WatchSonoma Watch

Court deals blow to county energy retrofit program


A legal fight to protect a program that allows Sonoma County residents to pay for energy-saving retrofits to their homes through property taxes was dealt a significant and possibly final setback last week.

The court fight is over tighter federal lending requirements that Sonoma County officials and others say hamper such programs by scaring off homeowners.

SolarThe new guidelines were crafted by a federal agency in 2009 amid a historic wave of home foreclosures and were intended to minimize further default risks for the recession-wracked lenders Fannie Mae and Freddie Mac.

The move prompted lawsuits from Sonoma County, the state of California and other public and private entities who said those risks were overblown. Their combined case against the Federal Housing Finance Agency said its new guidelines undermined the government-financed retrofit programs and harmed participating homeowners.

The programs enable a range of energy and water-saving upgrades, including solar panels, plumbing and heating improvements on homes and businesses.

On March 19, a three-judge panel for the 9th U.S. Circuit Court of Appeals waded back into the case, ruling unanimously that the Federal Housing Finance Agency was acting within its authority when it directed Fannie and Freddie to tighten lending practices on homes associated with such retrofit programs.

The court panel dismissed the county-state lawsuit and upheld the housing agency’s action, echoing similar decisions handed down in the past six months on related cases by two other U.S. appellate courts.

The outcome sets up a steep hurdle that could end the nearly three-year legal fight, county and state sources signaled Tuesday.

“I think we’ve all been through this enough times and don’t want to chase good money after bad,” said Board of Supervisors Chairman David Rabbitt.

County officials stressed they were not dropping their retrofit program. Upgrades for businesses have not been affected by the conflict.

The fight on lending practices for home retrofits now shifts back to Congress. A proposal by Rep. Mike Thompson, D-St. Helena, has failed to garner enough support in past years and could remain a longshot in the current session.

In the meantime, many observers are waiting to see if the Federal Housing Finance Agency follows through on a lower court’s order to complete a formal rule-making process — one it was set to finish in September but can now drop due to the appellate ruling.

The agency received a reported 40,000 comments in that process, an outpouring that supporters said showed broad support — including from other arms of the Obama administration — for allowing so-called Property Assisted Clean Energy, or PACE programs.

But at least a half-dozen high-powered banking groups have backed the Federal Housing Finance Agency’s stance on the retrofit programs, a lobbying campaign that could make a favorable resolution more elusive for program supporters.

In a written statement Tuesday, Alfred Pollard, the agency’s general counsel, said it was “pleased” with the last week’s court ruling. He did not respond to questions sent through an agency spokeswoman.

The Board of Supervisors is set to review its legal options with attorneys at its April 9 meeting.

A spokeswoman with the California Attorney General’s Office said the state was also considering its next move. Those include a second look at the case by the same three-judge panel or the full appellate court, or a request for review by the U.S. Supreme Court.

News of the appellate court decision surfaced Tuesday in a semi-annual update to the Board of Supervisors on the county’s 4-year-old Energy Independence Program.

To date, it has financed more than 1,800 energy upgrades on homes and businesses in the county. They include solar installations and other efficiency improvements — new windows, furnaces and insulation — worth more than $60 million.

County officials say the program has created dozens of permanent jobs, supplying much-needed business to local contractors. Sonoma County was the first to launch a countywide effort in 2009. Similar programs were taking hold across the country before the lending change.

Federal housing finance officials say such programs pose a threat to the mortgage giants Fannie Mae and Freddie Mac because, in the event of a foreclosure, they put repayment of property tax liens for the upgrades ahead of home loans.

Program supporters point to records that show loan defaults are extremely rare among retrofit customers.

Still, to minimize the risk, in July 2010 Fannie and Freddie — which together control more than half of all home mortgages in the country — said they would stop buying loans on homes that are participating in PACE programs.

They also required homeowners with their mortgages to pay off retrofit liens before selling or refinancing their house.

The crackdown dropped monthly applications to Sonoma County’s program by half and left its future, at least on the residential side, in some doubt.

In April last year, Supervisor Shirlee Zane said PACE programs including the county’s would have “a real hard time moving forward” unless the lending rules were reversed.

This year the message is more optimistic as recent activity has rebounded somewhat. Applications for February surpassed those recorded in the same month over the past two years.

The applicants include homeowners without a mortgage or those with a loan controlled by a lender other than Fannie or Freddie, county officials said.

Combined with commercial applications, monthly financing requests have averaged about $1.2 million.

If that level holds, county supervisors said, the program could be worthwhile even under the tighter lending requirements.

“It’s an uphill climb,” Zane said. “It’s not insurmountable.”

You can reach Staff Writer Brett Wilkison at 521-5295 or brett.wilkison@pressdemocrat.com.

