California Legislature—2013–14 Regular Session

Assembly Bill No. 122

Introduced by Assembly Member Rendon

January 14, 2013

An act to add Chapter 13 (commencing with Section 25987.1) to Division 15 of the Public Resources Code, relating to energy, and making an appropriation therefor.

LEGISLATIVE COUNSEL’S DIGEST

AB 122, as introduced, Rendon. Energy: energy assessment: nonresidential buildings: financing.

Existing law requires the State Energy Resources Conservation and Development Commission to implement a program to provide financial assistance for energy efficiency projects.

This bill would enact the Nonresidential Building Energy Retrofit Financing Act of 2012 and would require the commission to establish the Nonresidential Building Energy Retrofit Financing Program and to develop a request for proposal for a third-party administrator by July 1, 2013, to develop and operate the program to provide financial assistance, through authorizing the issuance of, among other things, revenue bonds, to owners of eligible nonresidential buildings for implementing energy improvements for their properties. The bill would require that the bonds be secured by the recording of an energy remittance repayment agreement, as defined, on the deed of the property for which the improvements are performed. The bill would require the State Board of Equalization to collect installment payments from owners of eligible properties whose applications have been approved by the commission.

The bill would require the commission to meet for the purpose of approving applicants to participate in the program. The bill would authorize the California Alternative Energy and Advanced Transportation Financing Authority, on behalf of the commission, to issue and renew the negotiable revenue bonds to generate moneys to finance energy improvements for approved applicants.

The bill would establish the Nonresidential Building Energy Retrofit Debt Servicing Fund in the State Treasury and the Loan Loss Reserve Account and Administration Account within the fund. The bill would require the State Board of Equalization to deposit the installment payment received from the owners of eligible buildings into the fund and certain fees collected into the specified accounts. The bill would continuously appropriate the moneys in the fund and the accounts to repay the principal and interest on the bonds, and to cover the administrative costs incurred by the authority, the commission, and the State Board of Equalization, thereby making an appropriation.

The bill would require the Director of Finance to transfer, as a loan, up to $1,000,000, to the authority, and up to $7,000,000, to the commission, from the General Fund for the purposes of implementing the program. The bill would require the loans to be repaid on or before January 1, 2023.

Existing law establishes incentives in the form of grants and loans to low-income residents, small businesses, and residential property owners for constructing and retrofitting buildings to be more energy efficient.

The bill would require the State Energy Resources Conservation and Development Commission, to the extent it determines necessary to effectively complete it duties under the act, to analyze and evaluate specified standards developed for nonresidential energy building retrofits.

Vote: majority. Appropriation: yes. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Chapter 13 (commencing with Section 25987.1)
is added to Division 15 of the Public Resources Code, to read:

 

Chapter  13. Nonresidential Building Assessment
Financing

 

Article 1.  General Provisions and Definitions

 

25987.1.  

This act shall be known, and may be cited, as the
Nonresidential Building Energy Retrofit Financing Act of 2012.

25987.2.  

The purpose of this chapter is to facilitate private
financing to enable private nonresidential building owners and
eligible public entities to invest in clean energy improvements,
renewable energy, and conservation, to incentivize private equity
managers to invest in clean energy improvements, integrate the
smart energy economy, and stimulate the state economy by directly
creating jobs for contractors and other persons who complete new
energy improvements, and to reinforce the leadership role of the
state in the new energy economy, thereby attracting energy
manufacturing facilities and related jobs to the state.

25987.3.  

The Legislature finds and declares all of the following:

(a) Nonresidential buildings represent a huge opportunity to
significantly increase energy efficiency and reduce greenhouse
gas emissions. To do this, we need to address the design,
construction, and operation of these buildings.

(b) The lack of accessible and affordable financing for energy
efficiency retrofits results in energy-inefficient buildings that are
estimated to consume up to 50 percent more energy than required
to achieve the same level of comfort. Energy use in the building
sector accounts for approximately 20 percent of global emissions
of carbon dioxide, or 10 billion tons, annually.

