The Board of Supervisors voted to axe the controversial PACE program in unincorporated Kern County Tuesday following a contentious, three-hour hearing over whether it helps or hurts consumers.
It directed county staff to begin terminating a series of agreements that allows the Property Assessed Clean Energy initiative to operate in its jurisdiction, meaning outside Kern's incorporated cities. The resolution to kill PACE is expected to come back to the board on July 11.
PACE allows companies to market clean energy improvements to residential homeowners and fund those improvements through a tax lien on the property. That tax lien, which trumps all other financing on the home, was the primary reason supervisors voted to end the program.
“The super-lien issue is the fundamental flaw,” Supervisor Mike Maggard said.
The other problem, he said, is there are bad actors in the contracting community who are using lies and deceit to sell PACE loans.
If the people who run PACE want to correct those problems through the California Legislature and bring it back to Kern County, he said, he’d be open to reauthorizing it.
Maggard made the motion to terminate the agreements that allow businesses like HERO to offer PACE loans to unincorporated county residents. Supervisor David Couch seconded the motion.
Supervisor Zack Scrivner argued the industry is not fixing the predatory practices of some contractors selling PACE loans and that impacts the value of homes and, ultimately, communities.
“I see this as putting our communities at risk,” he said.
“This is not a public war. This is about policy. This is about the public good,” Supervisor Mick Gleason said. “We’re allowing people with poor credit rating to qualify for a loan they otherwise can’t afford. I think there’s a problem with the idea of this PACE stuff.”
Supervisor Leticia Perez voted against the motion, saying she wanted more information.
The City of Bakersfield is also debating whether to continue allowing the PACE program to operate in its jurisdiction. No decision has been made.
PACE supporters argued passionately Tuesday that the financing tool is a critical option for homeowners and builds up the business of local contractors.
Hazel Solis of Tehachapi said it's been a blessing for her family. It used PACE to add energy-efficient windows, which have made their home much more livable, she said.
“We do plan to use the program again after we pay this loan down,” she said. “I hope the program can stay around so we can use it again.”
Paul Mince, an installer with Northwest Exteriors, said PACE is the reason he has a job after losing construction and oil field work. He was even able to get his son a job.
Without PACE, he said, “I and a lot of other guys out there with dirty shirts will be on the unemployment line.”
Laura Booker said she couldn’t get fire insurance because her home had a shake roof.
A PACE loan gave her a new roof, insulation and solar panels — dropping her power bills from $400 to $10 a month.
“This whole deal improved my quality of life in a manner I wouldn’t have been able to accomplish on my own auspices,” she said.
But the program has drawn the ire of local real estate professionals who say property owners are being sold a bill of goods only to find out later they cannot refinance or sell their homes.
Midge Jimerson, president of the Bakersfield Association of Realtors, urged the board to end the PACE program.
“How many homeowners will have to lose their homes before we stop this program?” she said. “It should be zero. Hundreds of transactions have been disrupted.”
She said she respects those who have work because of PACE but “we don’t think a person should have to lose their home so another person can have a job.”
A few homeowners shared concerns about their experiences.
Tom Smith said he was sold a refrigeration unit for his air conditioning system and the contractor didn’t tell him how much it would cost. When his tax bill came, he learned he’d paid $49,000 for the unit.
“When they found out my house was paid for, I was fair game,” he said.
The PACE program also took another hit — from county staff.
County officials are tangled up in the PACE program because governments place the liens on the property and are responsible for collecting the debt on the loan.
“I do believe there are some serious issues that do need to be addressed with PACE,” said Treasurer-Tax Collector Jordan Kaufman.
He said his staff regularly receives calls from property owners who have seen their tax bills unexpectedly explode.
His concerns about the program were several.
“If you’re selling the product, you shouldn’t also be selling the financing for the product. That’s fundamentally bad policy,” he said.
The real interest rate on a PACE loan, he said, can be 3 percent higher than the interest rate that is advertised.
And, Kaufman said, when a person defaults on a PACE lien, the interest rate goes up to 18 percent and, though his office has to collect that penalty rate, that money is paid directly to the PACE provider.
He said a critical piece of legislation, AB 271, would allow treasurer-tax collectors to strip the defaulted PACE assessment from the tax rolls.
That would force the businesses selling the PACE loans to collect their own debts and that, perhaps, would force them to be careful about whom they sold the loan to in the first place, Kaufman said.
The supervisors' decision will be bad for Kern, Blair McNeill, vice president for market development at PACE loan company Renovate America, said in a statement.
“Without PACE in Kern County, there will be no public-private partnership checking contractor license status, requiring that contractors complete projects to homeowners’ satisfaction before they receive payment, and screening out contractors with poor records," he said. "Without PACE in Kern County, jobs will be lost. Without PACE in Kern County, most importantly, homeowners will lose an option to improve their homes, make them more efficient, modern and comfortable.”