|In 2011, the Board of Supervisors adopted the Yolo County Climate Action Plan. One of the measures included in the Plan to reduce greenhouse gas emissions, is to reduce energy consumption in existing residential and commercial units (Measure E-2). To encourage voluntary participation in this measure, the County adopted a Property Assessed Clean Energy (PACE) Program to aid residents in financing the retrofits.
The PACE program allows the County Auditor-Controller's Office (now Department of Financial Services) to add energy efficiency improvement costs (5 to 20-year loans) of qualified property owners to the property tax roll and thus allow property owners to pay the annual cost of energy efficient retrofits on their property tax bills. The PACE administrators use a joint powers agency (JPA) to provide financing for the loans to qualified property owners. This is required as the JPA sells tax-exempt bonds as a means to provide the financing to PACE customers and then use the powers granted by the 1915 Act or Mello-Roos bonds to then enroll charges onto the customers tax bill. The JPA pays the PACE administrator a variety of fees for administering the PACE program. Since 2011, significant legislation has also occurred as described in Att. A - PACE Legislation that has impacted PACE programs.
Yolo County and the cities of Woodland, Davis, Winters, and West Sacramento agreed to limit the amount of PACE administrators to three, as at the time the impact on county and city staff was unclear. This was an unwritten agreement between all cities and the county, with the understanding that no changes would occur without all cities collectively agreeing. The first PACE administrator to be approved by the Yolo County Board of Supervisors to implement a PACE program was Ygrene. Since it was the first financing company in a newly developed federal program, the agreement was drawn as a contract without the County joining the related JPA. The agreement was initially adopted in 2013 with a five year term. Later, in 2015, the County and Cities enrolled in the HERO program and California First program by joining their respective JPAs (rather than contract execution with a PACE administrator) to complete the three agreed upon PACE administrators.
Since inception, the PACE program has provided financing to 1,200 properties within Yolo County and its incorporated cities. The break down is listed in Table I below. HERO and California First do not differentiate commercial properties from residential properties in reporting.
||Total Property Count
|Yolo County Total
|Yolo County Unincorporated
Prompted by recent requests from other PACE administrators to operate in the County, and an upcoming expiration of the contract with Ygrene, staff has been evaluating the program with a holistic approach in order to present the Board with a recommended action.
The basic questions that staff sought to answer were:
1) Should the County keep the existing program as is and renew Ygrene’s participation under a JPA?
2) Or, should the County eliminate the provider limit and open the program to additional providers seeking to do business in the County?
Some of the issues that staff has encountered include lack of consistency in reporting. As mentioned above, not all PACE providers separate residential and non-residential projects. The opportunity of having this information aids County staff in measuring the effectiveness and the impact for the Climate Action Plan.
The County provides various services to PACE administrators of which some are compensated through receipt of an administrative fee while others currently are not:
Therefore, having only three PACE providers allows County staff to limit costs associated with training PACE administrators on County processes and procedures as well as understanding the intricacies of each PACE program. Also, in order to have additional PACE administrators, this may require the County to join additional JPA's associated with these providers. This adds responsibilities to monitor and understand the activities of the underlying JPA's such as receiving annual audits and reviewing any risk factors associated with JPA operations.
- Application processing, approval, and lien filing - Community Services for certain PACE administrators will receive and review all applications and will file liens associated with PACE loans on behalf of PACE providers. This is compensated with a flat fee.
- Enrollment of Tax Charges - Property Tax Accounting unit in the Department of Financial Services receives files from the PACE administrators to enroll charges on the tax roll. A flat fee is received for each direct charge enrolled.
- Collection and Distribution of PACE charges - The Tax Collection unit in the Department of Financial Services receives the payment of taxes and charges which are then disbursed to the JPA by Property Tax Accounting. No additional PACE fees are received for this effort.
- Customer/taxpayer support - Certain PACE customers require additional customer support at various stages of the program, whether support prior to entering the program or subsequent to enrollment. Certain customers attempting to exit the program can take significant time of Department of Financial Services (DFS) staff in understanding the timing and intricacies or leaving the program. Though this support should come from the PACE administrators, at times taxpayers seek guidance from County staff to navigate the complexities of PACE programs. This requires DFS staff to become familiar with the operations, rules, timelines and procedures of each of the JPA's and PACE administrators to help support taxpayers.
Having additional PACE providers in the County would potentially increase competition, to the benefit of County residents. However, it also increases the burden on County resources. It could also be argued that a more crowded market of PACE administrators, may deter companies from wanting to market or actively engage within Yolo County, which could potentially reduce the amount of residents utilizing the program. The staff from the Cities have indicated that they agree with the County recommendation regarding a limit in PACE providers.
Additionally, new PACE legislation and regulation (Att. A - PACE legislation) attempt to regulate the industry similar to the credit financing industry; the credit of borrowing property owners must be assessed and the lenders (PACE program administrators) must be licensed and subject to certain marketing regulations. While these changes are taking place, the county should consider restraint in expanding the program and increase effort to ensure improvements intended by new laws and regulations are implemented by current PACE administrators.
In summary, staff recommends that the Board continue to limit the program to the existing three PACE providers and direct staff to renew Ygrene’s participation under the JPA to which the County is already a party.