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‘Get out of this business’: Assessor says St. Louis County should stop high-interest clean energy loan program [1]

['Nassim Benchaabane', 'Laurie Skrivan']

Date: 2022-08

CLAYTON — St. Louis County Assessor Jake Zimmerman is urging the county to rid itself of a high-interest “clean energy” residential loan program, equating proposals to add market competition and consumer protections to “putting lipstick on a pig.”

Zimmerman, whose office’s appraisals are used to calculate property tax bills, testified at a County Council hearing Tuesday on a measure to expand the state-supported Property Assessed Clean Energy program by adding a second loan administrator in unincorporated areas of the county.

The PACE program lets local governments borrow money at low rates and make it available to borrowers for energy-saving home improvements. The loan payments are added to borrowers’ property tax bills. The program is designed to provide needed financing for home upgrades in neighborhoods where traditional lenders typically don’t do business.

The measure before the council would expand the county’s PACE program by joining the Missouri Clean Energy District. That would allow the district’s contracted private lender, PACE Funding Group, to administer PACE loans in unincorporated St. Louis County. The change would introduce a second private PACE lender to areas currently only served by Ygrene Energy Fund, a private PACE administrator that operates under the public St. Louis County Clean Energy Development Board.

But questions have been raised about the program following a ProPublica investigation, published last month in the Post-Dispatch, that found that some PACE borrowers, saddled with the substantial costs of home improvements, are faced with high tax bills that they are unable to pay. More than 100 PACE program participants, out of about 2,700 analyzed, were at risk of losing their homes, ProPublica found.

Local government officials tasked with overseeing the program, including the St. Louis County Clean Energy Development Board, have deferred to private lenders and were unaware of the PACE delinquency rates, the ProPublica investigation found.

The investigative report prompted the council to revisit legislation, introduced last year by Kelli Dunaway, D-2nd District, and Mark Harder, R-7th District, to allow MCED to administer loans in St. Louis County. Dunaway urged the council to consider adding protections and stricter oversight.

At a lengthy hearing last week, the council heard testimony from California homeowners trapped in debt by PACE loans there and from their attorneys. Citing their experience, they urged St. Louis County not to expand its PACE program, which was launched in 2015, without strict oversight. Both California and Florida, the only other states with large residential PACE programs, have seen a backlash against the industry.

In response, representatives of both MECD and the county board, and their private lenders, told the council that California, as the site of the country’s first PACE program, lacked standards and a range of consumer protections, including requiring more conservative property valuations, that are now in place.

They also pointed to a state bill, sent to Gov. Mike Parson for his signature, that would require PACE’s residential loan programs to be examined by the state finance division at least every other year, provide borrowers with complete information about the loan, and establish penalties for violating the law.

And representatives of both PACE programs argued before the council that they would be the better, more responsible administrator for unincorporated areas of the county.

But Zimmerman on Tuesday said two private businesses were “in a food fight” and that the council should forgo PACE entirely.

“I’m really not interested in the food fight between whether the folks running PACE loans through the county program are doing a better or a worse job than the folks running that state program,” Zimmerman said. “My advice to the county would be: get out of this business. And don’t do business with either the state folks or the county’s PACE board.”

The PACE program gives “the folks who make money off of this type of financing” the county’s power to take away people’s homes for failure to pay taxes, Zimmerman said.

“The bottom line,” he said, “is that even with all the consumer protections in the world, at the end of the day what you’re doing is you’re handing over the police power of St. Louis County, you are handing over the county power to take somebody’s house when they don’t pay their property taxes, and you’re handing it off to private sector enterprises who are giving out loans with questionable interest rates.”

In St. Louis County, out of a total $1 million total in PACE assessment charges, about $250,000 of it hasn’t been paid, Zimmerman said. A total of 29 out of about 340 PACE assessed properties — 181 properties assessed by the St. Louis County Clean Energy Development Board and 159 by MCED in 26 county municipalities — stand to be sold at auction within the next three years for late tax payment. Ten of those property owners stand to lose their homes in August, Zimmerman said.

“We are not California yet, but if it goes on for another couple of years, whether you let the new guys in or not you won’t have hundreds, you’ll have thousands, and perhaps one day you’ll have tens of thousands, and when that happens, you will have corresponding more delinquencies and correspondingly more people losing their houses,” Zimmerman said.

Because county municipalities could continue PACE programs on their own, Harder and Tim Fitch, D-3rd District, asked whether doing away with the county oversight board wouldn’t just reduce government oversight. In addition to unincorporated St. Louis County, the county PACE board allows Ygrene to operate in all 88 municipalities in the county; MCED operates in 26 municipalities.

While the county would still be responsible for collecting taxes on those properties, Zimmerman told the council it should still opt out of backing the program.

“The bottom line,” he said, “is that there is no circumstance in my opinion in which it makes sense to offer the county’s power to take your house in return for getting you money to buy a new air conditioner.”

Supporters of PACE programs have characterized them as a way for homeowners without means to obtain financing.

Given that, Dunaway asked Zimmerman whether adding safeguards for borrowers would be sufficient: “For desperate people, if this is the last resort, is there anything we can do to protect them?”

“My honest answer,” Zimmerman said, “is you’re putting lipstick on a pig.”

Editor’s note: This report was updated to clarify that MCED’s contracted private lender, PACE Funding Group, would be competing with Ygrene if the measure before the council were adopted.

ProPublica report prompts St. Louis County Council to seek consumer protections for state-backed clean energy loans program The move follows a ProPublica investigation published in the Post-Dispatch on Sunday that found scores of some of Missouri’s most vulnerable homeowners who used the loans for urgent repairs ended up trapped in debt and could see their homes sold at auction.

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[1] Url: https://www.stltoday.com/news/local/govt-and-politics/get-out-of-this-business-assessor-says-st-louis-county-should-stop-high-interest-clean/article_38efdd5f-b5b3-5584-b278-e3bedbaf4018.html

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