One California PACE bill clears Senate as a second one lingers

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LOS ANGELES — A bill to strengthen consumer protections for Property Assessed Clean Energy financing programs in California was approved by the Senate Monday and is headed to the governor’s desk for his signature.

A second bill that would add more oversight has until Friday's end-of-session deadline to attain approval.

PACE allows homeowners and commercial property owners to finance energy efficiency and safety projects like solar panels, windows or earthquake proofing for up to 25 years through tax liens on their properties. The tax payments are structured to stay with a property even if it is sold to a new owner.

The industry had faced criticism that homeowners are not being adequately informed about how the program works before they agree to the tax liens.

State Sen. Nancy Skinner, D-Berkeley, who co-authored the state’s original PACE legislation in 2008, said she introduced Senate Bill 242, the bill that has reached Gov. Jerry Brown's desk, to make sure the program operated as intended.

“California is the national leader in PACE financing,” Skinner said. “SB 242 adds consumer safeguards so homeowners can continue to enjoy a convenient tool to finance energy, water and earthquake safety upgrades to their homes and properties.”

Since being launched in Berkeley in 2007, PACE has assisted thousands of California homeowners finance clean energy, energy efficiency, water conservation and earthquake safety upgrades to their homes, according to Skinner’s office.

PACE programs are administered by local governments who finance the program through a local government bond; loans to property owners are paid back via a line item on the owner’s property tax bill. PACE now operates in more than 44 cities and counties across California, as well as in 34 other states.

Skinner, also co-authored Assembly Bill 1284, which would expand consumer protections for homeowners participating in the state’s PACE programs by providing a regulatory framework under the California Department of Business Oversight.

Assemblymember Matt Dababneh, D-Woodland Hills, is the lead on AB 1284, which has yet to be approved as Friday's deadline looms.

AB 1284 would require PACE financing companies to obtain a license from the California Department of Business Oversight. The bill would also fortify consumer protections by granting the Department the ability to assess penalties, suspend and/or revoke a license for companies that do not follow the rules currently laid out in California law.

AB 1284 "would cut down on the unscrupulous practices by bad actors in the industry that trick consumers into participating in the PACE program without fully understanding the impacts it may have on their property taxes and their ability to sell or refinance their home," Dababneh said.

When Dababneh introduced the bill, he said California’s PACE program lacks the proper oversight of third-party administrators and contractors who work with consumers on financing these energy-efficiency projects.

“Since becoming Chair of the Assembly Committee on Banking and Finance, I have worked on making sure consumer protections are part of the PACE program,” Dababneh said. “However, with additional reports surfacing that outline flaws in how contracts are pitched to consumers, it is apparent that an additional tool is needed to protect homeowners and to ensure the PACE program continues to be viable in our state."

Dababneh also authored AB 2693, which passed last year. It added consumer protections to the market by requiring financial disclosures and a three-day right to cancel PACE transactions.

SB 242 adds consumer protections to ensure that owners are fully aware of loan terms and understand that loan payments are made through their property tax bills. SB 242 additionally provides a three-day right to cancel, and as PACE programs often rely on contractors to promote this financing opportunity, SB 242 makes it illegal for any “kickbacks” or other marketing incentives to be paid to contractors.

SB 242 garned support from local governments, builders, clean energy companies, environmental groups, business groups, and PACE providers.

"Renew Financial is honored to stand with Senator Skinner and the many other business and environmental stakeholders who worked so hard to strengthen PACE financing for California homeowners," said Cisco DeVries, CEO of Renew Financial and the innovator of PACE financing.

"This legislation establishes strong industry standards that will benefit homeowners uniformly across the state," DeVries said. "It will also serve as a national model for states that adopt PACE financing so they can provide homeowners with an effective financing option to make their properties more efficient, comfortable and secure."

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