“Chief Administrative Office requesting Board direction regarding a Property Assessed Clean Energy (PACE) program in conjunction with Ygrene Energy Fund.” That was the May 14 agenda item for the El Dorado County Board of Supervisors. With the support of the Builders Exchange and big-name contractor Carter-Kelly, it’s no wonder the CAO is pushing this scheme before the county Bond Screening Committee has met and made a carefully studied recommendation.
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Property Assessed Clean Energy is a fancy name for having home improvements financed through a third party contracting with the county and then put the loan on the county’s property tax rolls. The primary improvements to be financed are solar installations, but it would include other energy efficiency improvements such as new window, furnaces and insulation.
It is a worthy goal, getting more solar installations, et cetera. That is something that is already happening, however. In 2012, the county issued solar electrical and plumbing permits for a total value of $6.95 million. In the first quarter of 2013, permits totaled $2.65 million. The total for five quarters is $9.6 million. That’s a lot of solar installation without the benefit of a complicated county program.
What’s complicated about it? Two words: Mello-Roos. Bonds for the PACE program would be financed through a Mello-Roos Community Facilities District. There would be hearings. There would be Proposition 218 hearings in which a majority could file formal protests and scuttle it. Good luck with that, especially with a countywide Mellos-Roos that includes South Lake Tahoe.
The real problem with putting home improvements on the tax roll comes when some homeowner can’t afford the higher taxes and the county sells the home at a tax auction.
Don’t think it won’t happen, and bet on it that the Board of Supervisors will get blamed for the Mello-Roos district. Smart home buyers already ask if a home has Mello-Roos bonds. Mello-Roos taxes on top of property taxes and home owners association dues can be a deal breaker. If this PACE program goes, Realtors will have to disclose the 20-year loan added to the tax bill. It will not add much resale value to a house as home buyers are going to be reluctant to take on that higher tax bill.
What’s more, any home financed by Fannie Mae or Freddie Mac, whether directly or by a mortgage-backed security after the bank sold the loan to one of these two, cannot receive a loan that goes on the tax rolls. Sonoma County already lost that case in the U.S. Ninth Circuit Court of Appeals March 19. The Federal Housing Finance Authority will not allow a property assessed financing program. Putting home improvement costs on the property tax bills makes them senior to the government-backed loans. The government-sponsored enterprises will not allow that.
Fannie and Freddie control half of the mortgages in Sonoma County, according to the Santa Rosa Press Democrat. Figure El Dorado County has a similar percentage.
And finally, the county administrator is seeking a sole-source deal with one outfit. We call that crony capitalism. There are other companies that do the same thing.
Further, PG&E has a list of incentives and financial resources for solar photovoltaic programs, including the California Solar Initiative program. None of these PG&E-listed programs go on the tax rolls or mess with the Federal Housing Finance Authority.
We don’t need another Mello-Roos district, especially a massive one like this. And putting home improvement loans on the tax roll is asking for trouble.