A novel type of financing that is intended to help Americans renovate their homes and cut energy use faces a significant test in Florida, where hurricane season is prompting property owners to consider upgrades to gird against disaster.
The test is expected to come Tuesday afternoon when members of the Collier County commission will meet to reconsider their decision last month to abruptly end PACE (property assessed clean energy), a program that allows residents and businesses to finance energy efficiency upgrades, storm-hardening improvements, water conservation or renewable energy installations.
PACE, a program run at the city and county level, enables property owners to pay for such projects through a voluntary property assessment over five to 25 years.
Nationally, PACE began in 2007 as a pilot program in California. PACE-enabling legislation has since passed in 33 states and Washington, D.C. Three states have active residential markets: California, Florida and Missouri. Residential PACE assessments have soared in popularity in recent years. The industry has financed more than $5.1 billion in projects for 220,000 homes as of May 2018, according to trade group PACENation.
Historically, clean energy and environmentally friendly policies such as PACE have been pushed by Democrats and environmental activists, who are now closely watching the vote in Collier County at a time when research suggests that improving energy efficiency could help limit climate change.
In a boost for national market for energy upgrades, the Obama administration supported the program with $150 million in stimulus funding and provided guidance to the Federal Housing Administration to insure mortgages for homes with PACE liens.
The Trump administration reversed that policy in 2017, making it more difficult for homeowners seeking to resell their properties with PACE assessments. Trump recently signed a bill, sponsored by Sen. Marco Rubio (R-Fla.), that directs the Consumer Financial Protection Bureau to craft new regulations for PACE assessments that may conflict with state-level consumer protection standards.
PACE, however, has also drawn support from Republicans as an example of a program operated by local governments, funded by private capital, that provides assistance to businesses and homeowners to pay for capital improvements to their properties without incurring high upfront costs.
“[PACE] is a tool in the toolbox for communities for businesses and residents to finance clean energy projects. Especially when you’re talking about disaster resilience, it’s a great thing,” said Mark Fleming, the president and CEO of Conservatives for Clean Energy. “I don’t think anyone is saying it’s the end-all-be-all, but it’s a way to create a market and a way for people to pay for these projects without borrowing it all up front. It’s a lot cheaper for consumers than a home equity loan in most cases.”
Buildings—both commercial properties and homes—account for 40 percent of energy usage in the United States, according to the Department of Energy. Any solution to climate change will require innovative programs like PACE that help people lower utility bills, retrofit properties with cleaner energy and construct new, greener structures.
In Collier County, after a resident presented anecdotal stories that some PACE-certified contractors charged excess prices and recorded inflated tax assessments, the commission voted 3-2 to terminate the program. Commissioners who voted to end PACE, though, said they would support reviving the program if the county enhanced consumer protection measures.
California-based Ygrene Energy, the largest provider of PACE loans in the county, has weathered the bulk of the criticism, but company officials said that a few bad actors in the contracting community not specifically tied to Ygrene shouldn’t tarnish the program.
“PACE has succeeded in providing Collier County residents an affordable way to prepare their homes for hurricanes and add other environmentally-friendly improvements,” said Mike Lemyre, Ygrene senior vice president. “The overwhelming majority of Ygrene customers have had positive experiences. In fact, we have received only three complaints from all customers in the county after completing 400 projects. We look forward to continuing to partner with local lawmakers to ensure that all companies adhere to rigorous consumer protection guidelines.”
Ygrene representatives stressed statistics showing the program has benefited residents and Collier County in general: 224 jobs created, $8.5 million in property investments, $4.6 million in savings from disasters and $3.5 million in insurance premium savings.
A recent study (conducted independently but funded by Ygrene) by the University of Southern California Schwarzenegger Institute found that hurricane preparedness improvements in Florida funded by Ygrene are estimated to save $507 million in avoided future hurricane disaster losses as well as more than $708 million in potential insurance premium savings. Ygrene has funded hurricane mitigation projects worth more than $275 million from 2013-2018 in Florida.
At a recent Collier County commission meeting, Lemyre said Ygrene has policies in place to terminate unscrupulous contractors if they violate consumer protection guidelines. Lemyre also said consumers receive detailed written disclosures—including all project fees, interest rates, annual and monthly payback terms in a simplified document—before signing agreements and must verbally confirm terms on a recorded phone line. The average interest rate for an assessment is 7.1%, Lemyre said (and the interest paid is often tax deductible).
“PACE financing provides a critical tool for consumers to make storm-related home improvements,” said Guy McClurkan, executive director of Clean PACE, a Florida-based nonprofit dedicated to consumer protection in the PACE industry. “In some cases it may be the only means they have available to replace windows, shutters and roofs while protecting their homes against wind and water. The timing of Collier County’s decision—amidst hurricane season—is unfortunate becauseconsumers need access to reliable financing to protect their families and their homes.”
McClurkan said that Clean PACE works to audit providers to ensure that they comply with established industry standards and statutory requirements. Clean PACE has audited Ygrene’s Collier County projects and determined 100 percent compliance, McClurkan said.