In 2020, a then 66-year-old woman paid $190,000 for a home on Rockingham Road in the Wedgewood neighborhood of North Lakeland.
In the last year, county records show she signed a contract to pay $38,203 for a new roof on the 1,500 square-foot home built in 1999 through the Florida Property Assessed Clean Energy (PACE) Funding Agency.
PACE is a state home- and business-improvement program that was designed to help people with little to no credit perform energy-efficient and hurricane-hardening upgrades on their homes that they might not otherwise be able to afford. They can install solar panels and hurricane shutters, repair or replace roofs, install new air-conditioners, and purchase generators or even pool pumps.
According to Florida PACE’s website, homeowners like the one in North Lakeland are told they don’t have to have to put any money down, the program is 100% financed and there is no minimum credit score required. They can get pre-qualified in minutes and hundreds of projects are eligible. In addition, their construction bill can be placed on their tax bill and paid once a year. Approved PACE contractors go door to door, looking for customers.
But it’s not a loan — it’s a lien, and customers could actually lose their homes if they can’t pay what some say are exorbitant costs and interest rates.
Polk County Clerk of Courts records show a lien was placed on the Rockingham Road property in July and PACE is charging the single woman $3,390 a year for 30 years at 7.99% interest, for a total of $101,709 for the roof. She would be nearing 100 years old when it is paid off.
Those kinds of lending and billing practices have Polk County leaders doing battle against PACE, including issuing warning letters to homeowners and joining a lawsuit against PACE.
“I think it is predatory lending to the most vulnerable population,” Polk County Commission Chairman George Lindsey III told LkldNow. “It promises much and delivers little and burdens the homeowner unnecessarily.”
County records show PACE administrators are charging the Rockingham Road homeowner four times what another roofer is quoting on a similar roof. In other cases, PACE is charging interest rates up to 10%.
In 2010, the Florida Legislature provided specific authority for local governments to create Property Assessed Clean Energy (PACE) programs to provide up-front financing for certain qualifying improvements.
In 2017, under Florida Statute 163.08, PACE began an interlocal agreement between the state entity, Flagler County and the City of Kissimmee to administer PACE programs in those two areas.
Under the agreements with local and county governments, the cost of PACE home or business improvements can be placed on property tax bills in participating cities and counties. However, Polk County Tax Collector Joe Tedder said property tax bills should be sacrosanct and should not include collections for private construction companies.
According to Home Run Financing, PACE is “approved in more than 180 municipalities and 22 counties throughout the State of Florida.” Home Run also operates as a PACE financial administrator in California and Missouri.
According to a Senate bill analysis, the first residential PACE program was launched in 2008 in Berkeley and Palm Desert, California. PACE programs are now active in 24 states, plus Washington, D.C. — but only California, Florida, and Missouri offer residential PACE programs.
But for some, when their tax bill or PACE’s bill arrives, there is sticker shock. The woman on Rockingham Road received a $4,000 tax bill this year. And an additional bill from PACE for nearly that amount.
According to an editorial by Steve Bousquet in the South Florida Sun-Sentinel, a Gadsden County mobile home was assessed so low that, with exemptions, the elderly window’s property tax bill next year is $49.66. But after signing up with PACE to get a new roof at 8.99% interest, she now must pay $2,752 a year every year for 30 years, totaling more than $82,000. That is three times what her mobile home is worth.
“People are in jeopardy of losing their homes,” Gadsden County Tax Collector W. Dale Summerford told Bousquet and the Sun-Sentinel’s editorial board. “We have a duty to fight back on this.”
Polk County joins lawsuit
The cities of Haines City and Lake Wales originally signed onto the program to allow PACE to place its construction bills on the tax bills in those cities. But it is not offered in Lakeland and Polk County leaders won’t allow it in unincorporated areas, either.
In fact, Polk County Tax Collector Joe Tedder and the county commission are so concerned about PACE’s practices that they issued warning letters to property owners in June and October and joined a lawsuit for relief from the program after PACE moved to demand tax collectors in every Florida county place their program’s collections on tax bills.
“I want to warn people of the financial risk of this type of loan, when such large payments come due at the same time as their tax bills,” Tedder said. “There is never a free ride, but PACE and their contractors make it sound as if there is … and as a believer of small government, I also feel private businesses should not use the property tax bill as an instrument to collect consumer debt.”
Tedder is also concerned about PACE’s ability to take people’s homes for nonpayment. His office is the only entity in Polk County that can supersede homestead exemption on properties for nonpayment of property taxes and take the property — something he is known to personally work with homeowners to avoid. Banks also work with customers to refinance mortgages if property taxes haven’t been paid. But, with the way the law was written, PACE can step ahead of tax collectors, mortgage companies and other liens to get its money first or take a person’s home.
“I hate telling people there is nothing that can be done to save their property from being sold for unpaid taxes,” Tedder said.
Tallahassee lawmakers noted in a bill last year the issue with PACE superseding even mortage companies.
