speaker 4) told members that Springdale intends to pull out at year-end and that the City of Fayetteville is also considering withdrawal "without any projects coming forward before the end of the year," and asked the board to prepare for a December discussion on closing procedures and regional options.

Why it matters: the board’s continued existence depends on city participation and on projects materializing to justify staff and city resources. Steve (Administrator, speaker 5) said the district was created by ordinance and that formally terminating it would require acts by both city councils; he added that bylaws would likely need amendment to allow temporary deactivation rather than full termination. "This district was created by ordinance," Steve said, "to discontinue the district ... would also require an act of the 2 city councils." The board did not take action at the Sept. 12 meeting and scheduled follow-up for December.

Program update: staff reported the addition of a fourth qualified lender, Counterpoint SRE of Connecticut, and named Dr. Michelle Pitale as the lender contact. Steve said Counterpoint will consider loans for projects below $1,000,000 — sometimes as small as $100,000–$250,000 — closing a finance gap for smaller multifamily or commercial projects that larger national lenders often reject. "They are willing to loan for projects at less than $1,000,000," Steve said, calling the addition "a significant development." The program website was cited as advancearkansaspace.com/lenders for a list of qualified lenders.

Project progress and constraints: staff updated the board on a South Fayetteville multifamily project (six buildings, about 36,000 square feet). Steve said audits are complete and that the project is "probably about 25% into" the PACE process but is stalled while staff and the owner reconcile desired improvements and the constraints of the property’s existing mortgage. Steve described options including reassessment and lender refinancing but said the owner’s availability and loan capacity will determine timing. "Within 45 to 60 days we’re gonna know if that's a doable project," he said, while cautioning that some owner-desired improvements may not fit PACE payback timelines.

Finance context: Steve told the board that observed PACE loan rates have tracked commercial construction loan rates and are "now in the ... 8 and a half to 10%" range; he cited a recent PACE loan of $2.5 million that closed at about 7.8% as an example. He emphasized PACE’s value is not always lowest-cost financing but a way to finance longer-life energy improvements.

Retroactive financing and lender obstacles: staff described a separate Fayetteville case in which retroactive PACE financing was blocked by the original mortgage lender. Northbridge had been slated to finance that project, but the mortgage lender would not approve subordination to the PACE loan, leaving the proposal stalled. A lending representative (speaker 2) explained that banks are governed by supervisory loan-to-value and regulatory reporting rules that make accepting subordinate retroactive loans difficult because such loans could be classified into regulatory buckets that trigger reporting to regulators.

Next steps and procedural notes: Chris asked members to expect an update in December unless a major change occurs sooner. Board members also queried public-notice requirements; staff said special meetings have been called on short notice in prior cases. The meeting opened with approval of minutes by voice vote and adjourned after a seconded motion and no objections.

Actions recorded: the board approved meeting minutes by voice vote and later moved and seconded a motion to adjourn; no formal roll-call tallies were recorded in the transcript.

What’s next: the board will revisit the district’s status in December and staff said it will notify Chris and other board contacts if a significant development — for example, lender approval or a finalized project design — requires interim action.