(c) It is possible to retrofit the California nonresidential building
stock to use, on average, at least 50 percent less energy by 2050
through the wide adoption of deep energy retrofits that save more
energy and increase profits for building owners.

(d) Investment in building performance upgrades is an intelligent
business decision. Building performance upgrades lower operating
costs, improve occupant comfort, hedge against utility price
increases, demonstrate commitment to tenant well-being, reduce
exposure to regulation, help the environment, and ultimately boost
property values.

(e) It is in the best interest of the state and its citizens to enable
and encourage the owners of eligible nonresidential property to
invest in new energy improvements, including building energy
efficiency improvements that qualify for investor-owned utility or
publicly owned utility programs, water efficiency improvements,
and renewable energy improvements, by enacting this division to
establish, develop, finance, implement, and administer a new
energy improvement program that provides for both building
energy efficiency improvements and renewable energy
improvements and to assist those owners who choose to participate
in the program to complete new energy improvements to their
properties because of the following:

(1) New energy improvements, including building energy
efficiency improvements and renewable energy improvements,
can provide positive cashflow when the costs of the improvements
are spread out over a long enough time that a building’s cumulative
utility bill cost savings exceed the amount of the liens recorded
on the eligible building to ensure payment for the improvements.

(2) Many owners of eligible nonresidential buildings are unable
to fund a new energy improvement because the owners do not
have sufficient liquid assets to directly fund the improvement or
are unable or unwilling to incur the negative net cashflow likely
to result if the owner uses a typical existing loan program to fund
the improvement.

(f) Reduction in the amount of emissions of greenhouse gases
and environmental pollutants, resulting from increased efficiencies
and the resulting decreased use of traditional nonrenewable fuels,
will improve air quality and may help to mitigate climate change.

(g) The nonresidential building owners who participate in the
program established pursuant to this division to assist them in
completing new energy improvements, including building energy
efficiency improvements and renewable energy improvements, to
the building shall do so voluntarily.

25987.4.  

Unless the context otherwise requires, for the purposes
of this chapter, the following terms have the following meanings:

(a) (1) “Alternative sources of energy” or “alternative energy
sources” means energy from renewable cogeneration or gas-fired
cogeneration technology that meets the greenhouse gas emissions
and efficiency standards applicable to the Self-Generation Incentive
Program in effect at the time of the application, energy storage
technologies, or energy from solar, biomass, wind, or geothermal
systems, or fuel cells, the efficient use of which will reduce the
use of conventional energy fuels.

(2) The system shall be sized appropriately to offset part or all
of the applicant’s own electricity demand and shall be located on
the same premises of the application where the applicant’s own
electrical demand is located.

(b) “Applicant” means a person, or an entity or group of entities,
engaged in business or operations in the state, whether organized
for profit or not for profit that owns a nonresidential building and
applies for financial assistance from the commission for the
purpose of implementing a project in a manner prescribed by the
commission.

(c) “Authority” means the California Alternative Energy and
Advanced Transportation Financing Authority established pursuant
to Section 26004.

(d) “Board” means the State Board of Equalization.

(e) “Building energy efficiency improvement” means one or
more installations or modifications, for which a building permit
is issued after January 1, 2013, to an eligible building that either
qualifies for an investor-owned utility or publicly owned utility
energy efficiency program or is designed to reduce the energy
consumption of the building, and that may include, but is not
limited to, all of the following to the extent they qualify:

(1) High-efficiency mechanical equipment.

(2) High-efficiency electrical equipment.

(3) Capturing or reducing heat gain or solar shading, including
the roof and south and west walls, and not just glazing.

(4) High-efficiency water heating.

(5) Insulation in walls, roofs, floors, and foundations and in
heating and cooling distribution systems.

(6) Fenestration and door replacements, and door modifications
that reduce energy consumption.

(7) Automatic energy control systems.

(8) Heating, ventilating, or air conditioning and distribution
system modifications or replacements.

(9) Caulking and weather stripping.

