A BILL TO BE ENTITLED
AN ACT TO ADVANCE BUILDING RESILIENCY AND UTILITY EFFICIENCY IN NORTH CAROLINA BY AUTHORIZING A STATEWIDE PROGRAM TO UTILIZE ASSESSMENTS TO REPAY NONPUBLIC FINANCING OF COMMERCIAL BUILDING IMPROVEMENTS THAT WILL PROMOTE ECONOMIC DEVELOPMENT, REDUCE UTILITY BILL COSTS, AND HARDEN COMMERCIAL BUILDINGS AGAINST STORM AND FLOOD DAMAGE.
The General Assembly of North Carolina enacts:
SECTION 1.  Chapter 160A of the General Statutes is amended by adding a new Article to read:
"Article 10B.
"Commercial Property Assessed Capital Expenditure and Resilience Act (C‑PACE).
"§ 160A‑239.11.  Purpose; findings.
This Article shall be known and may be cited as the "Commercial Property Assessed Capital Expenditure and Resilience Act (C‑PACE)." This Article authorizes the establishment of a statewide C‑PACE program that local governments may voluntarily join to allow willing owners of commercial, industrial, agricultural, nonprofit, and multifamily residential properties with five or more dwelling units to obtain low‑cost, long‑term financing for qualifying improvements, including energy efficiency, water conservation, renewable energy, and resilience projects, secured by an assessment and lien authorized by this Article. The State finds that a valid public purpose exists because the use of a C‑PACE program creates an additional financing mechanism for property owners to use private funds to finance improvements to their eligible property, thereby driving economic development by creating a diversity of jobs in the resilience and clean energy sectors of the economy. The assessment requires minimal upfront costs and provides a more accessible financial mechanism to fund improvements that will increase the tax value of the affected properties at minimal administrative cost to local governments. C‑PACE improvements allow property owners to save on their utility bills because the improvements lead to energy or utility savings and will result in improved indoor air quality or increased resilience, which will increase the ability of communities and local governments to respond to natural disasters and improve public health.
"§ 160A‑239.12.  Definitions.
The following definitions apply in this Article:
(1)	Capital provider. – A private entity, or the private entity's designee, successor, and assigns, that makes or funds qualifying improvements under this Article.
(2)	Commercial property assessed capital expenditure program (C‑PACE program). – A program wherein a C‑PACE assessment and C‑PACE lien are voluntarily imposed by a local government on qualifying commercial property to pay for the costs of qualifying improvements.
(3)	C‑PACE assessment. – A voluntary assessment imposed on a commercial property by a local government under this Article pursuant to an assessment agreement for the total amount of the C‑PACE financing. The voluntary C‑PACE assessment shall not constitute a tax.
(4)	C‑PACE financing. – Direct financing between capital providers and property owners within the jurisdictional boundaries of a local government participating in the C‑PACE program to finance qualifying improvements.
(5)	C‑PACE lien. – A lien to secure the C‑PACE assessment that remains on the qualifying property until paid in full.
(6)	C‑PACE toolkit. – A comprehensive set of documents developed by the statewide administrator in consultation with stakeholders, and subject to approval by the program sponsor, that describes the C‑PACE program guidelines, application approval criteria, and forms consistent with the administration of the program as provided for in this Article.
(7)	Financing agreement. – The contract in which a property owner agrees to repay a capital provider for the C‑PACE financing provided, including, but not limited to, any finance charges, fees, debt servicing, accrual of interest and penalties, and any terms relating to the treatment of prepayment and partial payment, and the billing, collection, and enforcement of the C‑PACE financing.
(8)	Local government. – Any county or city.
(9)	Program sponsor. – The North Carolina Department of Commerce.
(10)	Project application. – The application submitted to the statewide administrator by the property owner to demonstrate that a proposed project qualifies for C‑PACE financing under this Article.
(11)	Property owner. – The owner or owners of a commercial property whose names are listed on the property title, duly recorded in the appropriate office of the register of deeds.
(12)	Publicly‑owned land. – Property that is owned by a State or local governmental entity and that is subject to a leasehold.
(13)	Qualifying commercial property. – Privately owned commercial, industrial, or agricultural real property or privately owned residential real property consisting of five or more dwelling units. This term includes property owned by nonprofit, charitable, or religious organizations.
