BILL ANALYSIS
SB 1340
Page 1
Date of Hearing: June 30, 2010
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
SB 1340 (Kehoe) - As Amended: June 17, 2010
SENATE VOTE : 23-4
SUBJECT : Energy: alternative fuels and vehicle technologies.
SUMMARY : Expands the use of the voluntary contractual
assessment to finance electric vehicle charging infrastructure
affixed on real property and would expand the Property Assessed
Clean Energy (PACE) Reserve program to assist local
jurisdictions in financing the installation of electric vehicle
charging infrastructure. Specifically, this bill :
1)Expands the definition of PACE bond to include a bond that is
secured by voluntary contractual assessment on a property or
through a voluntary special tax, which is levied through a
charter city's charter authority, for the purposes of
financing electric vehicle charging infrastructure.
2)Expands the criteria for participation in the PACE Reserve
program to include that proceeds of the PACE bonds are used to
finance qualified electric vehicle charging infrastructure.
3)Authorizes a public agency to enter into a contractual
assessment with a willing property owner to finance electric
vehicle charging infrastructure.
4)States that the Legislature finds that electric vehicle
charging infrastructure is a necessary component to
transitioning to increase electric vehicle usage. Electric
vehicles and their electric charging infrastructure also
address the issue of global climate change.
5)States that it is the intent of the Legislature that the
authorization created by this bill should be used to finance
electric vehicle charging infrastructure that is permanently
fixed to residential, commercial, industrial, agricultural, or
other real property.
6)Specifies that the costs of homeowners' electrical work needed
to fuel electric vehicles are eligible for subsides under the
SB 1340
Page 2
California Energy Commission's (CEC) Alternative and Renewable
Fuel and Vehicle Technology Program.
EXISTING LAW :
1)Creates a state Property Assessed Clean Energy (PACE) Reserve
program to assist local jurisdictions in financing the
installation of distributed generation of renewable energy
sources or energy or water efficiency improvements.
2)Defines PACE bond as a bond that is secured by voluntary
contractual assessment on a property or through a voluntary
special tax, which is levied through a charter city's charter
authority, for the purposes of financing the installation of
renewable energy sources, or energy or water efficiency
improvements.
3)Establishes the following criteria for participation in the
PACE Reserve program:
a) The interest rate on the PACE bond shall not exceed a
percentage as determined by the California Alternative
Energy and Advanced Transportation Financing Authority
(CAEATFA);
b) Minimum legal local structure and credit underwriting
criteria as determined by the CAEATFA are met;
c) Proceeds of the PACE bonds are used to finance qualified
energy and water efficiency and clean energy improvements;
and,
d) The improvement financed is for a residential project of
three or fewer units, or a commercial project that costs
less than $25,000.
4)Requires CAEATFA to evaluate the following conditions when
determining eligibility of an applicant's PACE program:
a) Loan recipients are legal owners of underlying property;
b) Loan recipients are current on mortgage and property tax
payments;
SB 1340
Page 3
c) Loan recipients are not in default or in bankruptcy
proceedings;
d) Loans are for less than 10% of the value of the
property;
e) The property is within the geographical boundaries of
the PACE program;
f) The program offers financing for energy efficiency
improvements; and,
g) Improvements financed by the program follow applicable
standards for energy efficiency retrofit work, including
any guidelines adopted by the Energy Resources Conservation
and Development Commission.
5)Requires CAEATFA to adopt best practices for the PACE program.
6)Requires CAEATFA to consider the following factors when
evaluating an application:
a) The use of PACE best practices to qualify eligible
properties for participation in underwriting the PACE
program;
b) The cost efficiency of the local jurisdiction's PACE
program, including bond issuance;
c) The projected number of jobs created by the PACE
program;
d) The local jurisdiction's PACE program requirements for
quality assurance and consumer protection as related to
achieving efficiency and clean energy production;
e) The mechanism by which savings produced by this program
are passed onto the property owners; and,
f) Any other factors deemed appropriate by CAEATFA.
SB 1340
Page 4
7)Authorizes public agencies, as defined, in California 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.
8)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
efficiency improvements that are fixed to residential,
commercial, industrial, agricultural, and other real property.