(10) Replacement or modification of luminaries to increase the
energy efficiency of the system, or additional lighting controls to
reduce electric lighting during periods of vacancy.

(11) Energy recovery systems.

(12) Daylighting systems and associated lighting controls for
daylight harvesting.

(13) A modification, installation, or remodeling approved as a
utility cost-savings measure by the commission or the Public
Utilities Commission and utilized by investor-owned utilities and
energy efficiency specialists participating in their Energy Efficiency
programs.

(14) Plug load solutions.

(15) Building commissioning or retrocommissioning.

(f) “Conventional energy fuel” means any of the following:

(1) A fuel derived from petroleum deposits, including, but not
limited to, oil, heating oil, gasoline, and fuel oil.

(2) Natural gas, including liquefied natural gas.

(3) Nuclear fissionable materials.

(4) Coal.

(g) “Demand response” means reductions or shifts in electricity
consumption by customers in response to either economic or
reliability signals.

(h) “Eligible building” means a nonresidential building that
completed construction on or before January 1, 2013, and located
within the boundaries of the state.

(i) “Energy remittance repayment agreement” means a
contractual agreement between an eligible building owner and the
commission, secured by a lien, as described in Section 25987.21,
recorded in the county where the property is situated and on an
eligible building specially benefited by a new energy improvement
for which the commission will make reimbursement or a direct
payment to the party financing the energy improvements, and
“contractual energy remittance” means that reimbursement or
direct payment. The amount to be repaid pursuant to the energy
remittance repayment agreement shall include the costs necessary
to finance the building energy efficiency improvements less any
rebates, grants, and other direct financial assistance received by
the owner pursuant to other law and a loan loss reserve fee in an
amount to be established by the program administrator in
consultation with the commission and the warehouse financier
under contract entered into pursuant to paragraph (8) of subdivision
(a) of Section 25987.25 to insure against nonperformance of the
loan and other losses of the program, and a program administrative
cost fee.

(j) “Energy efficiency specialist” means an individual or
business authorized or certified by rules of the commission to
analyze, evaluate, or install a renewable energy source, building
energy efficiency improvement, or water efficiency improvement
for eligible property.

(k) “Financial assistance” means either of the following:

(1) Loans, loan loss reserves, interest rate reductions, secondary
loan purchase, insurance, guarantees or other credit enhancements
or liquidity facilities, contributions of money, property, labor, or
other items of value, or any combination thereof, as determined
and approved by the commission.

(2) Other types of assistance the commission determines are
appropriate.

(l) “Loan balance” means the outstanding principal balance of
loans secured by a mortgage or deed of trust with a first or second
lien on eligible property.

(m) “Loan loss reserve fee” means a fee that serves as collateral
in the event of a loan default.

(n) “Nonresidential Building Energy Retrofit Bond” means a
bond issued pursuant to Section 25987.31 that is secured by an
energy remittance repayment agreement on property entered into
voluntarily to finance the installation of renewable energy sources,
building energy efficiency improvement or retrofits, or water
efficiency improvements.

(o) “Participant” means a person, or an entity or group of
entities, engaged in business or operations in the state, whether
organized for profit or not for profit, that, as a qualified applicant
is approved for financial assistance pursuant to Article 2
(commencing with Section 25987.5) and has entered into an energy
remittance repayment agreement with the commission for the
purpose of implementing a project in a manner prescribed by the
commission.

(p) “Portfolio” means an aggregation of approved applications.

(q) “Program” means the Nonresidential Building Energy
Retrofit Financing Program established by the commission in
accordance with Section 25987.7.

(r) “Program administration cost fee” means a fee imposed for
the costs incurred by the commission, the authority, and the State
Board of Equalization to administer the program.

(s) “Project” means an improvement to an eligible building that
constitutes a water efficiency improvement, alternative source of
energy, or building energy efficiency improvement.

