Florida PACE faces accusations of "predatory" financing in Jacksonville

Jacksonville City Council members are raising red flags about a statewide program that finances home improvements such as new roofs and air conditioning systems because they say it takes advantage of homeowners and the city never approved its use for residential property in Duval County.

The Florida PACE Funding Agency started offering financing this year for residential property-owners in Duval County who agree to pay assessments on their property tax bills. Florida PACE says it's a voluntary option that costs property-owners less than putting the expense of home upgrades on their credit cards. City officials highlight that if owners fail to pay the mandatory assessment, they risk losing their homes in a tax auction.

The dispute could be headed toward a legal battle. City Council will vote Tuesday on fast-tracking a lawsuit against Florida PACE over its program that provides financing at fixed interest rates as high as 10.49% for payment periods of as long as 30 years.

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City Council President Ron Salem said the city must stop the program "as quickly as we can."

"I hope my colleagues were as outraged as I was when I first saw this," he said during a meeting of the council's Neighborhoods Committee. "This is clearly predatory on the citizens in our community."

Florida PACE, set up as a special government district authorized by state law, denies it is predatory in any way and says a court ruling gives it legal authority to offer financing statewide for all property-owners.

The organization, which faces legal challenges from some other Florida counties, says it fills a need for residential property-owners who can benefit from having a less costly option to pay contractors for building improvements. The program covers work such as roofing, air conditioning, siding, insulation, solar modules, windows and generators that make buildings more energy-efficient and storm-resistant.

Homeowners who don't have cash on hand or home equity lines of credit from financial institutions can use Florida PACE's financing without running up debt on their credit cards at higher interest rates, Florida PACE Executive Director Mike Moran said.

"Residents of Jacksonville should be very disappointed because you've got politicians trying to take away a voluntary financing option to get a new roof on their home that is literally 20% less than a credit card," he said in an interview.

Florida PACE assessments face opposition by tax collectors

The program uses private financial entities for the funding. Property-owners choose their own private contractors. The governmental role involves putting the non ad valorem assessments on tax bills. Moran said the annual assessments are the key to private money flowing into the state for the eligible home improvements that will make Florida better able to weather hurricanes and reduce greenhouse gas emissions.

"There's not a penny of taxpayer dollars in this," he said. "This is all big institutional money that is carrying out a statewide public purpose."

He said that so long as the work covers eligible expenses, property-owners can obtain the financing through Florida PACE without putting any money down. State law generally limits the financed amount to no more than 20% of what the property appraiser says is the "just value" of the property, which is the property appraiser's estimate of its market value.

"The target for us is people who have a roof over 20 years old or an air conditioner that's over 12 years," Moran said. "We don't care what zip code you live in. We don't care what neighborhood you're in, whether it's gated or not. It's all property. Everybody should have access to this financing."

Duval County Tax Collector Jim Overton is among the tax collectors across the state refusing to put the assessments on tax bills. Overton said he agrees the cost of the assessments would end up causing some people to lose their homes. The non ad valorem assessments have the same weight of law as property taxes, so if the property-owner fails to pay, it can trigger a tax deed sale to collect what's owed.

"At this point, across the state, we're just refusing to put these (assessments) on the roll because we know what's going to happen," Overton told a City Council committee. "They'll lose their homes."

Homeowners have been the biggest users of the program, according to notices of assessment filed since January with the Duval County Clerk of Courts. Florida PACE filed 175 notices of assessments through Wednesday. Of those properties, about 85% have homestead exemptions that show the owner also lives in the houses.

The average "just value" this year of the 175 residential properties is about $210,000. The median value is $202,980, meaning half the properties have values less than that and half have greater values, according to the Times-Union analysis.

The financing took place in 31 zip codes across Jacksonville. The biggest concentration was in a part of the Northside and Northwest Jacksonville with a total of 60 notices of assessments in the 32218, 32208, 32209 and 32206 zip codes. A part of the Southside had 24 notices for the 32224 and 32246 zip codes that border each other. The Arlington zip codes 32211 and 32277 had a total of 21 notices.

The interest rates vary. Just over half of the financing had 9.9% interest rates. The lowest interest rates of 3.99% were for a handful of solar installation project. The highest interest rate was 10.49% charged on seven of the financing assessments.

Councilman says roof financing will be "compounding disaster"

The assessments space out the payments based on the type of work. According to Florida PACE, the length of the financing is based on the useful life of the home improvement. The longest period of 30 years is for roofs.

City Council member Matt Carlucci said that's too long because the reality is that in order to maintain insurance coverage, homeowners must replace their roofs far sooner than every 30 years. Carlucci, who is an insurance agent, said those who enter into the Florida PACE financing agreements would still be paying off that roof while they also are footing another bill for its replacement.

"What a compounding disaster that will be," Carlucci said.

Moran said the issue of insurance coverage for roofs is different from what the useful life is for a roof.

"These incredible, painful restrictions the private insurance market is putting on folks — that's a separate conversation," he said. "Some of these roofs can go out for 30 years. The insurance company is making them replace it at 15."

This isn't the first time city officials have examined programs like Florida PACE. City officials previously voiced concerns about the impact of such assessments on residential property-owners when City Council agreed in 2021 to allow such financing for improvements to commercial property but not to residential property.

"This is just for commercial," Stephanie Burch, who was the deputy chief administrator for the city, emphasized to City Council members at that time. "There were issues in other states with residential property-owners kind of being taken advantage of. We didn't want to put people in that position here."

She said for some commercial property-owners, the loans can be a "great financing tool" to pay for storm-hardening and energy-efficiency improvements on more affordable terms than going through a traditional bank loan. The requirements enacted by City Council say the loans are limited to nonresidential properties as well as apartment buildings with at least five units.

Florida PACE had been operating under other interlocal agreements with local governments across the state. Moran said those were unwieldy because each government enacted its own terms and conditions, creating a patchwork of different regulations from county to county and even with the same county.

He said a state circuit court ruling in November 2022 authorizing Florida PACE to issue up to $5 billion in debt also validated that it can operate in all Florida counties by assisting every type of property-owner without needing any interlocal agreements with local governments.

Salem's legislation says Florida PACE sought that bond validation judgment without giving any notice to the city and does not have the legal right to provide the financing in Jacksonville without the city regulating it. The legislation says residential property-owners "will be paying grossly inflated property tax bills for up to 30 years" and Florida PACE's "continued unauthorized operations" require immediate action by the city.

In one case shown to City Council members, the owner of a house that has a homestead exemption had a bottom-line tax bill of $361 in 2022. With the Florida PACE assessment, this year's bill would be about $3,200. In two other examples, tax bills would go from $627 to about $4,000 on one home and from $703 to $2,2336 on another home.

Salem's bill would greenlight the Office of General Counsel to file a lawsuit stopping the program without the city first going through a lengthy dispute resolution process required by state law for conflicts between different governmental entities.

Bypassing that step will require support by three-fourths of the 19-member City Council. The Neighborhoods Committee, Rules Committee and Finance Committee all unanimously approved Salem's bill, which also has picked up 13 council members as co-sponsors as it heads toward a final vote Tuesday.

This article originally appeared on Florida Times-Union: Jacksonville leaders assail Florida PACE financing