The BOCC voted 3-2 at the regular meeting on May 26, 2020 to discontine the Property Assessed Clean Energy (PACE) loan program in Hernando County.
The program came under fire recently and was featured on WFLA Channel 8’s “8 on your Side,” with two segments shown during the meeting. Commissioner Jeff Holcomb opened the discussion by describing problematic aspects of the program.
According to the 8 On Your Side reporter Peter Bernard, legislation is currently pending to “regulate the PACE problem,” and also added that the program has worked for some people in emergency need, but “too many people are getting in over their heads.”
Holcomb reported that a customer had asked for an air conditioner replacement, however the contractor who responded also sold the homeowner new doors, new windows and a new pool pump. The contractor was licensed as an air conditioning contractor only.
Holcomb described this case as fraught with problems beginning with work not being done, to the finance company severing their relationship with the contractor. The contractor may face criminal charges, but the homeowner is still responsible for the repayment of $37,000. One of the forms the homeowner unknowlying signed after work had begun stated that the contractor had completed the work.
“They call it a loan, it’s really not a loan, it’s a lien,” Holcomb said. He agreed that it’s relatively easy for a homeowner to be approved for the PACE loan, but disputes that the lien can be “sold” with the property. “In practice, that’s not true … no financing company is going to loan (over the appraised value) to pay off that lien … and for all practical purposes, you’re going to have to pay off the lien before you sell your home.”
“The disadvantages are huge even if you have a contractor that's not going to up-sell you … why would you put that lien on your property?”
Holcomb stated that the risk of foreclosure is also increased, citing a Spring Hill resident who recently lost his Wellington home when he was unable to maintain increases to his property taxes.
Commissioner Wayne Dukes briefly described a different experience. When the PACE program began, several residents of The Heather participated, and received new roofs by a local contractor. Dukes did not report any problems regarding that subdivision or contractor.
Commissioner Steve Champion stated that he’s had “dozens and dozens” of citizens praise the program. He also stated that the 7% PACE interest rate is far lower than financing such repairs and improvements with a conventional credit card, and the program could be the only funding available to those who do not use or qualify for conventional credit cards or loans.
Rather than eliminate the program, Champion said that he would be open to some regulation or amending of the PACE program.
The structure of the PACE loan is the aspect that Commissioner John Allocco dislikes. By design, the loan takes precedence over a homeowner’s mortgage. “If this was the other way around, and it was secondary to the mortgage, I'd have no problem with it.”
Ultimately, all commissioners acknowledged that possibilities exist for unscrupulous contractors to ‘game’ the system, and some homeowners may lack the experience to thoroughly understand the contracts and recognize problems early.
Tax Collector Sally Daniels stated that she has seen tax bills triple, and even quadruple. She told the board she’s spoken with at least one homeowner who can no longer afford his mortgage. “I've got people that went from a $600 dollar tax bill to a $1,600 tax bill ...one that went from $300 to $1,800 dollars. They can’t pay them. They have a mortgage company that is paying (the PACE loan) ... then (the homeowner) can’t pay the mortgage.”
Daniels referred to records she brought with her showing that some roof repairs will ultimately cost more than $48,000 after the PACE loan has been paid over 25 years.
Additionally, the implementation of the PACE program has cost the Tax Collector’s office $4,000 to $5,000. The loans need to be handled manually as the current computer system is unable to process them.
“It’s terrible for us, and I think it’s terrible for the public, too. I don’t think it’s a good thing.”
Champion again made the case for PACE as opposed to using a credit card. Holcomb countered by saying that a homeowner can discharge credit card debt in bankruptcy, but ultimately, they do not lose their home. “(Using PACE), the price (of default) is your home. What are you going to do after that?”
Kate Westner of Ygrene, a company that offers PACE loans reported that Hernando County has seen over $4 million in “hazard loss” savings and $1.8 million in “lifetime insurance savings” since the program began in 2017. They have since serviced roughly 350 projects in the county.
During her presentation, Westner stated that the traditional disclosures total about 20 pages, similar to realtors’ contracts.
Westner said that Ygrene is in contact with contractors when a complaint comes in from a homeowner. Ygrene attempts to remedy the given situation, and when it cannot be resolved, they have terminated relationships with contractors.
Editor's Note: The Hernando Sun originally reported that the 3-2 vote was in favor of keeping the PACE program. A correction has been made to reflect the actual vote: 3-2 to remove the program. We apologize for the error.