BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 44| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 44 Author: Blakeslee (R) Amended: 8/2/10 in Senate Vote: 21 SENATE LOCAL GOVERNMENT COMMITTEE : 3-2, 6/30/10 AYES: Cox, Kehoe, DeSaulnier NOES: Aanestad, Price ASSEMBLY FLOOR : Not relevant SUBJECT : Improvement Act of 1911: contractual assessments SOURCE : SunRun DIGEST : This bill expands the use of voluntary contractual assessments to include financing electricity purchase agreements by expanding the definition of "permanently fixed to real property" to include systems attached to a residential, commercial, industrial, agricultural, or other real property pursuant to an electricity purchase agreement between the owner of the system and the owner of the assessed property. The electricity purchase agreement must contain specified provisions. This bill also limits the total annual property tax and assessments from exceeding five percent of the market value of the property. ANALYSIS : Existing law authorizes only with the free and CONTINUED AB 44 Page 2 willing consent of affected property owners, public agencies to use "voluntary contractual assessments" to finance: 1. Public improvements to developed parcels (SB 837 [McQuorquodale], Chapter 1385, Statutes of 1987). 2. Renewable energy sources or energy efficiency improvements that are permanently fixed to real property (AB 811 [Levine], Chapter 159, Statutes of 2008). 3. Water efficiency improvements that are permanently fixed to real property (AB 474 [Blumenfield], Chapter 444, Statutes of 2009). To use voluntary contractual assessments, a public agency's legislative body must adopt a resolution, which: 1. Determines that it would be convenient, advantageous, and in the public interest to designate an area within which officials and property owners may enter into contractual assessments and make related financing arrangements. 2. Identifies the kinds of public works which may be financed. 3. Describes the area where contractual assessments may be used. 4. Describes the proposed financing arrangements, including criteria for determining the creditworthiness of a property owner. 5. States the time and place for a public hearing. 6. Directs an official to prepare a detailed report about the contractual assessment program and consult with the county auditor and county controller regarding fees. This bill expands the use of voluntary contractual assessments to include financing electricity purchase agreements by expanding the definition of "permanently fixed to real property" to include systems attached to a CONTINUED AB 44 Page 3 residential, commercial, industrial, agricultural, or other real property pursuant to an electricity purchase agreement between the owner of the system and the owner of the assessed property. The electricity purchase agreement must contain these provisions: 1. The attached system is an eligible renewable energy resource pursuant to the California Renewables Portfolio Standard Program/ 2. The term of the electricity purchase agreement is at least as long as the term of the related assessment contract. 3. The owner of the attached system agrees to install, maintain, and monitor the system for the entire term of the electricity purchase agreement. 4. The owner of the attached system cannot remove the system before the end of the term of the contractual assessment lien. 5. After installation, the electricity is purchased by a single payment using the funds from the contractual assessment program. 6. The right to receive the electricity from the system is tied to the ownership of the assessed real property and must be automatically transferred with the title to the real property whether the title is transferred by voluntary sale, judicial or nonjudicial foreclosure or by any other means. 7 The electricity purchase agreement identifies the public agency that is a party to the assessment contract on the real property as a third-party beneficiary of the electricity purchase agreement until the assessment lien is fully paid and, only until then, prohibits amendments to the electricity purchase agreement without the public agency's consent. This bill also requires the prescribed report to include criteria for determining the creditworthiness of a property owner, and limits the total annual property tax and CONTINUED AB 44 Page 4 assessments on the property to not exceed five percent of the market value of the property. Comments Since the 2008 Levine bill took effect, communities throughout California have developed financing programs to help property owners pay for renewable energy improvements. Financing solar power through electricity purchase agreements offers significant advantages over financing individually-owned solar systems. Electricity purchase agreements alleviate the property owner's responsibility for maintaining the system and provide incentives for the third-party service-provider to operate systems at maximum efficiency. Third-party providers can also take full advantage of federal tax credits and accelerated depreciation schedules, significantly reducing the costs of solar systems. Economies of scale also allow third-party providers to deliver solar power at lower costs. This bill improves on the Levine bill's success and benefits property owners by combining voluntary contractual assessment programs' low-cost financing with electricity purchase agreements' advantages over individually-owned solar systems. FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local: No SUPPORT : (Verified 8/3/10) SunRun (source) AGB:do 8/4/10 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED