We have been writing about the financing method known as PACE - for Property-Assessed Clean Energy- for many months. (You can find all of our posts here.) Made available statewide through AB 811, PACE financing allows for solar projects (and other energy efficiency measures) to be funded by an assessment on the property that is paid as part of the property tax bill over twenty years. The funding comes by way of the sale of municipal bonds and there is no burden on local government budgets to support the program. This allows homeowners to make their homes more efficient (thereby lowering their utility bills) with little or no up-front cash and at the same time helps to create good-paying jobs in the local community. The County of Los Angeles approved its own PACE program (LACEP) in May and the first loans were set to be funded sometime this Fall. PACE financing was viewed as such a win-win it is no wonder that communities all across the country were scrambling to join in.
Not so fast. Mortgage companies, led by Fannie Mae and Freddie Mac, have cried foul. Since the programs operate as a property assessment, they have priority over the existing mortgage in the event of a default and subsequent foreclosure. Using such a program could put a homeowner at odds with the terms of their existing mortgage and might, all by itself, result in a technical breach of the mortgage contract. Faced with such resistance, PACE programs have come to a grinding halt. A story in the August 19, 2010 LA Times reflects the chorus of bad news that has been trickling out now for many weeks. Does this mean that PACE financing is dead?
Perhaps - but is the position of the mortgage industry reasonable? After all, the LA County program had some pretty stiff requirements for participation that were designed precisely to prevent foreclosures. In particular, the LACEP required that the debt to value ratio for the home could not exceed 80% and that the loan to value ratio could not exceed 10%. Assuming that those valuations were for recent market conditions, they are very conservative requirements. In addition, the homeowner needed to be current on both the mortgage and prior property taxes. Since the LACEP would have allowed the homeowner to substantially reduce their energy bills with either zero or little up-front cost, it is hard to see how participating could have pushed the homeowner closer to default, but if default had occurred, the mortgage holder would have still been protected. Indeed, by putting more money into the homeowner's hands, it would seem that the risk of default would have been substantially lessened.
While legislative fixes are potentially in the works, in the meantime many projects are now on hold and with them, the jobs that are so badly needed during this difficult economy. Here's hoping that the Obama administration can talk some sense into the mortgage industry and get these programs back on track.
On Monday, June 14, with little fanfare or public attention, the Pasadena City Council approved a Resolution making Pasadena the first city to join the LA County Energy Program (LACEP). The Resolution clears the way for Pasadena residents to apply for Property Assessed Clean Energy (PACE) funding under the County’s AB 811 program, LACEP. As we have reported here before, the LACEP will allow homeowners to borrow money from the County (funded through the sale of bonds) to finance energy efficiency measures and solar energy projects. Those loans are then paid off over twenty years as part of the homeowner’s annual property tax assessment. If the owner sells the property, the assessment “runs with the land” and the new homeowner (who receives the benefit of the improvements) assumes the assessment. The County expects to begin accepting applications under the LACEP in the Fall.
Run on Sun has been a strong supporter of the LACEP concept and we are working hard with County officials (meeting with them as recently as this past Tuesday) to make the program work as well as it can for residents and small businesses alike. While we still have some concerns over the details in the program - including the interest rates that will be charged (9% or more?), eligibility requirements for homeowners (at least 20% equity in the home - but based on what assessment?), the process for certifying qualified contractors to do the work (to protect the county’s investment, the homeowner’s property and the reputation of the solar industry), and the timeliness of payments to homeowners and contractors - we believe that if done correctly, this program could be a great benefit for all involved.
Run on Sun is pleased and proud that Pasadena - our hometown - has become the first of the 88 cities in LA County to get on board. How about your city? When will they get in? If you need more information on what your city should be considering, here is a link to the Staff Report that was submitted to the Pasadena City Council.
There will be a final AB 811 Stakeholder’s Meeting on Wednesday, May 5 from 2:00 to 4:00 p.m. at the MTA Board Room (located next to Union Station, downtown Los Angeles, map here). This will be the last opportunity to provide meaningful input to County staff and their consultants before the Board meeting on May 25. This is a stakeholder’s meeting - if you care about the future of solar in Los Angeles County, you have a stake in the outcome of this meeting and you should be there. (You can read our report from the December Stakeholder’s Meeting, here.)
Many questions remain about how this program will be implemented and the answers to those questions will determine whether this program is a great success, or a millstone weighing down the local solar industry. At that meeting we expect to be hearing about what the bond interest rates will be, the impact of the recently passed SB 77 on lowering those interest rates, how much and how easily interim funding will be, how credit will be determined for previous homeowner efforts at energy efficiency, and more. When documents are distributed, we will update this thread to include them.
Yesterday we reported on the Stakeholder’s meeting that is being held next Monday, December 7, at the MTA HQ building. This is an important update meeting on the County’s progress toward implementing an AB 811 program for LA County and its member cities that will greatly facilitate funding for solar projects.
Today we are reporting on the Cities that we have been able to identify as potentially attending the meeting. Is your City on the list? Find out after the jump.
Learn more about AB 811 financing for solar at this meeting on Dec. 7!
We just received notice regarding the upcoming LA County AB 811 Program Stakeholders Meeting. We will be attending this meeting and will report back on what learn. However, it is important that County officials see the interest in this program from members of the public.
Details follow after the break.