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Did your old furnace finally fail in the dead of winter? Do you need a new roof?
For homeowners, particularly those on tight budgets, these are vexing questions. In nearly 100 communities in Missouri, homeowners can borrow the money they need for energy-efficient home improvement projects and pay it back through their property taxes.
Through the Property Assessed Clean Energy program — PACE for short — a contractor gets the money upfront from a state agency called the Missouri Clean Energy District, and the homeowner makes payments for up to 20 years through an added line item on their property taxes. To secure the debt, a lien is placed on the property.
Promoters of PACE worry that two elected officials in Clay County are putting the program in jeopardy in Missouri.
Clay County Collector Lydia McEvoy and Clay County Assessor Cathy Rinehart say the program created an administrative burden on their offices. In a Dec. 3 letter to cities in Clay County that participate in PACE — Kansas City, North Kansas City, Excelsior Springs and Gladstone — McEvoy and Reinhart say they can collect city property taxes or PACE liens, but not both.
“Since these liens were added as special assessments, both offices have seen a dramatic increase in customer service and legal concerns, absorbing staff time and resources,” the letter reads.
In an interview, McEvoy said her office deals with too many phone calls from Clay County residents who have questions about their property tax bills after PACE liens are added to them, with some expressing concerns over the increase in what they now owe.
“These liens are not what they seem to the taxpayers,” McEvoy told The Star. “We end up with the calls on the back end when the bill comes due with all these questions and all these concerns and all these problems.”
David Pickerill, executive director of Missouri Clean Energy District, the state agency that administers Missouri’s PACE program, says McEvoy “has some deep-seated objection to PACE” that he doesn’t fully understand.
After seven property owners took advantage of PACE in 2017, its use grew in 2018. Pickrell said 191 residential homeowners in Clay County have completed nearly $3 million in improvements.
“She has been hostile to cooperating with the PACE program and actually the PACE statute,” Pickerill said. “She initially refused to collect and the law says she shall collect.”
That refusal earned McEvoy a trip to court in 2017. The Missouri Clean Energy District asked a Clay County Circuit Court judge to compel her to collect the PACE assessments, just like the county collector gets residential and commercial property owners to pay the real estate taxes they owe. McEvoy in that case said that her office has no agreement with the Missouri Clean Energy District to collect PACE assessments, but the court didn’t find her argument persuasive.
The Missouri Court of Appeals reviewed the Clay County judge’s decision in August and agreed with it.
McEvoy, by telling cities that her office would not collect either property taxes or PACE liens, may be seeking another pressure point on the program.
“It’s disappointing that the Clay County Offices of Collector and Assessor have chosen to overstep their mandates and make PACE financing a political issue,” said Renovate America vice president of communications Greg Frost in an email. Renovate America subcontracts with Missouri Clean Energy District to provide financing.
“After two separate Missouri courts rejected their efforts to avoid their legal responsibilities, these activist officials are disrupting the balance of power in local government, depriving Clay County homeowners of options, and restricting private-property rights.”
Cities in Clay County that participate in the PACE program at this point don’t seem certain about how they will respond to McEvoy’s letter.
Kim Nakahodo, assistant city administrator for North Kansas City, said the city council would ultimately decide what to do.
“We are still trying to understand and educate ourselves as to what that letter entails,” Nakahodo said. “We’ve reached out to the Missouri Clean Energy (District) offices, they’re the ones who administer that program, and they’re supposed to get back with us on a few items.”
Issues with PACE?
The PACE program started in Missouri when the General Assembly passed legislation allowing it in 2010. Cities and counties have to opt into the program. Nearly 100 cities and unincorporated areas have chosen to participate in PACE.
California and Florida also are part of PACE.
Pickerill said the interest rates vary from 6 to 9 percent, depending on the price tag of the upgrade and how many years the homeowner wants to pay it off. Those interest rates are higher than those from a prime mortgage loan and many home equity lines of credit, but lower than most credit cards.
While the program is widely used in California and Florida, it has run into criticism.
PACE liens have first priority over a mortgage, meaning that if a house goes into foreclosure or a homeowner goes into bankruptcy, the PACE lien is the first first in line to get payment.
The liens also stay with the property rather than the homeowner, meaning that if the homeowner decides to sell the property, the new owner assumes the responsibility of making payments on the outstanding balance of the PACE lien.
Some homeowners have also been surprised by the amounts that show up on property tax bills, leading to some reports of borrowers defaulting on the loans. PACE lenders can foreclose on properties that default on the loans.
McEvoy said she has heard complaints from borrowers surprised at the payments on the assessments.
“Now all of a sudden I am the bad guy because my name is on the tax bill,” McEvoy said, pointing out that her office gets no compensation from collecting PACE liens. “I didn’t do anything to put this amount there. I have nowhere to point them.”
Pickerill said there have not been PACE-related foreclosures in Missouri.
“I have seen several bankruptcies,” Pickerill said. “That’s not precipitated by the PACE lien. Someone lost a job or had health issues or something like that.”
He acknowledged that at the beginning of the program with Renovate America, home equity was the main credit criteria for extending a PACE loan.
“In California, there were a number of cases where they had equity in the home but didn’t look to see if they could afford to make the payments,” Pickerill said.
As a result, Renovate America changed its underwriting standards to check for the ability to pay.
“That was a logical thing that was a bizarre oversight,” Pickerill said. “That’s our dirty laundry.”
Will PACE survive in Missouri?
Pickerill said the only other county that has voiced concerns over PACE is Randolph County, where the city of Moberly has opted into the program.
He said that borrowers are given repayment schedules ahead of agreeing to the loan that set out principal and interest payments, much like a mortgage disclosure. A follow-up phone call is placed to the borrower to go over the terms of the transaction, Pickerill said.
Still, McEvoy said, she fields calls about confusion over the program.
“Maybe they can do a better job, offer better protections for people, somewhere where I can turn people to and say here’s who you should call and they are going to listen to you and try to make it better,” McEvoy said. “Because I literally have no power.”
“We have an 800 number that people can call,” Pickerill said. “Lydia McEvoy can simply refer people to that toll-free number.”
Throughout Missouri, more than 1,500 properties have had $27 million in improvements funded through PACE. Pickerill said he worries a standoff with McEvoy could jeopardize the program. He said lenders want the loans paid back through special assessments on property tax bills or else borrowers might ignore the obligation.
“If McEvoy gets away with this, I think every collector in the state is going to follow suit,” Pickerill said. “And that will end residential PACE.”