“These … assessments are senior to existing mortgage debt, so if the homeowner defaults on the mortgage or goes into foreclosure, the delinquent PACE assessment payments may be recovered before the mortgage debt,” a Senate staff analysis reads. “Current law also specifies that a PACE program may be administered by a for-profit entity or a not-for-profit organization on behalf of and at the discretion of the local government.”
Generally, PACE providers are private companies that administer the local government’s PACE program on behalf of the local government and provide funding from private sources.
On Oct. 5, Tedder and the county commission filed a joint motion with the Palm Beach County tax collector, Anne M. Gannon, and Palm Beach Board of County Commissioners, to stop PACE from forcing the county to put the program’s assessments on county property tax bills.
The move came after a judge in Leon County Court ruled that PACE could operate there. The judge also granted PACE legal authority to issue up to $5 billion in debt to finance projects.
But Polk County officials said Florida PACE has taken the position that the Leon County judgment allows it to impose special assessments in all Florida counties, including Polk County, without having the counties’ approval, and without complying with any ordinances or consumer protection requirements enacted by the counties.
“The Polk County Board of Commissioners and Tax Collector disagree with Florida PACE’s interpretation, as do many other Florida counties and tax collectors, and believe that Florida PACE is not permitted to operate in Polk County unless authorized by the county,” a joint statement reads. “The Polk County Commission has not approved Florida Pace operations because of risk to property owners and erosion of Polk County’s constitutional and home rule authority. Further, the county passed a resolution in support of the Tax Collector’s position that special assessments imposed by Florida PACE should not be placed on a property tax bill without Polk County’s approval.”
Tax Collector Office spokeswoman Ashleigh Miller said PACE requested liens be placed on 186 homes in Polk County in 2023. However, the only liens put on tax bills were the ones in the jurisdictions of Haines City and Lake Wales, because these municipalities had local agreements to do so in place with PACE. The others property owners were in areas or cities not in compliance with the statute because they failed to have the local agreements in place with PACE. Of those not in compliance, 23 of them are in Lakeland.
Lake Wales pulls out of the program
The program became so alarming to Lake Wales City Commissioners that last month, they pulled out of allowing PACE bills to put on their property tax bills altogether.
“We rescinded the hell out of that thing,” said Lake Wales City Commissioner Robin Gibson. “You have a civil remedy for somebody who defaults on a contract. But to basically criminalize that or to take that civil remedy and enforce it as if a court had passed judgement on it and entered a judgement with the force of the court behind it — to do that, to enable a private company to do that, is an abuse.”
Gibson served as the first general counsel for Gov. Bob Graham and he wondered why Gov. Ron DeSantis hasn’t vetoed the bill.
“That is wide open veto-able,” Gibson said. “I know the process and one of the things we did was to evaluate these proposals for their legal sufficiency. And this is an abuse of the judicial process, I think, not to mention a constitutional officer like a tax collector being sicced on the public for the benefit of a private industry. To do this is to basically lay at the feet of a private industry, a private contractor, the powers that are reserved to the court system for the collection of a judgement. That ain’t right.”
Lakeland City Attorney Palmer Davis said if any city residents participate in the PACE program, program officials can still seek legal recourse to recoup any money owed.
“The City does not have an agreement with PACE and any debt arising from PACE’s program cannot be placed on a homeowner’s tax bill for collection,” Davis said. “That does not preclude PACE from seeking a court judgment against a homeowner using their program if the homeowner is in default of the terms of a private contract with PACE. A court judgment can ultimately result in a lien against property. But neither the city nor the tax collector would be involved in the collection of that debt. The debt would have to be collected in the same manner as any other debt arising between two private parties.”
According to a Florida Senate analysis of the bill written and passed last year, the state legislature recognized that there were serious issues with the program since its inception.
“These include the cost of funding, contractor sales techniques (notably, responding to a limited homeowner problem and marketing a full house retrofit), rolling the administrative fees for the local government into the PACE loan amount, product sales at above-market interest rates, workmanship issues, inadequate disclosures, and indiscriminate lending regardless of ability to repay,” the analysis reads. “In response to these consumer issues, Congress amended the Truth in Lending Act in 2018 to direct the Consumer Financial Protection Bureau to implement federal regulations which provide more effective consumer protections relating to PACE loans, especially those related to the ability of a homeowner to repay the loan.”
The bill adds several consumer protections relating to the current PACE program, including:
- Specifying that a financing agreement may not be used to fund ancillary work not meeting specified conditions.
- Capping the total of all non-ad valorem assessments, plus any mortgage-related debt on the property, at 97% of a residential property’s fair market value.
- Requiring a determination that a residential property owner is able to pay the assessment and meets certain minimum creditworthiness requirements.
- Allowing property owners to cancel a financing agreement within three days of execution.
- Ensuring that financing agreements do not exceed the estimated useful life of the qualifying improvement.
- Requiring acknowledgement of a number of key terms and disclosures, both orally and in writing, before execution of the financing agreement by the property owner.
- Requiring the appropriate licensure and background screening for contractors who install qualifying improvements under a PACE program.
- Requiring verification that the work was completed to code before funds are disbursed.
