BILL ANALYSIS AB 1873 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 1873 (Huffman) As Amended August 9, 2010 Majority vote ----------------------------------------------------------------- |ASSEMBLY: |52-24|(June 2, 2010) |SENATE: |24-10|(August 18, | | | | | | |2010) | ----------------------------------------------------------------- Original Committee Reference: NAT. RES. SUMMARY : Authorizes the State Treasurer, the California Public Employees Retirement System Board (CalPERS), and the State Compensation Insurance Fund (SCIF) to purchase bonds issued to finance the installation of distributed generation renewable energy sources or energy or water efficiency improvements through local property assessed clean energy (PACE) programs, and makes related findings. 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 interest in an assessment contract pursuant to an agreement between the JPA and the local agency. The Senate amendments add a new provision to the Joint Exercise of Powers Act authorizing a JPA to purchase, and a local agency to sell, the right, title, and interest in an assessment contract pursuant to an agreement between the JPA and the local agency. Senate Floor amendments of 8/9/10 add double-jointing language to avoid a chaptering-out problem with SB 1407. This bill will only become operative if both SB 1407 and this bill become effective on or before January 1, 2011 and if this bill is enacted after SB 1407. EXISTING LAW : 1)Authorizes cities, counties and other public agencies to designate areas within which 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. 2)States legislative intent that the authorization listed above should be used to finance the installation of distributed generation renewable energy sources and energy or water AB 1873 Page 2 efficiency improvements that are fixed to residential, commercial, industrial, agricultural, and other real property. Prohibits the authorization from being used to finance the purchase of appliances or installations not fixed to real property. 3)Makes findings and declarations concerning the need for energy and water efficiency improvements in order to address global climate change, the deterrent effect of high up-front costs on making those improvements, and the need to authorize an alternative procedure for authorizing assessments to finance the cost of energy efficiency improvements in order to make them more affordable and promote their installation. AS PASSED BY THE ASSEMBLY , this bill authorized the Treasurer, CalPERS, and SCIF to purchase bonds issued to finance the installation of distributed generation renewable energy sources or energy or water efficiency improvements through PACE programs, and makes related findings. FISCAL EFFECT : According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, this bill has negligible state costs. COMMENTS : Under PACE programs, the property owner or owners within a designated area choose to assess themselves for the cost of energy efficiency improvements or distributed renewable energy, such as solar. The local government then provides the up-front funds for the project, and the property owners pay an annual assessment until those funds, plus interest, are repaid. The underlying purpose is to create a means by which a project that provides both a public benefit and an incidental benefit to particular property owners can be financed without imposing the cost on property owners in other parts of the city who derive no benefit. Chartered cities have broad authority to create special assessment districts. Berkeley was the first city in the nation to launch a PACE program and used a special assessment district to establish a financing mechanism in which individual property owners can voluntarily participate and repay improvements through a special property tax assessment. This bill authorizes the Treasurer, CalPERS, and SCIF to purchase local AB 811 bonds, which may lower the interest rates AB 1873 Page 3 that local governments must charge homeowners, while simultaneously creating a new, secure income stream for the state of California. CalPERS' general authority already permits investment in this type of bond, as long as they find the investment consistent with their fiduciary duty. Analysis Prepared by : Jessica Westbrook / NAT. RES. / (916) 319-2092 FN: 0006261