(14)	Qualifying improvement. – A permanent improvement that is affixed to a qualifying commercial property and that includes one or more of the following approved by the program sponsor:
a.	Energy efficiency measure. – An equipment, physical component, or program change implemented that results in less energy used to perform the same function, including, but not limited to, energy produced from a combined heat and power system that uses nonrenewable energy resources.
b.	Resiliency measure. – An equipment, physical component, or program change implemented that includes, but is not limited to, storm retrofits, flood mitigation, stormwater management, wind resistance, indoor air quality improvement, energy storage, and microgrids and other resilience projects.
c.	Renewable energy measure. – (i) A solar electric, solar thermal, wind, hydropower, geothermal, electric vehicle charging station, or ocean current or wave energy resource, (ii) a biomass resource, including agricultural waste, animal waste, wood waste, spent pulping liquors, combustible residues, combustible liquids, combustible gases, energy crops, or landfill methane, (iii) waste heat derived from a renewable energy resource and used to produce electricity or useful, measurable thermal energy at a retail electric customer's facility, or (iv) hydrogen derived from a renewable energy resource. For purposes of this sub‑subdivision, the term "renewable energy measure" does not include peat or a fossil fuel.
d.	Water conservation measure. – An equipment, physical component, or program change implemented to decrease water consumption or demand or to address safe drinking water.
(15)	Statewide administrator. – The Economic Development Partnership of North Carolina.
"§ 160A‑239.13.  Statewide C‑PACE program – authorization.
(a)	The State authorizes a statewide C‑PACE program in which any local government may participate.
(b)	The program sponsor is hereby authorized under this Article to oversee the C‑PACE Program.
"§ 160A‑239.14.  Statewide C‑PACE program – administration.
(a)	In the administration of the C‑PACE program, the statewide administrator shall do the following:
(1)	Prepare a C‑PACE toolkit in consultation with local governments and the Program Sponsor prior to accepting applications for C‑PACE financing, which shall include, at a minimum, all of the following:
a.	A form of assessment agreement to be used between a local government and property owner specifying the terms of the C‑PACE assessment.
b.	A form of notice of C‑PACE assessment and C‑PACE lien.
c.	A form of assignment of notice of C‑PACE assessment and C‑PACE lien from the local government to the capital provider.
d.	A form of consent to a C‑PACE assessment by the holder of the mortgage or deed of trust.
e.	A form of project application with checklist requirements and corresponding documentation that will be required by the statewide administrator to approve a project application.
(2)	Impose fees to offset the actual and reasonable costs of administering the C‑PACE program, including:
a.	An application fee not to exceed seven hundred fifty dollars ($750.00).
b.	A processing fee assessed to the property owner whose application for C‑PACE financing is approved, which shall be one percent (1%) of the total amount financed but shall not be more than twenty‑five thousand dollars ($25,000).
(3)	Establish the process for reviewing and evaluating applications, which shall, at a minimum, require the following to be provided or demonstrated:
a.	For an existing building: (i) where renewable energy, energy efficiency, or water conservation measures are proposed, an energy analysis by a licensed engineering firm or engineer or another qualified professional listed in the C‑PACE toolkit stating that the proposed qualifying improvements will result in more efficient use or conservation of energy or water, the reduction of greenhouse gas emissions, or the addition of renewable sources of energy or water or (ii) where resilience measures are proposed, certification by a licensed engineer stating that the qualifying improvements will result in improved resilience.
b.	For construction of a new building, certification by a licensed engineering firm or engineer stating that the proposed qualifying improvements will allow the proposed project to exceed the energy or water efficiency requirements of the current State building code, or in the case of a resiliency measure, achieve compliance with a national model resiliency standard.
(4)	Accept and approve project applications for C‑PACE financing.
(5)	Require any commercial property owner seeking C‑PACE financing to certify that the applicant:
a.	Is the legal owner of the benefited property and that title to the benefited property is not in dispute.
b.	Is current on all mortgage payments and property taxes.
c.	Is not insolvent or in bankruptcy proceedings.
(6)	Upon execution by the local government of (i) C‑PACE assessment and C‑PACE lien and (ii) a notice of assignment of C‑PACE assessment and C‑PACE lien related to an approved project application, record such documents in the office of the register of deeds in the county in which the approved property is located. The statewide administrator may delegate recording duties to the property owner and the capital provider.
(7)	Submit a report to the Program Sponsor annually.
(b)	The provisions of Chapter 150B of the General Statutes shall not apply to the C‑PACE toolkit or any actions of the program sponsor or statewide administrator in the administration of the program.
"§ 160A‑239.15.  Local government participation.
(a)	A local government seeking to participate in the C‑PACE program shall adopt a resolution that includes all of the following:
(1)	A grant of authorization for the C‑PACE program to operate within its jurisdictional boundaries and for the statewide administrator to provide the administrative services described in G.S. 160A‑239.14.
