PACE allows owners of residential and commercial property to seek loans that they will repay as non-ad valorem assessments on their county tax bills
Chair Paul Caragiulo proved to be the swing vote on Oct. 11 as the Sarasota County Commission voted 3-2 to adopt an ordinance that will implement the state-approved Property Assessed Clean Energy Program (PACE) program.
As provided for in the Florida Statutes, PACE gives the public another means of seeking renewable-energy and energy-efficiency options for their homes and businesses, as well as hurricane-hardening measures, Lee Hayes Byron, the sustainability manager with the University of Florida/Institute of Food and Agricultural Sciences Extension (UF/IFAS) program in the county, explained during the public hearing.
The county will have limited involvement in PACE, she pointed out.
PACE allows owners of residential and commercial property to repay loans through non-ad valorem assessments. Along with collecting those assessments, it will be the county’s responsibility to verify that the adopted ordinance is being followed and that the public benefits are being achieved, she added.
Byron pointed out in an Oct. 11 memo to the board that each local government that participates in PACE has a third-party administrator that implements the program and interacts with the tax collector and property appraiser to levy the assessments.
Additionally, she explained to the board during the meeting, “Providers cannot connect the county to the program … and they are responsible for resolving customer complaints quickly and transparently.”
Commissioner Nancy Detert — who was a member of the Florida Legislature when the PACE law was approved in 2010 — and Commissioner Alan Maio cast the two “No” votes this week.
However, at Detert’s request, the Sarasota County ordinance calls for a statement of the risks associated with the PACE program — including those linked to participants’ failure to make the payments — to be provided to potential participants in a larger font in bold caps.
“I have a problem with this program looking like it’s a government-assured project,” she told Byron. Asked initially about what type of font she preferred, Detert responded, “I like World War II-type print saying, ‘This is not a government program.’”
The issue of the program’s risk drew four members of the public, who urged the commissioners not to adopt the ordinance.
Cathy Antunes, an advocate for consumers, has written in her blog The Detail that defaulting on a PACE loan could cause someone to lose their property. She pointed out in her blog that PACE “loans put a lien on a property that takes payment priority over any existing mortgage.”
She also criticized the fact that the county’s involvement in the program will lead to confusion about the true terms of the loans. She told the commissioners that those targeted for PACE loans “will be low-income people who don’t know what’s going on.”
However, Terry Stark, director of governmental affairs and commercial sales for Ygrene Works — one of the PACE loan providers in the state — said, “The legislation forbids foreclosure, so we do not have the right to foreclose on anybody that defaults.”
Moreover, he continued, “In case of default, our financing does not accelerate.” All a provider can collect, he added, is “that annual payment that is in arrears,” even if the person owes more than $10,000.
“The only senior lien position is that annual payment,” Stark stressed.
Nonetheless, County Attorney Stephen DeMarsh pointed out that because the assessments will be on tax bills, “if a tax bill in its entirety is not paid … a homeowner could lose title to their property through the tax sale process.”
That happens, Caragiulo responded, “if you don’t pay your [full] tax bill,” regardless of whether the part of the bill the person does not pay is a fire assessment, for example, or a stormwater assessment.
“You cannot pay part of the tax bill,” Maio stressed. “You pay the whole thing …”
“Basically, this program is for people that wouldn’t go to their bank and get a home equity loan,” Detert said as the board members wrapped up their discussion following the public comments. Those are people who have bad credit ratings, Detert indicated, not, for example — as one speaker told the commission — someone who simply experienced a credit problem because of a large medical bill. She owned a mortgage company for 25 years, she continued. “I’ve seen thousands and thousands of credit reports.”
Maio disliked the fact that the ordinance allowed prepayments penalties for commercial properties. “That, to me, is a game-changer.”
“No prepayment penalties may be charged or allowed on residential projects,” the ordinance says.
Although that language is in the ordinance, Byron told the board, owners of commercial property will be able to negotiate prepayments.
Commissioner Charles Hines pointed out that he has handled commercial loans for clients of his law practice. Generally, he continued, a business owner is “a more sophisticated borrower,” so he or she can use the prepayment option as a negotiating tool. “I’m not so offended” by that section of the ordinance, he added. Someone might be able to negotiate a better interest rate as a result of it, he said.