8 Responses to “Court deals blow to county energy retrofit program”

  1. andrew simpson says:

    Dear Mockingbird:

    Your comments at http://www.watchsonomacounty.com/2013/03/county/court-deals-blow-to-county-energy-retrofit-program/ on the waste contract– inserted in the Press Democrat dialog about clean energy—is interesting not the least because it further illuminates the Water Agency’s scope as paymaster for illegal payments by the Board of Supervisors.

    There is what amounts to a Water Agency Operating Manual for Graft and Payoffs.
    Here are the basics.

    • The County of Sonoma is governed in pyramid fashion.
    • The top of the pyramid comprises campaign contributors and special interests. These are the folks who actually govern the County.
    • One step down from the special interests—serving as middle management—are the Supervisors.
    • The Supervisors are hired help.
    • The Supervisors report to, work for, and are accountable to the special interests.
    • The tax payers, rate payers and citizens are at the bottom of the pyramid. They have no say in the use of the $400 million + general fund revenues they contribute.
    • All material decision making in the County of Sonoma is done in private.
    • Supervisors’ board meetings are ceremonial artifacts; theatre; and bear no semblance to transparent, public spirited democracy
    • The Water Agency serves as paymaster and bagman for major contracts on waste, water and energy; and systematically diverts funds amounting to tens of millions a year to private interests who are political supporters of the Supervisors
    • The County is a billion behind on pensions; and a similar amount on roads
    • This isn’t bad luck
    • This is County of Sonoma governance policy, in living application
    • If the waste contract is designed and executed according to the Water Agency Operating Manual for Graft and Payoffs, it will result in a) no scrutiny or contract supervision b) payment for services not rendered c) payment above market rates and d) County tax payer and rate payer money recycled to the Supervisors and to Supervisors’ friends

  2. MOCKINGBIRD says:

    In our examinations of the county and BOS contracting out county services we need to examine the contract being given to Republic to run the refuse dump. Our water agency has approved this and the state has issued them a license. This is a very long term contract. Republic has multiple major environmental damage lawsuits against it. The information is on the internet for anyone to research. The BOS knows about these violations since they’ve been given a list. Yet they intend to contract out anyway laying off experienced county employees. There will be no county oversight. This is a disaster in the making for this county’s taxpayers.
    This company has lost multiple lawsuits. They have not cleaned up the environmental damage in some of the sites leaving the counties funding the cleanups. They have one dump that has been burning underground for 7 years because they didn’t dispose of dangerous materials properly. They have been charged with using unskilled undocumented aliens to work the sites. The list goes on and on.
    This contract is extremely lucrative. We’re talking multiple millions of dollars profit here to include methane sales and recycling. You can bet, being a private contractor, they will cut corners to maximize profits as large corporations are doing across the country. I believe that the county should invest in that dump and make it a multimillion dollar goldmine for the taxpayers of Sonoma County. Maybe we can use the profits for the roads.
    I only post this here because it’s a contract that our water agency, the county and the BOS are in it together which makes it suspect to me. They will be discussing this at the BOS meeting on Tuesday April 9th. If you care about our environment, or care about valid contracts with reputable companies, or care about county employees being laid off please come and speak up.

  3. andrew simpson says:

    • Water Agency payoffs, farce and fraud
    • SCEIP as prelude to fiscal disaster
    • Some money stuff
    • The fraud
    • Did SCEIP do any good?
    • What this means


    The Water Agency’s principal distinction, heretofore, has been as bagman for the Board of Supervisors. Think of:
    • the $95,000 no-bid contract, paid by the Water Agency to a Santa Rosa Planning Commissioner for his vote in 2010.
    • the 2011 $115,000 no-bid contract paid to an associate of the x-Planning Comissioner, by The Water Agency; for a no-work contract on clean energy.

    The Water Agency has added farce to its repertoire of misaventure. And then fraud.

    Think of Stan and Ollie accidentally dropping a huge piano down a staircase,. And then trying, with inimitable comic gravity, to conceal the results.

    That more or less sums up the Water Agency’s role on Sonoma County Energy Independence (“SCEIP”).

    Only this wasn’t a piano. It was $60 million taken from retirees and rate payers. Then bumbled, Then concealed. With earnest, deadpan denials.

    And not just face- saving cover up.



    SCEIP is a County lending program to fund energy retrofits. SCEIP was nominally launched to drive down CO2 emissions and increase jobs.

    SCEIP spent $60 million to achieve, precisely, next-to-nothing on pollution and jobs.
    But SCEIP’s real goal, as it turns out, was to provide a test-drive on new Water Agency clean energy efforts.