(2)	A statement that the local government intends to (i) authorize C‑PACE financing, (ii) authorize the imposition of C‑PACE assessments and C‑PACE liens on qualifying commercial properties benefitting from qualifying improvements to secure repayment of C‑PACE financing and assign the same or the right to repayment proceeds to the capital provider providing C‑PACE financing, and (iii) delegate billing, collection, and enforcement duties for the C‑PACE assessment and C‑PACE lien to capital providers.
(3)	A statement that the amount of a C‑PACE financing and related assessment repayment terms shall be pursuant to the related financing agreement.
(4)	A statement identifying the local government department or employee that shall, upon receipt of an approved project application for C‑PACE financing within its jurisdictional boundaries from the statewide administrator, execute the documents included in G.S. 160A‑239.14(a)(1)a., b., and c. on behalf of the local government.
(5)	A statement that the local government shall be reimbursed by the statewide administrator for the actual and reasonable costs associated with the performance of the duties described in subdivision (4) of this subsection.
(b)	Pursuant to G.S. 160A‑239.17(4), no funds for repayment of the voluntary C‑PACE assessment should be received by the participating local government. However, if any such funds are received by the participating local government, such funds shall be custodial funds as described in G.S. 159‑13(a) for the benefit of the capital provider.
"§ 160A‑239.16.  Immunity and foreclosure process.
(a)	Neither the State nor any participating local government, its officers, or employees shall be liable for any actions taken pursuant to this Article. A local government shall not be financially or legally liable or responsible for any assessment and lien imposed within its jurisdiction under the program.
(b)	The capital provider shall be solely responsible for all billing, collection, and enforcement of the C‑PACE assessment and C‑PACE lien.
(c)	Delinquent C‑PACE assessment payments shall incur interest and penalties as specified in the financing agreement and shall accrue to the C‑PACE lien.
(d)	Enforcement of a delinquent C‑PACE assessment payment by the capital provider shall be in the manner of the foreclosure of a deed of trust as provided in Article 2A of Chapter 45 of the General Statutes, except that C‑PACE assessment payments not yet billed or due may not be accelerated or extinguished by foreclosure of the delinquent assessment payment or payments. Any outstanding or delinquent State, local, or federal taxes or liens at the time of the foreclosure proceeding shall be satisfied first, but the C‑PACE lien shall be superior to all other liens on the property from the date on which the notice of the C‑PACE lien was recorded until the C‑PACE lien, interest, penalties, and charges accrued or accruing are paid.
"§ 160A‑239.17.  C‑PACE assessment and lien.
The following shall apply to the C‑PACE assessment and lien:
(1)	The lien shall be inferior to all prior and subsequent State, local, and federal taxes or liens and superior to all other liens on the property from the date on which the notice of the C‑PACE lien is recorded until the C‑PACE lien, interest, penalties, and charges accrued or accruing are paid.
(2)	The lien shall run with the land, and that portion of the C‑PACE assessment that is not yet due may not be accelerated or eliminated by foreclosure of a property tax or other lien.
(3)	The recorded C‑PACE lien may not be contested on the basis that the improvement is not a qualified improvement or for any procedural or substantive irregularities related to the financing.
(4)	For C‑PACE assessments for leaseholds, the C‑PACE assessment may be levied on the leasehold or possessory interest, including on publicly‑owned land, subject to the consent of the entity owning the property and shall be payable by the owner of the leasehold or possessory interest.
"§ 160A‑239.18.  Financing.
(a)	The financing for assessments imposed under this Article may include, but is not limited to:
(1)	The cost of materials and labor necessary for the installation or modification of a qualified improvement.
(2)	Permit fees.
(3)	Inspection fees.
(4)	Financing fees.
(5)	Application and administrative fees.
(6)	Project development and engineering fees.
(7)	Interest reserves.
(8)	Capitalized interest, in an amount determined by the owner of the commercial property and the capital provider.
(9)	Any other fees or costs incurred by the property owner incident to the installation, modification, or improvement on a specific or pro rata basis, as determined by the local government.
(b)	The term of the C‑PACE financing may not exceed the weighted average useful life of qualifying improvements.
(c)	The financing agreement between the capital provider and the property owner shall be negotiated by the parties, including all terms and conditions of repayment, including interest, penalties, and prepayment.
"§ 160A‑239.19.  Lender consent.
