Robert Cox worked more than 30 years in the oil patch before he was laid off in 2015 following the global crash in oil prices. Meanwhile, his house in south Bakersfield had become a money pit. He started looking for a way to cut his energy costs while adding value to the home.
Enter Renovate America’s HERO Program and PACE financing.
PACE, or Property Assessed Clean Energy financing, is a partnership between local municipalities, private administrative agents like Renovate America and area contractors who help homeowners invest in energy retrofits for their properties by covering upfront financing, equipment and installation costs. Property owners repay this advance through an increase in property taxes.
It wasn't until long after he received a $54,000 loan for solar panels in January 2016 that Cox realized the loan was a tax assessment.
“Yes, I was aware of the payments I would owe,” Cox said of the $6,327 annual cost. “What I was not aware of was that it was a tax lien on my home.
“That lien has to be paid before your mortgage (is paid),” he said. “That’s the scandalous part of it.”
Indeed, PACE tax liens take seniority over residential mortgages. That means if a homeowner gets in financial trouble and can pay only one of the two, the tax lien wins.
At a Bakersfield City Council meeting last month, the issue of PACE financing was fiercely debated during the public comment period by people on both sides.
A representative of Renovate America’s HERO Program and several contractors who partner with the program said the PACE loans are quick and relatively easy to obtain, and the expected energy savings and potential increase in the value of the home may defray or even cover the cost of the increased tax bill. Besides that, the program is a job creator.
On the other side of the issue, real estate professionals hammered the program for allegedly misleading homeowners, using hard-sell tactics and saddling residents with higher interest rates than a home equity line of credit.
“It’s predatory. It’s damaging. And it’s going to have a long- and far-lasting effect on the current homeowner,” said Sheri Anthes of Coldwell Banker Preferred, Realtors.
Local appraiser Gary Crabtree, speaking on behalf of the Real Estate Anti-fraud Advisory Coalition, said REAAC members are concerned about reports of fraudulent activity by vendors overcharging homeowners for energy-efficient items and increasing their tax burden to “near usurious rates,” which he said have had a negative impact on what he called “a very tenuous real estate market."
“In addition to the lack of oversight by any regulatory body,” Crabtree said, “it is our opinion that currently structured, the program will do irreparable harm to the very people it is designed to help.”
Dustin Reilich, director of municipal development for PACE provider Renovate America, pointed out several local contractors and homeowners in the audience who are supporters of PACE financing and, specifically, Renovate America’s approach to its customers through its HERO program.
“They’re providing local jobs, stimulating local jobs by utilizing the HERO program to be able to help homeowners,” he said.
Reilich acknowledged that there have been problems but said they've been resolved.
“Things have changed with PACE over time,” he said. “Obviously when it started there were some challenges …”
Reilich cited AB 2693, a bill passed by the state legislature that went into effect Jan. 1 that added new protections for homeowners, “all but eliminating every problem that there could have been around PACE.”
Kent Greer, owner of Banner Air Conditioning, told City Council members that all of his customers who have taken advantage of PACE financing are happy with their outcomes.
“I support it,” he said. “And I think it would be a big job killer if the council took it off the table because it brings a lot of revenue to local contractors, and right now with the housing boom still down, we need all the support we can (get).”
According to Matt Bevins, a spokesman for Renovate America, approximately 3,150 “assessments” have been done in Kern County bringing more than $100 million in economic improvements to area homes and creating hundreds of jobs in the process.
Of the more than 3,000 PACE loans provided to date, only five have resulted in foreclosures and none were connected to the HERO program, Bevins said.
Indeed, although local Realtors contacted for this article have said there are dozens if not hundreds of unhappy PACE loan recipients in Kern County, none besides Cox came forward to tell his story.
Following the publication of a Jan. 11 Wall Street Journal article cautioning that the phenomenal growth of the PACE system may be "the next subprime" crisis waiting to happen, the New York-based Heron Foundation investigated further. On March 9, it announced it would divest its portfolio of residential PACE investments.
At the Bakersfield City Council meeting last month, the matter of PACE loans and whether the city should continue to be a municipal partner was referred to the Budget and Finance Committee chaired by Councilman Andre Gonzales.
“There are two sides to this,” Gonzales said. “It’s a tough one.”
The committee isn’t expected to tackle these questions until the latter part of April.
Meanwhile, Robert Cox said he’s trying to short-sale his house, as his mortgage is upside down. The money he saved by installing solar hasn’t come close to covering his annual loan payments.
At age 59, he’s not sure what he’s going to do. He says he deserves some blame for the dilemma he faces. But he also feels like he was sold a bill of goods.
“I’ve been unemployed since 2015, and yet I qualified for a $54,000 loan. That’s how aggressive they are.”