(t) “Qualified applicant” means a person or business entity who
does all of the following:

(1) Owns an eligible building that has a ratio of loan balance to
its appraised value not to exceed 85 percent and subject to
adjustment by the program administrator at the time the person’s
program application is approved, as shown in the records of the
county assessor, unless the holder of the deed of trust or mortgage
recorded against the eligible property that has priority over all
other deeds of trust or mortgages recorded against the eligible
property has consented in writing to the recording of an energy
remittance repayment agreement pursuant to this division against
the eligible property.

(2) Timely submits to the commission a complete application,
which notes the existence of any priority mortgage or deed of trust
on the eligible property and the identity of the holder of the
mortgage or deed of trust, to join the program and consents to the
levying of a special assessment on the property pursuant to this
chapter.

(3) Meets standard of credit worthiness that the commission
may establish.

(u) “Renewable energy” means heat, processed heat, space
heating, water heating, steam, space cooling, refrigeration,
mechanical energy, electricity, fuel cells, or energy in any form
convertible to these uses, and including energy storage
technologies, that does not expend or use conventional energy
fuels, and that uses any of the following electrical generation
technologies:

(1) Biomass.

(2) Solar thermal.

(3) Photovoltaic.

(4) Wind.

(5) Geothermal.

(v) “Renewable energy improvement” means one or more
fixtures, products, systems, or devices, or an interacting group of
fixtures, products, systems, or devices, that directly benefit an
eligible building or that are installed on the customer side of a
meter of an eligible building and that produce renewable energy
from renewable resources, including, but not limited to,
photovoltaic, solar thermal, small wind, biomass, fuel cells, or
geothermal systems such as ground source heat pumps, as may be
approved by the commission.

 

Article 2.  Nonresidential Building Energy Retrofit Financing
Program

 

25987.5.  

The purpose of the Nonresidential Building Energy
Retrofit Financing Program is to help provide the special benefits
of water efficiency improvements, alternative energy, and building
energy efficiency improvements to owners of eligible buildings
who voluntarily participate in the program by establishing,
developing, financing, and administering a program to assist those
owners in completing improvements.

25987.6.  

The commission shall have and exercise all rights
and powers necessary or incidental to or implied from the specific
powers granted to the commission by this chapter. Those specific
powers shall not be considered as a limitation upon any power
necessary or appropriate to carry out the purposes and intent of
this chapter.

25987.7.  

(a) The commission shall establish, develop, finance,
and administer, pursuant to Section 25987.9, the Nonresidential
Building Energy Retrofit Financing Program. The commission
shall provide general direction and oversight to the authority and
board as they complete duties specified in this chapter. The
program shall be designed to provide financial assistance for an
owner of an eligible building to use one or more energy efficiency
specialists to retrofit the property with one or more alternative
energy sources or renewable energy improvements, building energy
efficiency improvements, or water efficiency improvements, by
applying to the commission for inclusion of the owner’s project
in a portfolio that will be financed through the use of the revenue
bonds issued pursuant to this chapter. These bonds shall be secured
by revenues generated through energy remittance repayment
agreements recorded on the buildings benefited by the projects in
the portfolio.

(b) (1) The program shall provide financial assistance for
improvements when the total energy and water cost savings
realized by the property owner, and any successor or successors
to the property owner, during the useful life of the improvements,
as determined by an analysis required pursuant to subdivision (i)
of Section 25987.13 are expected to equal or exceed the total costs
incurred by the owner pursuant to the program.

(2) The commission may waive the requirements of paragraph
(1) by adopting a specific finding that additional improvements
may be undertaken that significantly increase energy efficiency
and improve public health.

(c) In developing rules to certify an energy efficiency specialist,
the commission shall consult with the Public Utilities Commission,
the investor-owned utilities, the contractor community, and other
entities the commission deems appropriate and consider existing
trade certifications or licensing requirements applicable to
occupations that perform work contemplated pursuant to this
chapter.

25987.8.  

To receive financial assistance pursuant to this
chapter, a qualified applicant shall contractually agree to the
recording of an energy remittance repayment agreement on the
eligible building that is being retrofitted.

25987.9.  