Prior to entering into an assessment agreement, the property owner must submit to the statewide administrator a written statement, executed by each holder of the mortgage or deed of trust on the property securing indebtedness, indicating their consent to the C‑PACE assessment and that the C‑PACE assessment does not constitute an event of default under the terms of the mortgage or deed of trust.
"§ 160A‑239.20.  Prohibition on use of public funds.
It is the intent of this Article that neither the State nor any local government shall use public funds to fund or repay any loan between a capital provider and property owner. Nothing in this Article shall be interpreted as authorizing a local government to pledge, offer, or encumber its full faith and credit, and no local government shall pledge, offer, or encumber its full faith and credit under this Article.
"§ 160A‑239.21.  Purchases and contracts.
The proposed arrangements for C‑PACE financing may authorize the property owner to do any of the following:
(1)	Directly purchase the related equipment and materials for the installation or modification of a qualifying improvement.
(2)	Contract directly, including through lease, power purchase agreement, or other service contract, for the related equipment and materials used in the installation or modification of a qualifying improvement."
SECTION 2.  G.S. 105‑375(i) reads as rewritten:
"(i)	Issuance of Execution. – At any time after three months and before two years from the indexing of the judgment as provided in subsection (b) of this section, execution shall be issued at the request of the tax collector in the same manner as executions are issued upon other judgments of the superior court, and the real property shall be sold by the sheriff in the same manner as other real property is sold under execution with the following exceptions:
(1)	No debtor's exemption shall be allowed.
(2)	At least 30 days prior to the day fixed for the sale, the sheriff shall send notice by registered or certified mail, return receipt requested, to the taxpayer at the taxpayer's last known address, in lieu of personal service, and to all lienholders of record. If within 10 days following the mailing of a notice, a return receipt has not been received by the sheriff indicating receipt of the notice, then the sheriff shall make additional efforts to locate and notify the taxpayer, if not yet notified, and all unnotified lienholders of record of the sale under execution in accordance with subdivision (4) of subsection (c) of this section.
(3)	The sheriff shall add to the amount of the judgment as costs of the sale any postage expenses incurred by the tax collector and the sheriff in foreclosing under this section.
(4)	In any advertisement or posted notice of sale under execution, the sheriff may (and at the request of the governing body shall) combine the advertisements or notices for properties to be sold under executions against the properties of different taxpayers in favor of the same taxing unit or group of units; however, the property included in each judgment shall be separately described and the name of the taxpayer specified in connection with each property.
The purchaser at the execution sale acquires title to the property in fee simple free and clear of all claims, rights, interests, and liens except the liens of other taxes, special assessments, and C‑PACE assessments authorized under Article 10B of Chapter 160A of the General Statutes not paid from the purchase price and not included in the judgment and conservation agreements, as defined in G.S. 121‑35(1)."
SECTION 3.  G.S. 105‑374(k) reads as rewritten:
"(k)	Judgment of Sale. – Any judgment in favor of the plaintiff or any defendant taxing unit in an action brought under this section shall order the sale of the real property or as much as may be necessary for the satisfaction of all of the following:
(1)	Taxes adjudged to be liens in favor of the plaintiff, other than taxes the amount of which has not been definitely determined, together with penalties, interest, and costs.
(2)	Taxes adjudged to be liens in favor of other taxing units, other than taxes the amount of which has not yet been definitely determined, if those taxes have been alleged in answers filed by the other taxing units, together with penalties, interest, and costs.
The judgment shall appoint a commissioner to conduct the sale and shall order that the property be sold in fee simple, free and clear of all interests, rights, claims, and liens whatever, except that the sale shall be subject to (i) taxes the amount of which cannot be definitely determined at the time of the judgment, (ii) taxes and special assessments of taxing units which are not parties to the action, (iii) C‑PACE assessments authorized under Article 10B of Chapter 160A of the General Statutes, (iv) in the discretion of the court, taxes alleged in other tax foreclosure actions or proceedings pending against the same real property, and (v) conservation agreements, as defined in G.S. 121‑35(1).
In all cases in which no answer is filed within the time allowed by law, and in cases in which answers filed do not seek to prevent sale of the property, the clerk of the superior court may enter the judgment, subject to appeal as provided in G.S. 1‑301.1."
SECTION 4.  There is appropriated from the General Fund to the Department of Commerce the sum of fifty thousand dollars ($50,000) in nonrecurring funds for the 2024‑2025 fiscal year to allocate to the Economic Development Partnership of North Carolina to develop the C‑PACE toolkit pursuant to G.S. 160A‑239.14.
SECTION 5.  This act becomes effective July 1, 2024.