BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 1873| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 1873 Author: Huffman (D) Amended: 8/9/10 in Senate Vote: 21 SENATE GOVERNMENTAL ORG. COMMITTEE : 8-0, 6/29/10 AYES: Wright, Harman, Calderon, Florez, Negrete McLeod, Padilla, Price, Yee NO VOTE RECORDED: Denham, Oropeza, Wyland SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 ASSEMBLY FLOOR : 52-24, 6/2/10 - See last page for vote SUBJECT : Property Assessed Clean Energy bonds SOURCE : Environmental Defense Fund Sonoma County DIGEST : This bill authorizes the State Treasurer, the California Public Employees Retirement System, and the State Compensation Insurance Fund to invest in Property Assessed Clean Energy bonds. Senate Floor Amendments of 8/9/10 add double-jointing language to avoid a chaptering-out problem with SB 1407 (Senate Banking, Finance and Insurance Committee). ANALYSIS : Existing law authorizes cities, counties and other public agencies to designate areas within which CONTINUED AB 1873 Page 2 legislative bodies and willing property owners may enter into contractual assessments to finance the installation of distributed generation renewable energy sources or energy or water efficiency improvements. Existing law declares legislative intent that the authorization listed above should be used to finance the installation of distributed generation renewable energy sources and energy or water efficiency improvements that are fixed to residential, commercial, industrial, agricultural, and other real property. Existing law prohibits the authorization from being used to finance the purchase of appliances or installations not fixed to real property. Existing law requires the Treasurer to invest or make deposits in banks and savings and loan associations of revenues in the Pooled Money Investment Account in accordance with designations specified by the Pooled Money Investment Board. The Board of Administration of California Public Employees' Retirement System (CalPERS) is authorized to make any investment authorized by law, including, among others, an investment in real property. The State Compensation Insurance Fund (SCIF) is authorized to purchase general obligation bonds or other evidence of indebtedness issued by the state. The Joint Exercise of Powers Act authorizes any separate entity created pursuant to that act to invest any money in the treasury that is not required for the immediate necessities of the agency or entity, as the agency or entity determines is advisable. This bill: 1. Authorizes the State Treasurer, CalPERS, and SCIF to purchase Property Assessed Clean Energy (PACE) bonds. 2. Adds a new provision to the Joint Exercise of Powers Act authorizing a joint powers authority (JPA) to purchase, and a local agency to sell, the right, title, and CONTINUED AB 1873 Page 3 interest in an assessment contract pursuant to an agreement between the JPA and the local agency. 3. Contains double-jointing language to prevent a chaptering-out conflict with SB 1407 (Senate Banking, Finance, and Insurance Committee), PACE Program: This 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 the City of Berkeley through its Charter Cities authority, and then authorizes 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 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. Comments According to the author's office, this bill intends to expand the AB 811 (Levine) program throughout the state by authorizing the State Treasurer, CalPERS and the SCIF to purchase local PACE bonds, thereby lowering the interest rates that local governments must charge homeowners, while simultaneously creating a new, secure income stream for the state of California. In addition this bill allows a JPA to act as a conduit for the loans, allowing local governments to sell the loans to the private market. The author's office points out that Prop. 13 prohibits a local government from selling loans directly to a private investor (e.g., bank) so this would set up a process whereby they can be transferred to an existing JPA and then sold to private investors. CONTINUED AB 1873 Page 4 FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No SUPPORT : (Verified 8/3/10) Environmental Defense Fund (co-source) Sonoma County (co-source) Breathe California CIO California Building Industry Association California Business Properties Association California Chamber of Commerce California State Council of Laborers City of Palm Desert Planning and Conservation League Renewable Funding Sierra Club Sonoma County Water Agency State Building & Construction Trades Council Vote Solar ARGUMENTS IN SUPPORT : Proponents contend that this bill will make contractual assessments more attractive to local governments and homeowners by reducing the cost of the loans made to homeowners to finance energy and water efficiency improvements. Proponents also emphasize that making these loan programs more attractive and encouraging local governments to use them will expand job growth at a time we most need it and also help the state meet its energy efficiency and renewable energy goals. ASSEMBLY FLOOR : AYES: Ammiano, Arambula, Bass, Beall, Blakeslee, Block, Blumenfield, Bradford, Brownley, Buchanan, Caballero, Charles Calderon, Carter, Chesbro, Coto, Davis, De La Torre, De Leon, Eng, Evans, Feuer, Fong, Fuentes, Furutani, Galgiani, Hall, Hayashi, Hernandez, Hill, Huber, Huffman, Jones, Bonnie Lowenthal, Ma, Mendoza, Monning, Nava, Nestande, V. Manuel Perez, Portantino, Ruskin, Salas, Saldana, Skinner, Smyth, Solorio, Swanson, Torlakson, Torres, Torrico, Yamada, John A. Perez NOES: Adams, Anderson, Bill Berryhill, Conway, Cook, CONTINUED AB 1873 Page 5 DeVore, Emmerson, Fletcher, Fuller, Gaines, Garrick, Gilmore, Hagman, Harkey, Jeffries, Knight, Logue, Miller, Niello, Nielsen, Norby, Silva, Tran, Villines NO VOTE RECORDED: Tom Berryhill, Lieu, Audra Strickland, Vacancy TSM:do 8/10/10 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED