PACE and HERO
Along with creative financing comes unintended consequences. Along with encouraging homeowners to acquire energy efficient improvements, sometimes the method may create consternation in the future. Especially when you want to refinance or sell your home.
I was not impressed with the Property Assessed Clean Energy (PACE) or Home Energy Renovation Opportunity (HERO) financing schemes when they were introduced to me as a County Supervisor.
Cities in Orange County have been individually approving this program for residents, to the consternation of our County Treasurer-Tax Collector, who must add the loan payments to the tax bills. This is a very new approach to financing energy improvements, and, as I anticipated, it has revealed itself to be an awkward duck and a nightmare to many.
Last Session, Assemblyman Matthew Dababneh made some reforms to PACE-type transactions with Assembly Bill 2693, which I voted for in the Senate Governance and Finance and Judiciary Committees and on the Floor. It was signed by the Governor on September 25, 2016.
I was glad to see Senator Nancy Skinner bring another bill this year to make more improvements, with Senate Bill 242. To invigorate the discussion, I was very clear, although I appreciate the need for improvements, I would have preferred to kill this method of financing. I voted against it in Senate Governance and Finance to send a message: PACE is flawed.
I’m not alone. There is now a proposed bill before Congress on this topic. Here is the update:
The National Association of Federally-Insured Credit Unions (NAFCU), along with 27 other trade associations, expressed support for a bill that would bring financing for Property Assessed Clean Energy (PACE) loans under the same consumer protections required of other mortgage products.
The Protecting Americans from Credit Entanglements Act of 2017 would impose the federal Truth in Lending Act requirements on PACE loans, to which they are currently not subject. The Senate bill was authored by Sens. John Boozman (R-AR), Tom Cotton (R-AR), and Marco Rubio (R-FL), while the House version was sponsored by Reps. Ed Royce (R-CA) and Brad Sherman (D-CA).
PACE loans enable mortgage borrowers to finance environmentally friendly home upgrades, such as solar panels and energy efficient appliances. Since the loans are typically initiated by the private companies making these improvements, the financing is raised by issuing municipal revenue bonds. These bonds, secured by the payments on the PACE loan obligation, are added to the borrower’s property tax bill and are paid through property tax installments.
“Although PACE loan obligations have all the attributes of a mortgage product, they are not subject to federal consumer protection requirements — as this alternative financing structure has been misclassified as a tax assessment rather than a loan,” NAFCU stated in a letter to the bill’s authors. “PACE loans are — in substance — consumer loans secured by real property and should be subject to federal consumer protection requirements, not dependent on a patchwork of limited or non-existent state/municipal laws that do not adequately protect homeowners.”
Congressman Brad Sherman and I are the two elected Legislative CPAs in California. This makes concerns over PACE loans a bipartisan one. All this to introduce a Letter to the Editor in the OC Register on the topic, in the first piece below. I appreciate someone in “sales” being supportive of this financing scheme, but I’m in “finance,” and I’ve seen too many homeowners frustrated when they wanted to refinance or sell. And that’s perhaps why I believe that the Orange County Association of Realtors may not be so amused with PACE and HERO programs, either.
All to say, it is wonderful to have constituents commenting on bills that I debate on, which is what Committees are all about. And I love having the opportunity to provide you with the reasoning for my comments and votes. With that, it was another busy week in Sacramento.
Monday afternoon found SB 32 and SB 454 rejected by the Senate Public Employment and Retirement Committee and allowed SB 681 to convert into a two-year bill (see SB 861 and SCA 8, Voted Down , PEPRA 2 With SB 32).
Wednesday morning, the Senate Education Committee rejected my effort to remove the cap on school district reserves, with SB 590. There was SB 751 (Hill), that was not as clean as SB 590, that had already passed this committee. It was the Committee Chair’s belief that SB 751 would have a better chance of making it to the Governor’s desk. The California Association of School Business Officials preferred my bill and came to speak in favor. The teachers’ unions were there in opposition. The Governor is rumored to also have a fix for this imprudent fiscal straight jacket in one of his upcoming budget trailer bills.
The Senate Governance and Finance Committee voted unanimously for SB 653, a bill I proposed to have all 58 County Treasurer-Tax Collectors post all of their required published notices on their websites. This would be another good way for taxpayers to find out if they are impacted through the use of search engines. This is particularly true for escheatment funds that should be refunded to individuals. I’ll spare you the details of the opposition’s arguments, but the Committee could see that many of my former Treasurer colleagues needed to be dragged into the 21st century (or hier a 13-year-old to cut, paste and add or link to the notice).
Thursday morning’s Floor Session found SB 742 approved on the Consent Calendar and now moves onto the Assembly. SB 742 will require California cities that issue bond debt to abide by Generally Accepted Accounting Principles (GAAP). This sounds blatantly obvious, but it is currently not expressly required in the state’s code.
There’s the recap from this week. Next week looks like we’ll have a chance to present SB 59 to the Senate Governance and Finance Committee (see Senate Bill 59). The Chair of this Committee also has a Developmental Center closing in his District and will be recommending dramatic amendments to assist my bill. We have been working closely with numerous impacted parties in Orange County and I believe they should be fine with the minor change in direction and I hope to keep this collaborative initiative moving forward.
The Daily Pilot provides the latest on my pension reform efforts in the second piece below (see Cronyism). At this time, my Constitutional amendments have not hit the presentation circuit.
PACE helping consumers
As a former state director for the California Association of Realtors Board of Directors, a former director for the Orange County Association of Realtors and someone with a keen understanding of the Orange County housing market, I was disappointed to hear state Sen. John Moorlach’s disparaging comments recently about Property Assessed Clean Energy (PACE) financing. In a Senate committee hearing on April 19 in Sacramento, Moorlach said he wanted to “kill” PACE.
The council will vote on whether to support pension-related legislation put forward by state Sen. John Moorlach (R-Costa Mesa).
Moorlach has proposed three bills and three amendments to the state Constitution. One amendment would “prohibit public employers from increasing retirement benefits for their employees without two-thirds voter approval.”