BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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                              UNFINISHED BUSINESS


          Bill No:  SB 77
          Author:   Pavely (D), et al
          Amended:  3/22/10
          Vote:     27 - Urgency

           
           PRIOR SENATE VOTE NOT RELEVANT

          ASSEMBLY FLOOR  :  Not available


           SUBJECT  :    California alternative energy and advanced  
          transportation 
                      financing authority

           SOURCE  :     Environmental Entrepreneurs


           DIGEST  :     Assembly Amendments  delete the Senate version  
          which expressed the intent of the Legislature to enact  
          necessary statutory changes relating to the Budget Act of  
          2009.

          This bill now establishes a state-financed reserve for the  
          Property Assessed Clean Energy (PACE) program by  
          transferring funds from the Renewable Resource Trust Fund,  
          and makes other changes related to the PACE program.  This  
          bill is similar to SB 26 X8 which passed the Senate 32-0  
          but died on the Assembly Third Reading File.  This bill  
          does not contain the prevailing wage language which was  
          placed in SB 26 X8 in the Assembly which became  
          controversial.

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           ANALYSIS  :    

          Existing law:

          1. Authorizes cities, counties, and other 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 through a system of voluntary contractual  
             assessments which is repaid, with interest, through  
             property tax assessments.

          2. Creates the California Alternative Energy and Advanced  
             Transportation Financing Authority (CAEATFA) for the  
             purpose of promoting the development and utilization of  
             alternative energy sources and the development and  
             commercialization of advanced transportation  
             technologies.  CAEATFA is authorized to issue up to $1  
             billion in revenue or prepayment bonds to fund projects.

          3. Authorizes the California Energy Commission (CEC) to use  
             federal funds received from the American Recovery and  
             Reinvestment Act of 2009 (ARRA), or subsequent federal  
             acts related to ARRA, to award contracts, grants, and  
             loans for energy efficiency, energy conservation,  
             renewable energy, and other energy-related projects and  
             activities.

          This bill:

          1. Authorizes CAEATFA within the State Treasurer's Office  
             to provide reserves for bonds issued through the  
             Property Assessed Clean Energy (PACE) program. 

          2. Specifies that the reserves may be up to 10 percent of  
             PACE bonds issued by local governments.  The reserves  
             would lower the cost to local governments of raising  
             money to make loans to homeowners and businesses for  
             energy efficiency and generation projects. 

          3. Sets forth various criteria that CAEATA must consider  
             when providing the debt reserves to localities,  
             including whether the PACE program offers loans for  

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             energy efficiency projects.

          4. Appropriates $50 million through January 1, 2015 from  
             the Renewable Resource Trust Fund (a fund used by the  
             California Energy Commission to support renewable energy  
             projects) to fund the program.  States that up to  
             $300,000 may be expended by the authority for the  
             initial administrative costs.

          5. Authorizes CAEATFA to pool local PACE bonds (for the  
             purpose of reducing borrowing costs), by purchasing them  
             from individual municipalities, combining them with  
             other PACE bonds, and selling the pooled bonds through  
             public or negotiated sales.

           Background  

           CAEATFA  .  CAEATFA was created in 1980 with an authorization  
          of $200 million in revenue bonds to finance projects  
          utilizing alternative sources of energy, such as  
          cogeneration, wind and geothermal power.  In 1994, it was  
          renamed the California Alternative Energy and Advanced  
          Transportation Financing Authority and its charge expanded  
          to include the financing of "advanced transportation"  
          technologies.

          During the energy crisis of 2001, its authority was again  
          expanded, this time to provide financial assistance to  
          public power entities, independent generators, and others  
          for new and renewable energy sources, and to develop clean  
          distributed generation.

          CAEATFA consists of five members:  the Director of the  
          Department of Finance, the Chairman of the CEC, the  
          President of the Public Utilities Commission, the State  
          Controller, and the State Treasurer.  Its current mission  
          is to provide financing for facilities that use alternative  
          energy sources and technologies.  CAEATFA also provides  
          financing for facilities needed to develop and  
          commercialize advanced transportation technologies that  
          that conserve energy, reduce air pollution, and promote  
          economic development and jobs. 

           Property Assessed Clean Energy Bonds/Program  .  First  

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          launched in California, these programs are being pursued  
          across the nation by municipalities to accelerate the  
          retrofitting of residential and commercial buildings with  
          renewable energy and energy efficiency improvements.  Bonds  
          are issued and the proceeds are loaned to property owners  
          to finance energy retrofits who then repay their loans over  
          20 years via an annual assessment on their property tax  
          bill.  PACE bonds can be issued by municipal financing  
          districts and the proceeds can be typically used to  
          retrofit both commercial and residential properties.

          Although the costs of energy efficiency and renewable  
          energy generation can be offset by lower energy payments,  
          property owners are challenged to finance those  
          improvements as a result of declining property values.  The  
          PACE program addresses that issue by permitting  
          improvements to be paid for through property tax  
          assessments which will run with the property and pass on to  
          the next owner along with the promise of lower energy  
          bills.  Property tax liens are senior to mortgage debt  
          reducing the default risk for local governments.   
           
          Comment

          California Programs  .  Charter 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.  

          The Legislature specifically addressed this issue by  
          permitting the use of voluntary contractual assessments for  
          energy and water efficiency and renewable energy generation  
          as a result of AB 811 (Levine), Chapter 159, Statutes of  
          2008, which was expanded by AB 474 (Blumenfield), Chapter  
          444, Statutes of 2009.

           FISCAL EFFECT  :    Appropriation:  Yes   Fiscal Com.:  Yes    
          Local:  No

          According to the Senate Appropriations Committee:


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                           Fiscal Impact (in thousands)

             Major Provisions        2009-10     2010-11     2011-12     Fund  

            Transfer to new account         $50,000              
            Special*
                                  ($50,000)                      
            Special**

            Program administration                    $300       
            $300Special**

             *    Renewable Resource Trust Fund
             **   California Alternative Energy Authority Fund, PACE  
               Account

           SUPPORT  :   (Verified  3/23/10 )

          Environmental Entrepreneurs (source)
          State Treasurer, Bill Lockyer
          Adura Technologies
          California Building Performance Contractors Association
          California Energy Efficiency Industry Council
          Center for Sustainable Energy California
          Cleantech Group LLC
          County of Santa Clara
          Eco Motion
          Efficiency First
          Energy Industries
          Environmental Defense Fund
          Johnson Controls
          KW Engineering
          Lime Energy
          McCalmont Engineering
          National Parks Conservation Association
          Natural Resources Defense Council
          New Resource Bank
          RBC Capital Markets
          Recurve
          Renewable Funding
          Sempra Energy
          State Building and Construction Traces Council of  
          California
          Stone & Youngberg

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          Southern California Edison
          Suntech
          The Vote Solar Initiative
          Union of Concerned Scientists

           ARGUMENTS IN SUPPORT  :    According to the author's office,  
          this bill is intended to create a state program in the  
          State Treasurer's Office through which local PACE programs  
          can be aggregated into larger groupings to make the loans  
          both much more attractive to financial markets and lower  
          the costs of financing.


          DLW:do  8/23/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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