Homeowners face dizzying new choices to fund improvements

Choices, choices.

Sonoma County homeowners seeking to add a solar energy system, replace that old furnace or install artificial turf soon will have an array of options to fund the improvements.

The county is witnessing a proliferation of government-sponsored programs that offer to finance various energy- and water-efficiency projects. But figuring out which option is best can be difficult.

Many homeowners already know about the 6-year-old Sonoma County Energy Independence Program, or SCEIP, which is available in each of the county’s nine cities and the unincorporated area. For little money down, the county-sponsored effort provides financing for various projects, with costs added to the homeowners’ property tax bills. Approved contractors complete the work, and owners pay back the borrowed funds over periods of 10 or 20 years with an annual interest rate of 7 percent.

Now three more separate programs are joining SCEIP to compete for residential projects, and a fourth offers financing solely for commercial work. Fees vary and interest rates range from just under 7 percent for a five-year loan to more than 8 percent for a 20-year loan.

However, none of the new residential programs currently are available throughout the county, as SCEIP is. For example, two new programs are taking applications today in Sebastopol and one is available in Windsor and Petaluma. None are yet available in Santa Rosa, though that may change this summer. Program officials said they hope to eventually operate countywide, but that depends on getting approval from each city council.

Sound complicated? Homeowners thinking about improvement projects first may benefit by contacting the Sonoma County Energy Independence Office, the government office that is gearing up to provide consumer information on the emerging marketplace.

“We’ll steer them to whatever resources we know of,” said Jane Elias, a community program coordinator for the county’s energy efficiency efforts.

The new residential financing programs include Santa Rosa-based Ygrene Energy Fund, San Diego-based Home Energy Renovation Opportunity, or HERO, and CaliforniaFirst, operated by Oakland-based Renewable Funding. The programs also offer financing for commercial projects, as does San Diego-based Figtree Financing. Each was authorized under state law by a government entity somewhere in California.

The programs belong to a financing approach known as PACE, or Property Assessed Clean Energy. The efforts began about six years ago with the idea that homeowners could improve their homes for virtually no money down. The expected savings in water and energy costs then could offset the increase in property taxes.

However, the fledgling programs hit a roadblock in 2010 when federal home loan regulators deemed them an added risk to the nation’s mortgage system. The regulators argued that in foreclosure, PACE liens on homes would take precedence over first mortgages. Federal regulations now limit PACE liens accompanying most mortgages. To date the rules have prevailed in court, while efforts to overturn them in Congress have failed.

In California, the PACE programs benefited in 2014 when the state set aside $10 million as a guarantee to protect banks from any mortgage losses tied to PACE programs. That guarantee is one reason for the programs’ expansion this year into Sonoma County.

However, PACE now isn’t the only financing option for energy- and water-saving work.

“SCEIP and the others like SCEIP have lots of competition now,” said Daniel Smith, a director at Zero Energy Associates, a Santa Rosa building contractor approved for the county PACE program.

These days some homeowners are finding more attractive interest rates outside of the PACE programs by refinancing their home mortgages or using a home equity line of credit to fund improvements. For solar systems, some banks and credit unions offer special loans, while another option is to lease, rather than own, the solar panels and other components.

“As a solar contractor, my job is not just solar but it’s also financing,” said Jeff Mathias, a partner in Sebastopol-based Synergy Solar & Electrical Systems.

The company offers four or five financing options to purchase systems, Mathias said, but for now SCEIP is its only PACE program.

For those interested in improving their homes’ use of energy and water, homeowner Abigail Smyth has some advice: “Ask lots of questions. Be an informed consumer.”

In 2011 Smyth and partner Bradford Rex bought a century-old home near downtown Petaluma. The home, she said, “didn’t have a lick of insulation” and was both drafty and noisy.

In 2012 the couple used SCEIP financing and approved contractors to add insulation, install a new steel roof, seal up the house and put in a new combined “hydronic” water heater and heating system.

