MISSION VIEJO – The City Council during its Monday meeting rejected lending programs that offer financing for homeowners and businesses that want to go green.

Three lenders asked the city to join their property-assessed clean energy programs, commonly known as PACE programs. If the city becomes a member, residents will be able to get a long-term, typically 15- to 20-year, loan for energy-efficient or renewable energy improvements, such as installing rooftop solar panels.

What makes the PACE program unique is that loans are attached to the property rather than an individual. The City Council needs to approve the program for residents to get the loans because payments will be collected through their property tax bill.

The City Council on Monday discussed requests from three PACE providers – California HERO, CaliforniaFIRST and Figtree Financing – and voted 3-2 in favor of denying them. Mayor Trish Kelley and Councilman Frank Ury supported the programs.

“It’s my gut feeling,” Mayor Pro Tem Dave Leckness said. “I’m not convinced that this is the best thing for our residents.”

Proponents say the PACE program allows residents to defer the upfront costs of energy-efficient upgrades while enjoying savings from low energy costs. They can pass on the remaining loans if they decide to sell the property.

Dustin Reilich, director of municipal development for California HERO, said his program will stimulate the economy by partnering with local contractors. He said 209 communities have joined the HERO program so far. Villa Park is the only other city in the state that has declined to participate in the program, Reilich said.

The city would bear no liability if it decides to join the program and can opt out anytime, PACE program representatives said. Only those who take out the loans will be responsible for paying them back, the representatives added.

The program, however, suffered a setback in 2010 when Fannie Mae and Freddie Mac announced it would refuse to buy loans with PACE liens on them. Dennis O’Connor, a director of the Orange County Association of Realtors, advised the City Council that PACE is “a wonderful program,” except for this one issue.

“If you were to try and refinance your home or sell your home, there’s a better than equal chance that you are going to have to pay that loan off to accomplish that,” O’Connor said.

He said the OCAR will support this program when this issue is resolved – which he predicted will happen in the near future.

Councilwoman Cathy Schlicht has opposed the city’s participation in PACE programs since the idea was first discussed Nov. 3.

“So for the couple of people that have a Freddie or Fannie loan that may decide to do this program and refinance or sell immediately or within the next couple of years, we are foregoing the opportunity for any homeowner in Mission Viejo to take advantage of energy efficiency?” Reilich asked Schlicht on Monday.

“There is plenty of financing out there,” Schlicht responded. “We are not stopping anybody.”

Schlicht added PACE programs offer unfair competition against the private market, as the state has set aside $10 million for PACE lenders whose clients can no longer make payments.

Ury and Kelley said the City Council’s role is not to decide how good PACE programs are but to give residents an option.

Kelley, who is termed out, suggested that the voting take place after newly elected council members are sworn in in December, but the proposal was struck down.

Contact the writer: tshimura@ocregister.com