    Styled as Sonoma Clean Power these new efforts’ purpose is to gain control of $200 million in electricity delivery revenue now paid to PG&E; and not just $200 million in new revenue, but a billion or more in capital spending: under control of the Supervisors’ bagman, the Water Agency.

    Here’s how the Water Agency’s SCEIP efforts achieved—albeit unintentionally– its true purpose: a preview of the County’s future: a County run by mendacious boneheads.

    This future, echoing Water Agency incompetence and fraud on SCEIP, compounds inevitable misadventure– at billion dollar scale, in Sonoma Clean Power—with the Supervisors’ looming fiscal black hole in underfunded pensions ( a billion) and roads (another billion)/
    SCEIP is a preview to still-avoidable fiscal disaster in the County of Sonoma.


    The Supervisors let the Water Agency take $45 million of County retiree money to start SCEIP.

    The retirees lent the Water Agency $45 million to start SCEIP. This loan was against the retirees’ pension fund policy. That policy said, make sure the investments are short term and liquid.
    The retirees’ loan to the Water Agency was long term and illiquid.

    Not short term and liquid. Long term and illiquid—like a lot of the mortgages that crashed our financial system in the last five years.

    How did this happen? The Water Agency said, well, this is actually a short term loan from the retirees. We’ll go to the banks and they’ll package up the loans for resale in the mortgage markets. And the Water Agency and the Board and the Auditor Controller and County Counsel said, quietly, to each other “and besides, even if we can’t get this refinanced, we’ll just roll this into our new billion dollar clean power initiative and nobody will ever notice.”

    The Water Agency couldn’t get the loans refinanced. And we noticed.

    Here’s what happened.

    The Federal Government said, “these SCEIP loans are toxic”. And the banks said “no thanks” to refinancing SCEIP.

    The retirees were now stuck with $45 million of illiquid long term loans to the Water Agency nobody wanted to buy. When you’re holding real estate paper nobody wants to buy, you’re holding paper that’s worth less. In the case of SCEIP, millions less.

    This is the part of the Laurel and Hardy scenario when the piano starts to slip and Stan– hat askew and tears running down his cheeks–says “Ollie, what-are-we-going-to-do?”

    And Ollie, with dignity bordering on unction, says “we’re just peachy; proceed!”.

    With Ollie-like obliviousness to consequence, the Water Agency then took $15 million of rate payer money to prop up SCEIP; which by this time was facing another free-market phenomenon. Not only were the free capital markets saying “no” to refinancing the SCEIP loans; the would be SCIEP consumers were saying “uh, wait a minute: can’t we accomplish the same thing, cheaper, with no money-down solar leases?”

    As our figurative tumbling-down-the-stairways-piano, SCEIP, prepares to crash, Stan cowers and Ollie boldly announces to the piano’s owners, “that noise is your imagination playing tricks on you.”

    That is to say, that noise you’re hearing in SCEIP is the sound of fraud.


    The Water Agency, with the complicity of the Supervisors and County Counsel, got the Auditor Controller to say: “the retiree loans to the Water Agency are secured by first liens and are paying back timely”.

    That’s probably true.

    And conceals the more relevant point.
    The retirees’ loans were made against pension fund policy—on the oral promise that these loans were, in fact, short term loans to be repaid by bank refinancing..
    These loans turned out to be long term loans. Illiquid loans nobody wanted. Loans branded as toxic by the federal government. Loans that could only be sold at a discount. Loans that are worth less than face value.

    The Auditor Controller is supposed to report fully and fairly to the retirees on the value of their investments. By failing to mention that tens of millions of retiree investments had become long term illiquid loans worth less than their face value, the Auditor Controller—at the best of the Water Agency and with the complicity of the Supervisors and General Counsel—has committed fraud.

    The fraud is in the failure to report to County retirees that their investment in SCEIP has lost value; is worth less.


    Leaving aside the Water Agency’s antics compounded with County-wide complicity in fraud, did SCEIP do any good?


    Its stated goals were to lower pollution and boost jobs.

    The County’s—and its sister cities’—stated CO2 reduction goal is to lower CO2 emissions by about 1.6 million metric tons a year. That’s 1,600,000 tons. SCEIP spent $60 million to lower CO2 emissions by 6,000 metric tons. That’s 6,000/1,600.000. That’s .004. It’s less than half a percent.

    Can we put that in perspective? Our County road maintenance is $ 1 billion behind. Would we have been better served to have invested $60 million in roads, or $60 million to reduce CO2 by about half a percent?

    But what about jobs? SCEIP created about 70 jobs a year for two years. At a cost of $60 million. So that’s $60 million spread over two years; or about $30 million a year. So how much did each job cost? Each job SCEIP created cost:
    $30,000,000/70=about $400,000 a job.
    How many jobs could you create with $400,000? Ten? With $60 million? Ten times as many as SCEIP achieved?


