Along with creative financing comes unintended consequences. Along with encouraging homeowners to acquire energy efficient improvements, sometimes the method may create consternation in the future. Especially when you want to refinance or sell your home.
I was not impressed with the Property Assessed Clean Energy (PACE) or Home Energy Renovation Opportunity (HERO) financing schemes when they were introduced to me as a County Supervisor.
Cities in Orange County have been individually approving this program for residents, to the consternation of our County Treasurer-Tax Collector, who must add the loan payments to the tax bills. This is a very new approach to financing energy improvements, and, as I anticipated, it has revealed itself to be an awkward duck and a nightmare to many.
Last Session, Assemblyman Matthew Dababneh made some reforms to PACE-type transactions with Assembly Bill 2693, which I voted for in the Senate Governance and Finance and Judiciary Committees and on the Floor. It was signed by the Governor on September 25, 2016.
I was glad to see Senator Nancy Skinner bring another bill this year to make more improvements, with Senate Bill 242. To invigorate the discussion, I was very clear, although I appreciate the need for improvements, I would have preferred to kill this method of financing. I voted against it in Senate Governance and Finance to send a message: PACE is flawed.
I’m not alone. There is now a proposed bill before Congress on this topic. Here is the update (see https://financialregnews.com/nafcu-supports-bill-regulate-property-assessed-clean-energy-loans/):
The National Association of Federally-Insured Credit Unions (NAFCU), along with 27 other trade associations, expressed support for a bill that would bring financing for Property Assessed Clean Energy (PACE) loans under the same consumer protections required of other mortgage products.
The Protecting Americans from Credit Entanglements Act of 2017 would impose the federal Truth in Lending Act requirements on PACE loans, to which they are currently not subject. The Senate bill was authored by Sens. John Boozman (R-AR), Tom Cotton (R-AR), and Marco Rubio (R-FL), while the House version was sponsored by Reps. Ed Royce (R-CA) and Brad Sherman (D-CA).
PACE loans enable mortgage borrowers to finance environmentally friendly home upgrades, such as solar panels and energy efficient appliances. Since the loans are typically initiated by the private companies making these improvements, the financing is raised by issuing municipal revenue bonds. These bonds, secured by the payments on the PACE loan obligation, are added to the borrower’s property tax bill and are paid through property tax installments.
“Although PACE loan obligations have all the attributes of a mortgage product, they are not subject to federal consumer protection requirements – as this alternative financing structure has been misclassified as a tax assessment rather than a loan,” NAFCU stated in a letter to the bill’s authors. “PACE loans are – in substance – consumer loans secured by real property and should be subject to federal consumer protection requirements, not dependent on a patchwork of limited or non-existent state/municipal laws that do not adequately protect homeowners.”
Congressman Brad Sherman and I are the two elected Legislative CPAs in California. This makes concerns over PACE loans a bipartisan one. All this to introduce a Letter to the Editor in the OC Register on the topic, in the first piece below. I appreciate someone in "sales" being supportive of this financing scheme, but I’m in "finance," and I’ve seen too many homeowners frustrated when they wanted to refinance or sell. And that’s perhaps why I believe that the Orange County Association of Realtors may not be so amused with PACE and HERO programs, either.
All to say, it is wonderful to have constituents commenting on bills that I debate on, which is what Committees are all about. And I love having the opportunity to provide you with the reasoning for my comments and votes. With that, it was another busy week in Sacramento.
Monday found SB 247 rejected by the Senate Business Professions and Economic Development Committee Monday morning (see MOORLACH UPDATE — Voted Down — April 25, 2017 april 25, 2017 john moorlach, MOORLACH UPDATE — There Ought Not Be A Law — April 23, 2017 april 23, 2017 john moorlach and MOORLACH UPDATE — Behested Payments — April 28, 2017 april 28, 2017 john moorlach).
Monday afternoon found SB 32 and SB 454 rejected by the Senate Public Employment and Retirement Committee and allowed SB 681 to convert into a two-year bill (see MOORLACH UPDATE — SB 861 and SCA 8 — March 10, 2017 march 10, 2017 john moorlach, MOORLACH UPDATE — Voted Down — April 25, 2017 april 25, 2017 john moorlach and MOORLACH UPDATE — PEPRA 2 With SB 32 — January 15, 2017 january 15, 2017 john moorlach).