Energy savings were sufficient to qualify for the maximum amount of an Energy Upgrade California rebate, which at the time was $4,500. Just as important, Smyth said, the upgrades significantly improved the quality of life in the home.

Before undertaking such improvements, experts offer some basic advice: Get two or three bids; think first about insulation, weather sealing and similar projects that reduce the amount of energy consumed before considering solar and other energy generation systems; and check with local utilities about any rebates or incentive programs.

Approved contractors can look over a house and offer a menu of possible improvements, plus the expected costs and savings.

“It’s kind of like going to a restaurant,” said John Sutter, owner of Applied Building Science, a Santa Rosa building performance contractor. “They order what suits them.”

Sutter suggested one advantage of going through the PACE or Energy Upgrade California rebate programs: The approved contractors. “You can be pretty sure they’re reputable and knowledgeable,” he said.

As part of the process, homeowners will decide whether to pay for a home energy audit. Contractors said sometimes the money can be better spent directly on actual improvements, but some rebates require such initial assessments in order to calculate the achievement in energy savings.

Owners also will need to decide how to pay for the work. Even some participating contractors note that the PACE programs typically offer higher interest rates than available by refinancing a mortgage or using equity lines of credit.

Otto Kobler, branch manager in Santa Rosa of Summit Funding, said a home equity line of credit is available today at a variable rate of about 4.25 percent, considerably less than the 7 percent fixed rate of the SCEIP program.

Even so, Kobler acknowledged one advantage of the PACE programs: an easy qualification process. Homeowners typically must show only that they aren’t behind on their mortgage or taxes and that they have enough equity in the property to allow for the planned improvements. In contrast, Kobler said, banks and mortgage companies are “heavy duty” in the documentation they now require of owners seeking to refinance their properties.

For those who decide to go with a PACE program, the variety of possible improvements is impressive. HERO, which has funded more than $617 million in projects, has a list of 1 million eligible products for its contractors to offer, said Oriana Yanes, a community development manager.

Among the top improvement projects in this fourth year of statewide drought are artificial turf installation and the planting of drought-tolerant landscaping. The latter became eligible for funding in late 2014, Yanes said.

Of the new PACE programs, CaliforniaFirst is currently operating in the most communities here: Cloverdale, Healdsburg, Petaluma, Sebastopol, Sonoma and Windsor, plus the county’s unincorporated areas. Statewide the program has funded more than $25 million in projects.

Joseph Livaich, a regional director for CaliforniaFirst, said PACE programs provide a needed source of financing for those families who have allocated cash and savings for more pressing matters.

“Energy and water aren’t really a necessity until something goes wrong,” Livaich said.

Santa Rosa-based Ygrene has yet to begin its program here. But the company, which has funded $300 million elsewhere in California and Florida, has been meeting with officials for the county and its cities and hopes to win government approval so that it can begin accepting applications this summer.

“We’re really excited to do this in our backyard, in our hometown,” said Ygrene vice president Mike Lemyre.

Liz Yager, the program manager of the county’s energy independence office, said she is seeking by the end of June to have an interactive website running that will allow consumers to easily compare the costs associated with each program. That includes the fees, which can amount to hundreds of dollars in one-time expenses.

The county’s SCEIP program has financed more than $60 million in projects, but it has only about $17 million still available for future improvements. That amount doesn’t begin to finance the estimated $2 billion in home improvements needed to meet a greenhouse gas reduction target set by the county, let alone to address a more ambitious statewide goal set by Gov. Jerry Brown.

Thus, the county Board of Supervisors has welcomed the new PACE programs in order to provide homeowners with needed financing. And county officials want to offer a place where consumers can turn for answers on saving water and energy.

“Our hope,” Yager said, “is to be that information resource to the county.”

You can reach Staff Writer Robert Digitale at 521-5285 or robert.digitale@pressdemocrat.com. On Twitter @rdigit