    Pensions and roads are each a billion behind in County funding. No news there.
    The Water Agency serves as a conduit for graft and payoffs by the Supervisors. That’s not news, More of a smoke signal.

    In the face of the County’s declining fortunes, the folks who run things in Sonoma County are looking for a new way to juice up their patronage and payoffs.

    Enter clean energy.

    Sounds politically cool. And with the obliging folks at the Water Agency using their long experience in skimming public funds, what could be more perfect?


    It turns out that the Water Agency doesn’t have the faintest idea of how to run energy operations. They didn’t create jobs. They didn’t lower CO2 emissions.

    The Water Agency has won fame in the annals of bad governance, for its dimwitted prevarication and misuse of public funds.

    They promoted SCEIP with $45 million of retiree money. When that flopped, they threw good money after bad—rate payer money as it turns out—to the tune of $15 million.

    When that didn’t work, they—and the Auditor Controller, County Counsel and the Board—did a “make believe” on the loss of millions of value in unrepaid retiree funds.

    All of which pales in significance to SCEIP’s real meaning.

    SCEIP is an omen, like black crows circling over the corpses of our pension and roads legacy, of what can happen to the County if the Water Agency and the Board get their most fervent wish: control of the billion dollar check book in Sonoma Clean Power.

  4. David Stubblebine says:

    @Kathy: Yeah, the taxpayer stands behind the bonds in the event of a total meltdown of the system, but only in that event. The point was the funding for SCEIP came from bond investors and not taxpayers. Repayment is based on SCEIP clients (borrowers) making their payments which are guaranteed through all the property tax collection rules so it’s pretty solid. Absent a total meltdown of the system, the impact on taxpayers is zero.

    My point here wasn’t so much meant to be a defense of SCEIP as it was to say, based on foreclosures of PACE properties, the Fed seems determined to impose a solution for which there is no problem.

  5. James Bennett says:

    Ah, “The Green Building Retrofit Program”.

    Snuck in as part of the ICLEI directed “Climate Action Plan”.

    The property rights molesting details included a spending a percentage of your property’s value pursuant to making it more energy efficient. This would be mandatory whenever you sold or pulled a permit. We all have to pull a permit eventually, re-roofing, etc..

    It wouldn’t matter if your home was just on the cover of Green Living Magazine.

    All of this when we have an abundance of clean burning natural gas.

    Part of ICLEI’s oppressive model is a privatized monopolization of energy and water.

    It’s not about choices. It’s about control and impoverishing us. Orchestrating our decline in any way you wish to define the word.

    In the true spirit of fascism only ‘approved’ union contractors could perform the over priced solar installation (even if the home owner was a contractor).

    Sonoma County’s insider Rat Pack was to do the financing. But Fannie May/Freddie Mac freaked ’cause they’d be in second position, hence the lawsuit.

    Along with the installation of ‘Complete Streets’, and adopting ‘Climate Action Plans’; these are ICLEI directed criteria for grant money eligibility.

    Get the way it works? They bribe OUR representation into imposing their globalist tyranny on us.

    A handful of us lodged a flyer campaign a few years back when they first snuck it in. The flyer informed citizens and included then Mayor Susan Gorin’s phone number. She needed a fire extinguisher for her phone, so they swept it under the rug for a while till the smoke cleared and it was off our radar. Then included it last year in ICLEI’s Climate Action Plan. In preparation for the mother of all local ICLEI oppression…One Bay Area.

    Everything truly meaningful to our well being is a secret.

    Our public officials should be ashamed.

  6. Kathy Robler says:

    @ Stumblefield

    Bonds are backed by the taxpayers. Who do you think stands behind them? Fairies with fairy dust sleeping under the money tree?

  7. David Stubblebine says:

    @Kathy: SCEIP loans money to Sonoma County residents at above market rates and those loans are guaranteed AHEAD of even the first mortgage – that’s what has Fannie/Freddie so ticked off. SCEIP money is backed by bonds not taxes so there is no burden on the taxpayer. If “ugly” is your biggest criticism of solar panels, then let me ask: How ugly do you think smog is? Or is it okay that the smog from coal fired power plants is somewhere else so who cares?

    Given that all parties agree the track record for foreclosures of homes with PACE-type liens is nil, this sounds like the Court has cleared the way for the Fed to impose a solution for which there is no problem – BUT they get to stop progress so I guess they see that as a bonus.

  8. Kathy Robler says:

    This whole program is a scam and good riddance to it. It is another nanny state taxpayer subsidised program that should have died long ago.

    If a homeowner wants ugly, expensive solar panels on their roof, they need to get the permits and pay the total bill for a total boondoggle.

    Leave the taxpayers out of the equation.