CA is doing something right

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Kman's picture
Status: Bronze Member (Offline)
Joined: Jan 19 2009
Posts: 72
CA is doing something right

   A little over a year ago, CA passed AB811.  This bill allows for what is termed PACE funding- Property Assessed Clean Energy.  In essence, cities and counties can loan money that is secured by a property tax assessment for the purpose of improving energy efficiency of homes and businesses.

  It took a little while for this to catch on, but one county embraced it very early.  That is Sonoma County (about an hour N of San Francsisco) with about 500,000 people.  Sonoma has always been at the leading edge of environmental improvements.  The city of Santa Rosa was one of the first cities to use LED lights in the traffic signal.  With PACE, Sonoma County launched its campaign to have the highest installed base of Solar in the country.   About a year ago, the Sonoma County Energy Independence Program was launched- referred to as SCEIP.  It is a PACE based program administered by the County.   

  SCEIP allows homeowners and commercial property owners to borrow money from the County for energy improvements.  Solar is the most common, but not the only- other improvements like high efficiency windows and cool roofs are also allowed.  Financing is fixed rate for 5,10, or 20 years.  It is paid twice a year when the property tax are paid.  Income or credit are not checked, as it is the property, not the individual that secures the loan.  SCEIP will only make loans available when the property owner is current on taxes and all other liens (such as mortgages).  In addiition, limits the loan amount to 10% of the property value and sets a cap on the CLTV of all loans including SCEIP at 110%.  If the property is sold, the financing stays with the property.

    Once SCEIP makes enough of these loans, around $30-50M, it then sells them on the market, much like bonds.  However- these are not municipal bonds.  These are loans secured by property tax with first lien positions.  So about as secure as anything these days.  In the event that a homeowner defaults, the entire loan is not called like a mortgage- instead, it just has to be brought current by the new owner.  This is also good for banks as their loans are not put at "further" risk.

    Simply, this is about as easy as it gets to get a loan for improving ones property.  The paperwork is also very minimal.  Many of you may be thinking- great, another easy finance to increase debt.  However, when put in context with what the loan is for (and they make sure this is what it is used for) it typically does not increase the property owners expenses. It is designed to lower them and increase the value of the property!   It is good debt: debt that reduces ones expenses while helping the environment and helping to solve our energy problems.

   The perfect example- a SCEIP loan for a homeowner to put a solar PV system on their home.  They can 100% finance the cost of going solar (less rebates).  The solar system can completely eliminate the property owners electric bill.  In most cases, in the first year- the net financing payments are less than electric costs paying pre-solar.  Given the inflation in energy costs, the fixed rate financing for solar makes the savings grow every year.  Given all the issues we are facing, just think of the savings once we realized by locking in todays power rates 5,10,25 years out!

   This has been a huge success in Sonoma County.  The Solar industry has been taking off.  Jobs have been created.  Property owners have reduced their costs and positioned themselves for the next 25+ years.   The County believes so much in this that it is actively educating homeowners and business owners about its benefits, with PG&E's support.  Rod Dole, the County Treasurer has been to Congress and the White House educating them on the merits of the program.

   So now, coming to a city near you, programs just like SCEIP.  This Summer about a dozen more cities and counties will be adopting a PACE based program called CaliforniaFIRST.   Los Angeles and San Francisco are already working on their own programs.  It won't be long before CA has a cohesive program enabling energy improvements throughout the state.  And soon, it won't just be CA, many other states are doing the same.

   Just thought I would share and let everyone know that there are some signs of hope when states as messed up as CA can do something right for change.


Ken C's picture
Ken C
Status: Platinum Member (Offline)
Joined: Feb 13 2009
Posts: 753
Re: CA is doing something right

I was wondering from where they will get the money to loan to the homeowner?




earthwise's picture
Status: Platinum Member (Offline)
Joined: Aug 10 2009
Posts: 848
Re: CA is doing something right

From Kman:

It is good debt: debt that reduces ones expenses while helping the environment and helping to solve our energy problems.

If my memory serves me correctly from "Martenson University"  this type of debt is called "self-liquidating debt", really the only kind of good debt. If they had that here in San Diego County, I'd be signing up tommorrow. How refreshing to hear of Government doing something right for a change.

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