BILL ANALYSIS
AB 1873
Page 1
Date of Hearing: May 12, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1873 (Huffman) - As Amended: April 27, 2010
Policy Committee: Natural
ResourcesVote:6-3
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill authorizes the Air Resources Board (ARB) to use AB 32
revenues to purchase Property Assessed Clean Energy (PACE) bonds
to finance the installation of distributed generation renewable
energy sources or energy or water efficiency improvements.
FISCAL EFFECT
1)It is unknown how much revenue will be generated by the AB 32
program, but, if ARB implements a cap-and-trade program and
auctions the permits, which it is considering, revenue could
total in the hundreds of millions of dollars. To the extent
ARB uses that revenue to purchase PACE bonds as proposed by
this bill, it will preclude other uses of this revenue, at
least until the loans financed by the bonds are repaid.
2)Potential ongoing annual costs to ARB of approximately
$680,000, equivalent to four positions, to perform various
accounting functions (Air Pollution Control Fund).
(Currently, ARB does not purchase or administer bonds, which
this bill authorizes it to do. As a result, should ARB choose
to exercise the authority given to it by this bill, ARB would
need to establish new records and monitoring requirements,
monitor bonds sales and buy-backs, and administer revenues.
These ongoing costs would diminish somewhat in 2012-13
following ARB's establishment of its new systems.)
COMMENTS
1)Rationale . The author intends ARB to use AB 32 revenues to
purchase PACE bonds issued by local governments, thereby
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allowing the locals to provide low-cost financing to
homeowners and businesses energy efficiency improvements.
2)Background
a) AB 32 Revenues . AB 32 (N??ez, Chapter 455, Statutes of
2006) requires California to limit its emissions of
greenhouse gases (GHGs) so that, by 2020, those emissions
are equal to what they were in 1990. To that end, AB 32
requires ARB to quantify the state's 1990 GHG emissions and
to adopt, by January 1, 2009, a "scoping plan" that
describes the board's plan for achieving the maximum
technologically feasible and cost-effective reductions of
GHG emissions reductions by 2020.
AB 32 authorizes ARB to collect fees from sources of GHGs.
The statute also authorizes, but does not require, ARB to
implement a system of "market-based compliance mechanisms"
to bring about GHG reductions. In the scoping plan, ARB
indicated its intent to implement a cap-and-trade
market-based mechanism as part of its AB 32 program. ARB
has yet to determine, however, whether and to what extent
it will charge for permits under such a system, questions
that may greatly affect the amount of revenue brought into
the program. Actual fee revenue depends on whether ARB
implements a cap-and-trade program and how it chooses to do
so, but the totals could be in the hundreds of millions of
dollars.
b) PACE program . The PACE program permits local public
agencies and utility districts to provide up-front
financing to property owners to install solar or other
renewable energy-generating devices or make specified water
or energy efficiency improvements to their properties. This
financing mechanism was first used by Berkeley through its
Charter Cities authority, and then authorized statewide by
AB 811 (Levine), Chapter 159, Statutes of 2008, and AB 474
(Blumenfield), Chapter 444, Statutes of 2009. Under the
program, a city, county, or other public agency issues
bonds and uses the proceeds to make loans to property
owners to finance energy retrofits. These loans are repaid
by the property owner over 20-30 years via an annual
assessment on the owner's property tax bill. The assessment
remains on the property even if it is sold or transferred.
From the property owner's perspective, the added property
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tax assessments are partly or fully offset by energy
savings resulting from the retrofit. The loan repayments
from the property owners are dedicated by the
municipalities to the repayment of the revenue bonds.
3)Related Legislation .
a) AB 811 (Levine) , Chapter 159, Statutes of 2008,
authorized general law cities to provide up-front financing
to property owners to install solar or other renewable
energy-generating devices or make specified energy
efficiency improvements to their properties through a
system of contractual assessments. Prior to AB 811,
contractual assessments were only authorized for certain
types of public works projects (e.g., under grounding of
power lines or installation of streetlights).
b) AB 474 (Blumenfield) , Chapter 444, Statutes of 2009,
added water efficiency improvements to the list of
improvements that can be paid for through a contractual
assessment between a willing property owner and a public
agency.
c) SBX8-26 (Pavley, 2010) sought to establish a
state-financed reserve for the PACE program by transferring
funds from the Renewable Resource Trust Fund. The bill
passed this committee on a vote of 11-3 but failed passage
on the floor.
Analysis Prepared by : Jay Dickenson / APPR. / (916) 319-2081