Tuesday evening found SB 677 barely rejected by the Senate Judiciary Committee (see MOORLACH UPDATE — Voted Down — April 25, 2017 april 25, 2017 john moorlach, MOORLACH UPDATE — Student Whistleblower Protection Bill — April 14, 2017 april 14, 2017 john moorlach and MOORLACH UPDATE — Senate Bill 677 — April 6, 2017 april 6, 2017 john moorlach).
Wednesday morning, the Senate Education Committee rejected my effort to remove the cap on school district reserves, with SB 590. There was SB 751 (Hill), that was not as clean as SB 590, that had already passed this committee. It was the Committee Chair’s belief that SB 751 would have a better chance of making it to the Governor’s desk. The California Association of School Business Officials preferred my bill and came to speak in favor. The teachers’ unions were there in opposition. The Governor is rumored to also have a fix for this imprudent fiscal straight jacket in one of his upcoming budget trailer bills.
The Senate Governance and Finance Committee voted unanimously for SB 653, a bill I proposed to have all 58 County Treasurer-Tax Collectors post all of their required published notices on their websites. This would be another good way for taxpayers to find out if they are impacted through the use of search engines. This is particularly true for escheatment funds that should be refunded to individuals. I’ll spare you the details of the opposition’s arguments, but the Committee could see that many of my former Treasurer colleagues needed to be dragged into the 21st century (or hier a 13-year-old to cut, paste and add or link to the notice).
Thursday morning’s Floor Session found SB 742 approved on the Consent Calendar and now moves onto the Assembly. SB 742 will require California cities that issue bond debt to abide by Generally Accepted Accounting Principles (GAAP). This sounds blatantly obvious, but it is currently not expressly required in the state’s code.
There’s the recap from this week. Next week looks like we’ll have a chance to present SB 59 to the Senate Governance and Finance Committee (see MOORLACH UPDATE — Senate Bill 59 — February 7, 2017 february 7, 2017 john moorlach). The Chair of this Committee also has a Developmental Center closing in his District and will be recommending dramatic amendments to assist my bill. We have been working closely with numerous impacted parties in Orange County and I believe they should be fine with the minor change in direction and I hope to keep this collaborative initiative moving forward.
The Daily Pilot provides the latest on my pension reform efforts in the second piece below (see MOORLACH UPDATE — Cronyism — April 21, 2017 april 21, 2017 john moorlach). At this time, my Constitutional amendments have not hit the presentation circuit.
PACE helping consumers
As a former state director for the California Association of Realtors Board of Directors, a former director for the Orange County Association of Realtors and someone with a keen understanding of the Orange County housing market, I was disappointed to hear state Sen. John Moorlach’s disparaging comments recently about Property Assessed Clean Energy (PACE) financing. In a Senate committee hearing on April 19 in Sacramento, Moorlach said he wanted to “kill” PACE.
He’s clearly been spending so much time with the bankers and tax collectors that he’s failed to see the benefits of this innovative financing mechanism. PACE is effectively solving a marketplace failure in Orange County, where the lion’s share of homes are energy-inefficient and where housing costs are high.
It’s no surprise thousands of Orange County homeowners have chosen PACE to finance improvements like energy-efficient windows and doors and HVAC systems, not to mention rooftop solar. What is surprising is why our senator would want to kill off a free-market approach to reducing utility bills and creating jobs at no cost to public budgets.
— Wally Malesh, Huntington Beach
Huntington Beach council will take on pensions again at meeting Monday
By Ben Brazil
The Huntington Beach City Council will decide Monday whether to take a public position on the statewide pension crisis.
The council will vote on whether to support pension-related legislation put forward by state Sen. John Moorlach (R-Costa Mesa).
Moorlach has proposed three bills and three amendments to the state Constitution. One amendment would “prohibit public employers from increasing retirement benefits for their employees without two-thirds voter approval.”
Originally, the council considered the item April 17 but voted to have the Intergovernmental Relations Committee review the legislation before the council takes another vote to conform to established protocol.
The IRC, which voted to support the legislation, is a council subcommittee formed by Mayor Barbara Delgleize, Mayor Pro Tempore Mike Posey and Councilwoman Jill Hardy. The group reviews pending legislation and its potential effects on the city.
The initial item was proposed by council members Lyn Semeta and Erik Peterson. They have stressed the need for pension reform, citing Huntington Beach’s tens of millions of dollars in unfunded pension liabilities.
Representatives from the California Public Employees’ Retirement System, or CalPERS, will be present at the study session to give a presentation addressing pension concerns.
The representatives’ appearance was approved by the council at the last meeting after being proposed by Councilman Billy O’Connell.
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