By Margie Palmer

Residents can now use new financing models for energy efficiency

Rising energy costs have always been a concern for homeowners, but thanks to recent decisions by the La Mesa City Council, residents can take advantage of key programs that will allow them to go solar without breaking the bank.

In May of this year the council voted to allow residents to participate in new Property Assessed Clean Energy (PACE) programs, which enables homeowners to finance renewal energy improvements with little to no up-front cost.

Financing for single-family home upgrades is available through the Home Energy Renovation Opportunity (HERO) program; ultimately, eligible applicants will be able to finance 100 percent of their purchase and installation costs and will make annual payments through their property taxes.

Repayment terms are varied, with options ranging from five to 20 years. The five-year option, however, seems to be the most popular.

David Savarese, director of project development at Sullivan Solar Power, said the associated tax benefits and incentives that run alongside PACE/HERO help take a big bite out of the total cost.

“With the PACE program you can sign up today and you wouldn’t make your first payment until your December 2015 property taxes,” he said. “It allows people who thought they couldn’t afford to go solar before to do it without paying anything out of pocket up front. They’ll also receive an additional 30 percent federal tax credit, which in most cases, is enough to offset their first year payment.”

For example, if a homeowner installs a $30,000 system, they would receive a $9,000 federal tax credit during year one, he said.

Another key savings component relates to no longer needing to pay monthly energy costs, especially considering the average homeowner pays between $250 and $300 to month to their utility provider.

When a solar energy system is installed that monthly expense can be eliminated. This can translate into a savings of $3,000 to $3,600 each year. Savarese said PACE/HERO participants may also be eligible for additional tax breaks and advises homeowners to go over those eligibility requirements with their accountant.

“The exact amount of what they can write off is all based on their income tax bracket,” he said, “but the interest is tax deductible regardless as to what tax bracket they fall into.”

Lenders further note that since the cost of the solar system is linked to the property taxes, if the homeowner decides to move, the investment will stay with the property.

Renovate America, a company that specializes in HERO financing, said this is because HERO is not your typical loan.

“In a traditional sense, when someone takes out a loan the lender will underwrite that loan against the borrower’s credit score,” said Renovate America Vice President of Community Development Blair McNeill. “With HERO, we don’t underwrite against the credit score. We underwrite against the equity in the property.”

In most cases, property owners may be eligible to participate in PACE/HERO if their mortgage debt does not exceed 90 percent of the value of the property, if they are current on their payments and property taxes and if they don’t have any outstanding or involuntary liens or active bankruptcies.

Savarese said that while Sullivan just recently started to focus on marketing efforts to help make the public aware that PACE/HERO is now available in La Mesa, they’ve already started to see an uptick in both order activity and inquiries.

“It’s just starting to gain momentum, but it’s one of the most unique financing options I’ve ever seen for solar,” Savarese said. “The great thing is that this opens up the market to a different demographic of people who thought they could never do it because it was too expensive, and considering that utility rates keep going up, a five- to seven-year payback on a system that will provide free electricity for the next 25 to 30 years can give homeowners a really great return on investment.”

McNeal said that anyone who considers taking advantage of the program should start off by educating themselves.

“This could involve someone doing research online or speaking directly with a HERO registered contractor, who can help put together a quote and walk them through the process,” he said. “The reality is that this type of financing is a completely new product, and that can be scary for some folks, but when they start to see the savings on a monthly basis and realize they have the ability to pay through their property taxes as an assessment — and have the payments transferred with the property should they choose to sell their home — it can start to make a lot of sense to a lot of people.”

While solar panels are a popular choice, the PACE/HERO financing program can also be used to pay for dozens of other home energy efficiency upgrades, including solar water heating systems, graywater treatment systems, artificial turf, water-saving fixtures, whole house fans and fuel cell generation systems.

For more information about financing options and registered contractors, visit heroprogram.com/lamesa.

—Margie Palmer is a San Diego-based freelance writer who has been racking up bylines in a myriad of news publications for the past 10 years. You can write to her at [email protected].