Petaluma Argus Courier: Petaluma approves financier for energy-efficient retrofits

May 11, 2015

Petaluma homeowners and businesses now have another option for financing energy- and water-saving property upgrades after the Petaluma City Council on Monday authorized a second participant in the city's Property Assessed Clean Energy program, commonly known as PACE.

Oakland-based company CaliforniaFIRST will now join the Sonoma County Energy Independence Program, or SCIEP, in offering PACE financing in Petaluma. Property owners in Petaluma will now have more options on rates and terms when they finance efficiency-oriented retrofits through PACE.

SCIEP will administer both its own financing programs and those from CaliforniaFIRST, and is working to launch a new web site to allow residents to easily compare their options, said Liz Yager, manager of Sonoma County's energy and sustainability program.

The decision marks the latest example of a Sonoma County PACE market opening its doors to new participants, following similar decisions by the Sonoma County Board of Supervisors and the city councils of Sebastopol, Sonoma, Healdsburg and Cloverdale. Financing through SCIEP had formerly been the only countywide PACE financing option.

"We want to compete on our terms and our programs, but not on our goals," Yager said.

Unlike traditional loans that lean heavily on a borrower's credit history, PACE financing is tied to the property itself and paid back through a property tax bill. Owners can typically borrow up to 10 percent of their property's value, with fixed rates ranging from 6.75 percent for five years and 8.39 percent for 25 years.

PACE loans ег actually a lien on the property ег can be used to install drought-tolerant landscaping, rooftop solar, energy-efficient water heating, climate control systems and more. There have been 290 PACE-financed retrofits worth nearly $4 million in Petaluma since the city joined the countywide PACE program in 2009 and $66.8 million for the county as a whole, according to the city.

"Anything that's going to make your home more energy-efficient is pretty much eligible," said Kathy Miller, Petaluma councilwoman.

Around 39 percent of PACE projects are for solar, and 85 percent in terms of dollars have been for residential projects, Yager said.

Sonoma County was the first to launch a countywide PACE program following the passage of a state law in 2008, which made such financing mechanisms possible. It is considered a tool in the county's wider goal of reducing greenhouse gas emissions to 25 percent below 1990 levels by the end of this year.

The Sonoma County Board of Supervisors issued a $60 million bond to start the PACE program in 2009, with around $17 million left over for new financing. Bringing new providers into the fold will be crucial to allowing PACE to continue, Yager said, with an estimated $2 billion needed to accomplish a county goal of retrofitting 80 percent of buildings countywide with a 30 percent efficiency improvement.

CaliforniaFIRST uses a $300 million line of credit to purchase bonds issued by the California Statewide Communities Development Authority, and uses revenue from those bonds to fund PACE loans in cities throughout the state, said Jonathan Kevles, senior director for the company. Petaluma is already a member of the authority, which allowed the council to immediately authorize CaliforniaFIRST to begin serving Petaluma residents.

The council chose to hold off on allowing two other PACE financiers, California HERO and Figtree PACE, to serve residents, citing concern over potential liabilities from the two associated joint powers authorities Petaluma would need to join in order to participate. The council directed staff to revisit the question within six months.

"I think a competitive interest would be to our advantage," said councilman Dave King, advocating for adding more providers to the local marketplace in the long term.

The ongoing popularity for PACE financing in Sonoma County has occurred despite the announcement in 2010 that the large government-sponsored mortgage backers Fannie Mae and Freddie Mac would no longer purchase mortgages with an associated PACE lien. Fears that the situation would make it hard for borrowers to buy or refinance a home with a PACE lien have not materialized, Yager said, with lenders finding ways to work with the lien and a state-administered fund launched in 2013 to pay off the lien in the event of a default.

Originally published in the Petaluma Argus Courier