BILL ANALYSIS Ó
SB 555
Page 1
SENATE THIRD READING
SB 555 (Hancock)
As Amended April 26, 2011
Majority vote
SENATE VOTE :27-11
LOCAL GOVERNMENT 5-2
-----------------------------------------------------------------
|Ayes:|Smyth, Alejo, Campos, | | |
| |Gordon, Hueso | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Knight, Norby | | |
| | | | |
-----------------------------------------------------------------
SUMMARY : Adds the acquisition, installation, and improvement of
energy efficiency, water conservation, and renewable energy
improvements that are affixed to the types of facilities that a
community facilities district (CFD) may finance, or refinance,
regardless of whether the buildings or property are privately or
publicly owned. Specifically, this bill :
1)Adds the acquisition, installation, and improvement of energy
efficiency, water conservation, and renewable energy
improvements that are affixed to the types of facilities that
a CFD may finance, or refinance, regardless of whether the
buildings or property are privately or publicly owned.
2)Specifies that the energy efficiency, water conservation, and
renewable energy improvements financed by a CFD may only be
installed on a privately owned building and on privately owned
real property with the prior written consent of the owner or
owners.
3)Prohibits the financing mechanism established under this
measure from being used to finance the installation of energy
efficiency, water conservation, and renewable energy
improvements on a privately owned building or real property in
connection with the initial construction of a residential
building unless the initial construction is undertaken by the
intended owner or occupant.
SB 555
Page 2
4)Provides that work on privately owned buildings and real
property may be financed by a special tax levy only if all of
the votes cast on the question of levying the special tax are
in favor of levying the special tax; and, with the prior
written consent to the special tax of all of the owners of
each property that may be subject to the special tax.
5)Specifies that the prior written consent constitutes a
unanimous vote in favor of the special tax and any associated
bond indebtedness.
6)Authorizes an alternate procedure for forming a CFD that
initially consists solely of territory proposed for annexation
to the CFD in the future, with the condition that a parcel or
parcels within that territory may be annexed to the CFD and
subjected to the special tax only with the unanimous approval
of the parcel owner or owners at the time of annexation.
7)States that for any CFD formed to finance the installation of
energy efficiency and renewable energy improvements, the
appropriations limit for the CFD, the applicable rate of the
special tax and the method of apportionment and manner of
collection of that tax, and the authorization to incur bonded
indebtedness must be specified and be approved by the
unanimous approval of the owner or owners of each parcel or
parcels at the time that the parcel or parcels annex the CFD.
8)Declares that any improvement on private property authorized
to be financed by a CFD constitutes a "public facility" for
purposes of the Mello-Roos Community Facilities Act of 1982
(Mello-Roos); and, a "public improvement" for purposes of
specified statutes, whether the improvement is owned by a
private entity, if the legislative body has determined that
the improvement provides a public benefit, or the improvement
is owned by a public agency.
9)States that if a validation lawsuit is filed regarding the
special taxes levied against a parcel by a CFD formed under
the alternative process, it must be done so within 15 days
after the notice of special tax lien is recorded against the
parcel.
10)States that for any CFD formed to finance the installation of
SB 555
Page 3
energy efficiency and renewable energy improvements the local
agency may, without additional hearings or procedures,
designate a parcel or parcels as an improvement area within
the community facilities district.
11)Provides that after the designation of a parcel or parcels as
an improvement area, all proceedings for approval of the
appropriations limit, the rate and method of apportionment and
manner of collection of special tax, and the authorization to
incur bonded indebtedness for the parcel or parcels, shall
apply only to the improvement area.
12)Specifies that the refusal of a developer to participate in
the formation of, or annexation to, a CFD established pursuant
to this bill's provisions shall not be a factor in the
consideration of the approval of a building permit or other
legislative or adjudicative act affecting the developer's
property.
13)Defines "Property Assessed Clean Energy bond" or "PACE bond"
as a bond that is secured by any of the following:
a) A voluntary contractual assessment on a property;
b) A voluntary contractual assessment or a voluntary
special tax on property to finance the installation of
distributed generation renewable energy sources, electric
vehicle charging infrastructure, or energy or water
efficiency improvements that is levied pursuant to a
chartered city's constitutional authority; or,
c) A special tax on property authorized under a CFD.
EXISTING LAW :
1)Authorizes, pursuant to Mello-Roos, a CFD to finance the
purchase, construction, expansion, improvement, or
rehabilitation of certain facilities, including, among others,
child care facilities, undergrounding of water transmission
and distribution facilities, and the cleanup of hazardous
materials.
