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  Regular-Community Services   #   58.    
Board of Supervisors Community Services  
Meeting Date: 07/24/2018  
Brief Title:    PACE Program Update
From: Taro Echiburu, Director, Department of Community Services
Staff Contact: Kimberly Villa, Community Services Analyst, Department of Community Services, x8431

Subject
Receive update on the Property Assessed Clean Energy program, affirm continuation of the current program with the existing limit of three providers, and direct staff to renew agreement with Ygrene. (No general fund impact) (Echiburu)
Recommended Action
  1. Receive a presentation on the Property Assessed Clean Energy (PACE) Program; and
     
  2. Affirm the continuation of the current PACE Program with the existing limit of three providers and direct staff to renew the agreement with Ygrene under the related JPA, Golden State Finance Authority (GSFA)
Strategic Plan Goal(s)
Sustainable Environment
 
Reason for Recommended Action/Background
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.
Table 1
    Ygrene (Residential) Ygrene (Commercial) HERO CA First  
Name Total Property Count Homes Improved Commercial Improved Properties Improved Properties Improved Total
Yolo County Total 50,539 683 15 209 293 1,200
             
Davis 15,333 106 5 33 76 220
West Sacramento 14,008 283 5 84 76 448
Winters 1,946 15 0 11 21 47
Woodland 14,546 219 4 71 102 396
Yolo County Unincorporated 4,706 60 1 10 18 89

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:
  • 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.
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.
 
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.
 
Collaborations (including Board advisory groups and external partner agencies)
Community services staff collaborated with the following entities in arriving at the recommended action:
  • Department of Financial Services
  • County Counsel
  • City of Davis
  • City of West Sacramento
  • City of Winters
  • City of Woodland

Fiscal Information
No Fiscal Impact
Fiscal Impact of this Expenditure
Total cost of recommended action $0
Amount budgeted for expenditure $0
Additional expenditure authority needed $0
On-going commitment (annual cost)
Source of Funds for this Expenditure
General Fund $0
Attachments
Att. A. PACE Legislation
Att. B. Presentation

Form Review
Inbox Reviewed By Date
Taro Echiburu Taro Echiburu 07/17/2018 04:46 PM
Form Started By: Kimberly Villa Started On: 06/26/2018 03:44 PM
Final Approval Date: 07/18/2018
Level double AA conformance,
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