- Imposing certain marketing and communication guidelines, including limitations and prohibitions on solicitation, advertising, and other inducements.
- And specifying terms relating to enforceability of contracts for qualifying improvements and associated remedies.
The bill took effect on July 1, 2022.
Federal regulators have also seen issues.
In 2010, and again in 2014, the Federal Housing Finance Agency (FHFA) directed mortgage underwriters Fannie Mae and Freddie Mac — two of the largest mortgage underwriters in the country — not to purchase mortgage loans of homes encumbered by a first-lien PACE loan due to its senior status above a mortgage.
Under normal circumstances, real estate lien priority is established by the order in which the liens are filed. According to the federal agency, super-priority liens increase the risk of losses to taxpayers. Fannie Mae and Freddie Mac support the housing finance market by purchasing, guaranteeing, and securitizing single-family mortgages. FHFA officials said mortgages supported by Fannie Mae and Freddie Mac must remain in first-lien position, meaning they have first priority in receiving the proceeds from the sale of a property in foreclosure.
Additionally, in December 2017, the United States Department of Housing and Urban Development announced that the Federal Housing Administration will no longer insure new mortgages on properties that include PACE assessments, citing concerns about the potential for increased losses to the Mutual Mortgage Insurance Fund resulting from the priority lien status given to such assessments.
In 2013, California created a reserve fund to compensate first-mortgage lenders in case of a foreclosure or a forced sale due to a PACE loan. Oklahoma and Vermont have passed legislation to downgrade PACE from senior lien to junior lien, and there have been attempts by Congress to revise residential PACE programs at the federal level, including the 2014 PACE Assessment Protection Act.
Michael Moran is a Sarasota County Commissioner who crafted legislation to use the PACE program there. In 2020, the Sarasota Herald-Tribune investigated Moran after he became the Florida PACE Funding Agency executive director — a $150,000 job. He was the only applicant.
Moran said told the Sarasota Herald-Tribune that he saw PACE as “one of the most effective public-private partnerships I have ever witnessed. It brings hundreds of millions of private dollars into Florida to carry out the mission of hurricane hardening and energy efficiency.”
“There’s not a single, solitary conflict,” Moran told the paper. “Not an ounce.”
“I have a hard time understanding why a county commissioner of any county where PACE loans are allowed would then become an executive director of a PACE provider,” Mike Fasano, the Pasco County tax collector and former state lawmaker, told the Sarasota Herald-Tribune. “I would certainly think his constituents would be suspicious of all of that.”
Alice Vickers is the former director of the Florida Alliance for Consumer Protection, a nonpartisan nonprofit whose mission is to advance consumer protection and tenants’ rights. “This obviously sounds like a huge conflict of interest,” Vickers told the paper. “It’s definitely a point of concern.”
Moran is also pushing back against tax collectors he calls “rogue” — those like Tedder, who refuse to participate in the PACE program. Tax collectors in Volusia, Duval, Alachua, Pasco, Palm Beach, Hillsborough, Collier and Lee counties have also stonewalled bundling the assessments onto tax bills.
According to the Naples Daily News, Moran vows to take his fight all the way to the Florida Supreme Court to force county tax collectors to “adhere to the law.”
Moran, who will term limit off the Sarasota County Commission in 2024, is now challenging current Sarasota County Tax Collector Barbara Ford-Coates.
Little legal recourse
Lakeland Director of Communications Kevin Cook said city residents have an option other than PACE to perform home improvements.
“The City of Lakeland has our own rebate/energy savings program through Lakeland Electric called Re-Energize Lakeland,” Cook said, providing a link to the program. “We are not affiliated with PACE.”
Polk County Commission Chairman Lindsey cautioned homeowners to research and turn to traditional lenders in order to take advantage of their home’s equity, which is all that they have paid into it and the rising value of homes.
“They certainly should not respond to the first offer — they need to do some due diligence themselves about local financing or bank financing or credit unions,” Lindsey said. “With the prices of existing home values up — people have more equity in their home than they really realize. The market has that impact.”
Lindsey said he worries about people like the woman on Rockingham Road, saddled with an unexpectedly high roofing cost.
Her $38,000 roof over a 1,500 square-foot home is nearly four times a bid last year for a similarly sized home in Lakeland. Code Red Roofers quoted about $10,000 to do that roof, including tie-downs. And the $100,000 cumulative cost over 30 years is predatory, Lindsey said.
“She (likely) won’t live to see it paid off and whoever the heirs are or the buyers of her house will have to satisfy that lien, so the equity that’s been building up has just been evaporated — it’s just been zapped,” Lindsey said about the woman on Rockingham Road. “Or they will start foreclosure and they’ll tie it up in the court system for some extended period of time. It’s unfortunate this lady has been a victim of that process.”
As for any legal action she or her family could take, Lindsey said there is little to no path.
“If she has no family, then there’s not much recourse,” Lindsey said. “If she does have family and they can show that she was legally incapacitated, there may be some legal relief.”
LkldNow tried to reach the Rockingham Road homeowner, but she did not respond to a note left on her door and phone numbers listed for her were incorrect.
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