9)States that for the purpose of financing the installation of
water efficiency improvements, "public agency" means a city,
county, city and county, municipal utility district, community
services district, sanitary district, sanitation district, or
water district.
10)Prohibits the authorization from being used to finance the
purchase or appliances or installations not fixed to real
property.
11)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.
12)Declares that a public purpose will be served by a
contractual assessment program that provides the legislative
body of specified public agencies with the authority to
finance the installation of distributed generation renewable
energy sources or energy or water efficiency improvements to
residential, commercial, industrial, agricultural and other
real property.
13)Authorizes the legislative body to determine that it would be
convenient, advantageous, and in the public interest to
designate an area within the public agencies jurisdiction,
which may encompass the entire jurisdiction or a lesser
portion, within which authorized legislative body officials
and property owners may enter into contractual assessments to
finance the installation of distributed generation renewable
SB 1340
Page 5
energy sources or energy or water efficiency improvements that
are fixed to the property.
14)States that the term "energy efficient improvements"
includes, but is not limited to, the installation of
distributed generation renewable energy resources; and, that
any energy efficiency improvement must be fixed to the real
property.
15)Requires that the resolution adopted by the governing body
direct the appropriate city official to prepare a report
including specified provisions.
16)Provides that, upon the written consent of an authorized city
official, the proposed arrangements for financing the program
pertaining to the installation of distributed generation
renewable energy resources, energy or water efficiency
improvements fixed to real property may authorize the property
owner to purchase directly the related equipment and materials
and to contract directly for the work on the property owner's
residential, commercial, industrial, and other real property.
17)Specifies that assessments may be levied only with the free
and willing consent of the owner of each lot or parcel on
which an assessment is levied at the time the assessment is
levied.
18)States that assessments levied pursuant to this chapter, and
the interest and any penalties thereon shall constitute a lien
against the lots and parcels of land on which they are made
until they are paid.
19)Specifies that the collection of assessments in the same
manner and at the same time as the general taxes of the city
on real property are payable.
20)Requires that a specified city official enter into
consultations with the office of the county auditor or
controller in order to reach agreement on what additional
fees, if any, will be charged to the city or county for
incorporating the proposed contractual assessments into the
assessments of the general taxes of the city or county on real
property, and to include a report on the results of these
consultations in the report to be submitted to the legislative
body
SB 1340
Page 6
of the city.
21)Requires a legislative body to publish notice of a hearing
regarding contractual assessments.
22)Defines "city" for purposes of these sections as a city,
county, or city and county.
23)Defines "water district" as any district or other political
subdivision, other than a city or county, a primary function
of which is the irrigation, reclamation, or drainage of land
or the diversion, storage, management, or distribution of
water primarily for domestic, municipal, agricultural,
industrial, recreation, fish and wildlife enhancement, flood
control, or power production purposes.
24)Specifies for the purpose of financing the installation of
distributed generation renewable energy sources or energy
efficiency improvements, "public agency" means a county, city,
city and county, or a municipal utility district, an
irrigation district, or public utility district that owns and
operates an electric distribution system.
25)Establishes the Alternative and Renewable Fuel and Vehicle
Technology Program, administered by the California Energy
Commission, that provides grants, revolving loans, loan
guarantees, loans, or other appropriate funding measures to
public agencies, vehicle consortia, businesses, consumers,
recreational boaters, and academic institutions to develop and
deploy innovative technologies that transform California fuel
and vehicle types to help attain the state's climate change
policies.
FISCAL EFFECT : Unknown
COMMENTS :
1)According to the author, "the Alternative and Renewable fuel
and Vehicle Technology Program currently is not specifically
set up to address the needs of plug-in electric vehicle (PEVs)
or plug-in hybrid electric vehicle (PHEVs) owners who will
have to have their homes (garage to power-box) upgraded to
SB 1340
Page 7
handle the additional power needs of these vehicles to
properly and safely charge them. Additionally, there are
other financing programs, like PACE, that currently exist that
should also include electric vehicle charging infrastructure
into their programs. The use of electrically-fueled vehicles
will lead to greenhouse gas emission reductions as more and
more consumers swap out their petroleum-fueled vehicles with
electric ones. However, public perception and confidence in
these vehicles will quickly erode if PEV and PHEV vehicle
owners have to confront costly in-home electrical issues in
order to operate these vehicles. As a solution, this bill
specifically requires the CEC to administer a program that
will provide funding for homeowners who purchase a plug-in
electric vehicle to offset costs associated with modifying
electrical sources to include residential electric vehicle
charging stations. This bill's recent amendment allows
electric vehicle charging infrastructure into the PACE
program."