Although Caragiulo voiced concerns about the prepayment issue, he voted to adopt the ordinance after listening to Hines’ remarks. “I absolutely see it through that prism.”
His primary interest in the program, Hines indicated, is the potential for expanding solar energy in the state. “Florida’s got to do something,” he added, because even Germany has more solar power than Florida.
“I don’t like government being a collection agency for private business,” Detert said.
“We are talking about sticking our noses into something we’re not normally sticking our noses in,” Caragiulo acknowledged.
“I choose to see the glass half full on this,” Commissioner Michael Moran said.
Moran had won assurance from Byron that if the commissioners heard numerous complaints from the public after the program began, they could modify the ordinance or do away with it. No provision necessitates the law staying in place for a specific period of time, Byron noted.
Furthermore, “Government is never a substitute for individual accountability,” Moran said.
Moran made the motion to adopt the ordinance, and Hines seconded it.
Pointing out the advantages
Bill Johnson, founder and president of the solar energy company Brilliant Harvest in Sarasota, was among 16 speakers who urged support of the PACE ordinance.
Solar power has proven to be an option only for wealthy people up to this point, Johnson told the board. While the PACE program is “not perfect,” he said, “it’s another arrow in the quiver.” He added that he believes the net effect of implementing the program in the county “is going to be overwhelmingly positive.”
“I think most people can agree that [solar energy is] a very desirable thing,” Caragiulo told Johnson. “I think the thing I’m trying to get over is the issue of the financing mechanism on your tax bill.”
Efforts to implement a better policy at the state level have not worked, Johnson responded. “Unfortunately, we have been blocked. Is it in the public interest to encourage resilience and sustainability? Absolutely.”
“No question,” Caragiulo replied.
Any policies that can be implemented to encourage people to pursue more sustainable energy options “I think are worthy of our consideration,” Johnson said.
When Commissioner Detert asked whether he thought it was a good idea to have a PACE loan supersede a first mortgage, Johnson replied, “This is about risk, [but] investment in solar … is essentially a risk-free investment.”
Technology allows a solar power provider to determine approximately how much energy a house will produce, based on the size of its rooftop, Johnson noted.
“The ordinance does call out the fact that we do have to certify the energy savings,” Johnson also pointed out.
Kevin Morris of Advance Solar & Spa in Fort Myers told the board that numerous homeowners can cut their energy bills in half by installing solar power systems. Their savings would typically allow them to repay the PACE loans in eight years, he added. Yet, solar panels have a life expectancy of 20 to 25 years. “That’s a significant savings” for residents, he noted.
Solar power never will totally eliminate the need for conventional utility providers, Morris said. Still, a homeowner can achieve savings of 50% to 70% on their bills, he added.
Stark of Ygrene Works also told the board that his firm has financed more than 13,000 projects totaling more than $250 million in the state. Of those, 95% were residential, he continued. Only five went into default, and three of those incidents resulted from the homeowner taking out second mortgages after they received their PACE financing, he continued. All five of the default situations were resolved without foreclosure, he noted.
A delay in the hearing
The consideration of the ordinance had been postponed from the board’s Sept. 26 meeting. On that day, Byron, the county’s sustainability manager, told the commissioners that because of continuing discussions with the public, the proposed ordinance needed to be revised.
Given the need to advertise the correct information in advance of the public hearing, the agenda item was moved to Oct. 11.
In a Sept. 26 email, Assistant County Administrator Mark Cunningham wrote County Administrator Tom Harmer,
“Over the past several days, staff received new information from several sources regarding the proposed PACE Ordinance. After reviewing the proposed information, it is my determination that collectively, they could amount to a significant change to the version of the proposed ordinance that is currently published and available to the public, should they be presented to the Board for adoption.”
“A continuation will allow time for staff to review and research the new information, and subsequently compose a revised memo and proposed ordinance for republication to allow adequate public review of the materials,” Cunningham added.
Among those changes was inclusion of the provision that no prepayment penalties would be allowed on residential projects. A new section was added in regard to the issue for commercial properties.