Nov. 16, 2020 - Created, Updated Apr. 6, 20211
The comments and videos linked below are all the opinion of Vance Jochim, FiscalRangers.com.
Latest update: Apr. 6, 2021: Bloomberg.com published a long article describing the horrors being encountered by homeowners who use PACE financing which is HERE.
The following memo needs to be updated - We researched PACE Commercial and PACE Residential finance programs and published videos on each of them. In a nutshell, PACE Residential Loans are very risky and should be avoided, and even local county or city governments should reject them in our opinion. We did issue an opinion that PACE Commercial financing might be a good idea for cities to approve since we expected Commercial Developers to be much more savvy about their risks.
Our Mar. 22, 2021 warning opinion video about PACE Residential financing for home improvement projects is HERE.
Our separate Dec. 18, 2020 opinion video about apparent benefits to cities/counties of approving PACE Commercial financing programs is here. (Due to commercial developers being much more sophisticated about the risks of using them.)
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Below is the memo I sent to the Lady Lake, FL Town Commissioners in late 2020 who were being asked to possibly approve PACE financing schemes for their residents and/or commercial properties. This post will be replaced later with a rewritten overview of our opinion about both types of PACE financing schemes, but the above linked videos are a good source.
Memo to Lady Lake City Commission Related to the PACE Financing scheme discussed in agenda item 6 (Resolution 2020-115) for residential and commercial projects.
I am the FiscalRangers.com blogger who has appeared at some of your meetings. I am a retired Certified Internal Auditor, Certified Fraud Examiner and I was an anti-corruption manager in the Iraq Reconstruction Management Office in Baghdad, Iraq in 2004-2006 before retiring to Lake County, FL.
It is my opinion the
PACE financing scheme is a RISKY sub-prime lending program to finance specific home improvement projects like window replacements, solar roof panels, air conditioners, etc. It was designed to circumvent normal financing methods based upon credit ratings. Instead, no credit reports are required and the financing is based strictly on equity in residential or commercial buildings that have a lien placed on them AND the collection risk is transferred to the County Tax Collector since, in my opinion, no rational lender wants the loans.
The "green" home improvement firms market the ease of financing with "no credit checks" and focus on the financing rather than the return on investment of the project. Solar firms are using this and if there is limited payback and promises of "free electricity" are not met, the homeowner has a higher tax bill than expected without offsetting "solar energy" savings.
PACE programs are administered following state regulations enacted by industry lobbyists and require cities or counties to approve them so the loan liability can be added to a property tax bill similar to assessments for street lights, etc. Thus, in my opinion, as a taxpayer advocate, the PACE funders and home improvement vendors avoid any risk of non-payment since the County is required to collect the annual amount due on property tax bills.
Some government officials and government staff push PACE because it is a way to finance questionable "green programs" like solar which cannot get funding any other way. There are many reports online where residential owners were lied to about payback, equipment life, government subsidies, etc. and there was no recourse.
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They have to keep paying even if the project, such as solar, fails in less time than promised. Vendors avoid responsibility completely.
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Homeowners find the PACE loan is a lien or second mortgage on their property, preventing other home equity loans and they did not know that.
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Homeowners find they cannot sell their home with the PACE loan on their property tax bill. In some cases, Federal agencies that approve loans will not approve refinancing or transfer of mortgages with PACE liens.
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If a homeowner fails to pay their tax bill due to the added PACE loan, they can lose their house and county taxpayers will foot the bill for the collection process. Such financing should be CREDIT RATING BASED upon ability to pay and not based upon only equity in a home or commercial building. It should use the standard equity loan process based upon credit ratings and third party collection systems and be ALL third party administered and not involve the County tax collector.
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If a home improvement provides shoddy services or products, the homeowner is stuck with payments and no easy recourse since it is on their property tax bill.
Finally, I am amazed that staff would bring this to the Commission without researching all the negative reports on PACE for an informed Commission decision. DO NOT RELY on the vendor presentations which will try to deny all the weaknesses.
This is my opinion, and the Lady Lake, FL City Commission should deny approval of any PACE programs. Leesburg stopped theirs after one project. I have asked Mt. Dora staff to explain their participation. The Lake County Board turned down a request for PACE programs about three years ago. Lady Lake Government should not be subsidizing commercial vendors by approving the PACE program which relies on the Tax Collector, rather than commercial to provide collection services and risk.
At the very least, PACE approval should be postponed entirely until staff and the Commission get input from the Lake County Tax Collector David Jordan. He has agreed to work with me on producing a video about all the negative aspects of the PACE program.
Vance Jochim
352-638-3578
Tavares, FL
Lake County, FL Fiscal Watchdog blogger - FiscalRangers.com
Retired Fortune 500 Internal Audit Manager, anti-corruption manager
YouTube: FiscalRangersFlorida channel
Twitter: FiscalRangers
Vance Jochim
FiscalRangers@comcast.net
YouTube Channel "FiscalRangersFlorida"