2)AB 811 (Levine), Chapter 159, Statutes of 2008, proposed to
further the public interest
of addressing climate change through energy conservation efforts
by authorizing 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. Under contractual assessments, the property
owner or owners within a designated area choose to assess
themselves for the cost of energy efficiency improvements or
public works projects (i.e., under grounding of power lines or
installation of streetlights). 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.
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.
SB 1340
Page 8
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.
3)Earlier this year the Legislature passed SB 77 (Pavley),
Chapter 15, Statutes of 2010, which created a state PACE
Reserve program to assist local jurisdictions in financing the
installation of distributed generation of renewable energy
sources or energy or water efficiency improvements. SB 77
authorizes CAEAFTA to purchase locally-issued PACE bonds,
which will allow local jurisdictions to sell bonds to CAEAFTA
at a lower rate and then CAEAFTA could pool all the bonds
together and sell those out into the market at
lower rates.
4)Some federal housing finance regulators worry that voluntary
contractual assessment programs may overburden property owners
with debt, raising risks of default. Mortgage lenders and
regulators are concerned because voluntary contractual
assessment financing is secured with a tax lien that has
superior priority over first mortgages. PACE Program
advocates respond that financing energy and water improvements
may pose less risk of default than traditional public
financing because lower utility bills offset a property
owner's financing costs. However, SB 1340 authorizes
financing for electric vehicle charging infrastructure, which
does not produce offsetting cost savings. The Committee may
wish to consider whether, by authorizing voluntary contractual
assessment financing for improvements that does not produce
cost savings directly to the property, SB 1340 invites greater
scrutiny by federal regulators and mortgage lenders.
5)Support Arguments : The author points out that major auto
manufacturers will be introducing new electric vehicles and
plug-in electric vehicles in the fall of 2010 and early 2011,
and as consumers seek to purchase these vehicles, many will
require electrical improvements at their homes. Costs for
these improvements can range from a few hundred dollars to
several thousand dollars.
Despite the air quality and energy efficiency benefits of the
technology, many potential electric vehicle purchasers may be
SB 1340
Page 9
dissuaded from buying an electric-drive vehicle if it
additionally requires hundreds of dollars of initial costs at
their homes. This bill gives clear legislative authority for
the CEC to design an Alternative and Renewable Fuel and
Vehicle Technology program that helps to off-set these costs
as well as expanding the PACE program for clean vehicle
purposes.
Opposition Arguments : Opposition could argue that this
measure adds yet another improvement to the laundry list of
improvements that a local government can finance through
contractual assessments; the Legislature may wish to consider
whether it is prudent to continue to authorize local
governments to become a glorified bank to help pay for on-site
property improvements.
Moreover, the contractual assessments stay with the property
and any subsequent owner would be subject to the assessment.
In regards to the installation of an EV charging system, the
new property owner would be faced with paying the assessment
regardless of ownership of an EV. The financing of
improvements such as solar panels or water efficiencies could
be of benefit to any subsequent property owner, but the
assessment upon a new property owner who does not own an EV
may not be as beneficial.
6)This bill is similar to AB 1755 (Swanson) and AB 2182
(Huffman), which are currently pending in the Senate. As
these contractual assessment bills move forward, each will
need to be amended to avoid chaptering out issues.
7)This bill is double-referred to the Committees on Local
Government and Transportation.
REGISTERED SUPPORT / OPPOSITION :
Support
Sacramento Municipal Utility District
SB 1340
Page 10
Opposition
None on file
Analysis Prepared by : Katie Kolitsos / L. GOV. / (916)
319-3958