Final nail in the coffin for PACE: DeMarco says no to pilot

Hope you all had a great weekend.

For those who might have missed it, Grist reported on Friday that the FHFA has rejected any notion of a PACE “pilot.”  In my assessment, a negotiated settlement with the FHFA that allowed PACE to proceed in pilot capacity was the best hope for keeping PACE alive.  Of course the judicial and legislative fights will go on, but the prospects are dim on both fronts. I have an update on the situation with the Senate Banking Committee that I’ll send along on Monday or Tuesday of this week, but the short version is that legislation does not look likely prior to the mid-terms.

I wish there were better news for PACE, but it unfortunately doesn’t seem like it’s going to happen. FHA Title I, anyone?

Update on LA County courtesy of Run on Sun, a Pasadena solar installer

Sorry for the radio silence of late, folks. There just hasn’t been much going on in the world of PACE over the last few weeks. I’m hearing ruminations of a big legislative push post-Labor Day, but I’m not h0lding my breath.

Meanwhile, I came across a blog recently that has some interesting tidbits on LA County’s PACE program, LACEP, which is currently on hold.  LA County is apparently considering its options at the moment, which include moving forward with PACE tailored to non-conforming borrowers (tough road, given that non-conforming borrowers at the jumbo end probably have better financing options than PACE, and sub-prime borrowers probably shouldn’t be putting more debt on anyway), a subordinate PACE lien program (also tough given the performance of home equity of late – who would want to take junior exposure to US real estate?), and FHA Title I loans (this seems to be the most promising option, and one I’m hearing a lot about).

For those interested in following LA County’s program, it makes an interesting read.  Most of the other content will already be well-known to readers of this blog. You can find the blog here.

Happy final days of summer!

LA Times reports on PACE; sadly, no “new” news

In what has otherwise been a very quiet few weeks on the PACE news front (and the PACE legislative front, frankly), the LA Times today penned a piece on PACE and the impact that the regulatory decision has had on solar contractors and home performance retrofitters.

No “new” news in this piece, but here’s a link in case you’re dying for a fix from the PACE newsfeed: http://www.latimes.com/business/la-fi-pace-20100819,0,7260415.story

SunRun and WRCOG to CEC: be very careful with how you spend that $30m

Remember that recent California Energy Commission (CEC) meeting to discuss the cancellation of funds allocated to PACE (if you don’t, I wrote about it here and here)? Well, I have a few updates on that meeting for you.

(Quick background for those new to the issue: the CEC long ago allocated over $30m in ARRA funds to support PACE programs across the State of California.  This spring the CEC was sued by the Western Riverside Council of Governments (WRCOG) over its award methodology (WRCOG was bitter over being left out), and WRCOG was successfully awarded an injunction preventing the disbursement of funds. As a result, programs that had been designed on the assumption of getting support from the CEC (for example, San Francisco’s PACE program which was using CEC funds to buy 150bps off the interest rate to get it to parity with Sonoma County’s rate at 7%), had to be suspended.  Then the FHFA debacle hit, and the CEC was told by Governor Schwarzenegger’s Recovery Task Force to reallocate funds to other initiatives beyond PACE or be at risk of losing the money.  At a July 28 meeting the CEC decided to do so.  The idea was to stick with the municipalities which had already been awarded funds under PACE, but broaden the use of funds to financing initiatives beyond PACE.)

Now some interesting documents have been published that lend insight into what’s going on behind the scenes.

1) WRCOG’s lawyers wrote a letter to the CEC notifying them that their plan of switching funds around within the same municipalities that had been awarded funds under PACE was unfair (probably true, in my opinion), and that they considered it to be a violation of the court-ordered injunction. The letter is here.

2) SunRun, a residential solar financing company, wrote a letter asking the CEC to require PACE Program Administrators to enter into a non-compete agreement that would preclude them from becoming energy efficiency and solar financing companies at a future date. SunRun is trying to prevent Renewable Funding from winning the contract to become the administrator of the CEC’s funds (which would put it in a position to gather valuable competitive data on SunRun) and then leveraging that position to then compete with it by offering financing as well. That letter is here.

This puts the CEC in a tough position. I don’t envy them.  They don’t have time to run another competitive bid process as WRCOG wants.  If they redistribute the funds within existing grantees, as they need to in order to comply with Governor Schwarzenegger’s request, they’ll get sued by WRCOG for being in violation of the injunction.  Complicating this is SunRun’s letter saying that it’s not fair for Renewable Funding to be both program administrator and provider of financing for these programs. Hmmm….must be interesting times over at CEC.

Lastly, in a recently published  Staff Paper that was drafted to support the meeting, I found the direct language from the Governor’s Office that compelled the CEC to act to move the funds away from PACE. Here’s the language from the July 15th, 2010 letter from Rick Rice of the Governor’s Recovery Task Force to Karen Douglas, Chairman of the CEC:

On October 8, 2009, your Commission issued Solicitation Number 400-09-401 and is now in the process of contracting with several entities as part of your Municipal Financing Program.  However, due to recent decisions by Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency that would prevent the continuation of PACE programs, it is evident that the efforts of the [Energy Commission] to use the PACE financing model no longer constitutes a viable option.

I am calling on the [Energy Commission] to adapt to the changed regulatory landscape in a way that will allow full obligation of the reallocated funds by September 30, 2010. If the [Energy Commission] does not respond to the challenges recently imposed by aforementioned federal entities, the [Energy Commission] is teetering on failing to honor both Governor Schwarzenegger’s Executive Order and the federal mandate to put Recovery Act funds to work for the American people as quickly and efficiently as possible. Every day that passes without action by the [Energy Commission] increases the chance that stimulus funds so vital to California’s recovery could be rescinded. The Governor has indicated in the past that any rescission of Recovery Act funds is unacceptable. Therefore, it is incumbent upon the [Energy Commission] to immediately find ways to encumber State Energy Program funds in a manner that prioritizes expediency and viability.”

Anyone have any insight into the latest goings-on at CEC?

Greentech Media overviews last two remaining PACE programs: Babylon and Sonoma

For those who might have missed it, Mark Boslet of Greentech Media recently wrote a summary of the Sonoma and Bablyon PACE programs that brings together some interesting data. Earlier Mark wrote a piece called “Seven Ways to Save PACE” that I’ve been meaning to write a response to (I disagree with many of his conclusions, particularly the notion that there is demand in the market for revenue bonds backed by junior assessments), but haven’t been able to find the time of late.

Anyway, for those looking to get grounded in some data and facts on Sonoma County’s and the Town of Bablyon’s PACE programs Mark’s article is useful. You can find it here: http://www.greentechmedia.com/articles/read/paces-respectable-track-record/