2)Specifies the requirements for the establishment of a CFD,
including, among other things, a petition, a hearing,
SB 555
Page 4
establishment of the boundaries of the CFD, and an election on
the question of establishment.
3)Requires that if a lawsuit to test the validity of a CFD's
special taxes is filed, it must be done within 30 days after
voters approve the special tax.
FISCAL EFFECT : None
COMMENTS : Mello-Roos is an important feature of the local
fiscal landscape, providing local officials with a key tool for
accumulating the public capital needed to pay for the public
works projects that make new residential development possible.
Since 1985, CFDs have issued over $18 billion in long-term
bonds, mostly for capital improvements. Without access to
Mello-Roos bond funding, many builders would have to pay higher
development impact fees and raise housing prices.
This bill authorizes the use of Mello-Roos taxes to help finance
renewable energy, water conservation, and energy efficiency
improvements on private property. To simplify the process by
which property owners can voluntarily use Mello-Roos financing,
local officials want to be able to create a CFD that initially
contains no parcels of land, but consists only of territory from
which parcels may subsequently be annexed to the CFD with the
unanimous approval of parcel owners.
In addition to financing public works such as park, school, and
library facilities, CFDs can pay for improvements on privately
owned buildings or real property. For example, CFDs may pay for
work deemed necessary to bring buildings or real property,
whether privately or publicly owned, into compliance with
seismic safety standard and regulations.
To initiate the formation of a CFD, a local agency's legislative
body must adopt a resolution of intention to establish the
district, which must describe the district's boundaries;
describe the facilities and services proposed to be finance;
state that a special tax, secured by a lien against real
property, will be annually levied; specify, in detail, the rate,
method of apportionment, and manner of collections of the
special tax; and, fix a time and place for public hearing.
Under existing law, after holding the hearing and considering
SB 555
Page 5
protests, if the legislative body determines to establish the
CFD, it must adopt a resolution of formation containing all of
the information provided in the resolution of intention; and, if
a special tax is to be levied, some additional information about
the tax levy.
This bill authorizes a separate procedure for establishing a CFD
where the district initially consists solely of territory
proposed for annexation to the community facilities district in
the future, as specified, and provides an alternate procedure
for incurring bonded indebtedness for community facility
districts established in this manner.
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.
AB 1709 (Hancock) of 2008 and SB 279 (Hancock) of 2009, both
almost identical to this bill, would have added the acquisition,
installation, and improvement of energy efficiency and renewable
energy improvements that are permanently fixed to the types of
facilities that a CFD may finance, or refinance, regardless of
whether the buildings or property are privately or publicly
owned. AB 1709 was vetoed by Governor Schwarzenegger, stating
that "while I support the use and inclusion of energy efficiency
products for the homes in our state as demonstrated by my
Million Solar Roofs Initiative, this bill would allow Mello-Roos
taxes to be imposed on homeowners in order to finance energy
efficiency improvements. This provision represents a
fundamental shift in the purpose of Mello-Roos taxes and is one
that I cannot support." SB 279 was also vetoed by Governor
Schwarzenegger stating "I support the use and inclusion of
energy efficiency products for homes in our state. However, by
allowing Mello-Roos taxes to be imposed on homeowners to finance
energy efficiency improvements, this bill would represent a
fundamental shift in the purpose of Mello-Roos taxes, which are
intended to finance core infrastructure needs such as roadways,
sewers, and street lighting. This is a shift that I cannot
support."
AB 474 (Blumenfield), Chapter 444, Statutes of 2009, added water
SB 555
Page 6
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.
Support arguments: Supporters, including the California
Advocacy Committee of the US Green Building Council, state that
"SB 555 builds on the principals of PACE and California FIRST to
enable cities and counties to establish a voluntary community
facility district to help finance energy efficiencies, renewable
energy, water conservation. Property owners who opt in to pay
Mello-Roos taxes will be able to leverage utility bill savings
against their financing costs over time on their property tax
bills." Supporters believe that this bill will help accelerate
conservation savings throughout the state.
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 Mello-Roos
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.
The Legislature may also wish to consider if it would be wise to
place some type of cap on the amount of voluntary assessments a
local government may enter into at any one time in order to
reduce the financial risk for the local agency.
Analysis Prepared by : Katie Kolitsos / L. GOV. / (916)
319-3958
FN: 0001449