By July 1, 2013, the commission shall develop a
request for proposal to develop the program by a third-party
administrator. The third-party administrator shall administer the
program and establish an automated, asset-based underwriting
system for all eligible buildings in the state. The third-party
administrator shall provide consultation to the commission in
developing guidelines for the program. The party selected as the
third-party administrator shall only be selected if the program
proposal submitted by the party requires all costs, including startup
costs of the program, to be covered by the loan recipients, the
administrator, the bond purchasers, or some combination thereof.
The program selected shall not include General Fund costs or
liabilities, with the exception of loans from the General Fund
pursuant to Section 25987.41 utilized for startup costs.

25987.10.  

The third-party administrator shall establish
underwriting guidelines that consider an applicant’s qualifications,
and other appropriate factors, including, but not limited to, credit
reports and loan-to-value ratios, consistent with good and
customary lending practices, necessary for the authority to obtain
a bond rating for bonds issued pursuant to Article 3 (commencing
with Section 25987.29) for a successful bond sale.

25987.11.  

The third-party administrator shall disclose to an
owner of a nonresidential building all fees imposed pursuant to
this chapter, including the loan loss reserve fee, the program
administration cost fee, and the interest rate charged, prior to the
submission of an application by the building owner.

25987.12.  

(a) An owner of an eligible building who wishes to
undertake an improvement shall submit to the third-party
administrator an application to participate in the program.

(b) The submission of an application is deemed to be a voluntary
agreement by the owner for the commission to record the energy
remittance repayment agreement on the deed of the eligible
building upon the approval of the application.

(c) The application form developed by the third-party
administrator shall include a statement in no less than 12-point
type stating the following:

SUBMISSION OF THIS APPLICATION CONSTITUTES THE
VOLUNTARY CONSENT OF THE APPLICANT FOR THE
RECORDATION OF THE ENERGY REMITTANCE
REPAYMENT AGREEMENT ON THE DEED OF THE
ELIGIBLE PROPERTY. UPON THE APPROVAL BY THE
COMMISSION OF THE APPLICATION AND THE
RECORDATION OF THE ENERGY REMITTANCE
REPAYMENT AGREEMENT, A LIEN IN THE AMOUNT
SPECIFIED IN THE ENERGY REMITTANCE REPAYMENT
AGREEMENT SHALL BE SECURED BY THE PROPERTY.

25987.13.  

The owner of an eligible building shall include all
of the following information in the application:

(a) The name, business address, and email address of the owners
of the eligible building.

(b) The names of all entities that hold a secured lien on the
eligible building and their contact information.

(c) The total dollar amount of liens that have been recorded on
the eligible building.

(d) An appraisal of the value of the eligible building that has
been conducted within the past six months or during an appropriate
timeframe consistent with industry practices for underwriting of
nonresidential buildings.

(e) A detailed description of the building energy efficiency
improvements being funded.

(f) The name of the financial institution providing interim
financing for the improvements or the warehouse line of credit
developed pursuant to Section 25987.26.

(g) The structure of the loan financing the building energy
efficiency improvements.

(h) Any information that the commission or third-party
administrator requires to verify that the owner will complete the
project.

(i) An analysis performed by an energy efficiency specialist to
quantify the costs of the energy and water efficiency improvements,
and total energy and water cost savings realized by the owner, or
his or her successor during the effective useful life of, and
estimated carbon impacts of, the improvements, including an
annual cashflow analysis.

(j) Copies of an application that have been made for energy
efficiency incentives identified pursuant to subdivision (d) of
Section 25987.19 for any applicable retrofits.

(k) Other information deemed necessary by the commission or
the third-party administrator.

25987.14.  

(a) In addition to the information required under
Section 25987.13, an applicant shall provide in the application a
detailed description of all of the following:

(1) The eligible building.

(2) The transactional activities associated with the eligible
improvements, including the transactional costs.

(3) Other information deemed necessary by the commission or
the third-party administrator.

(b) An applicant shall agree in the application to remit repayment
installments due by an electronic funds transfer under procedures
prescribed by the board.

25987.15.  

(a) The third-party administrator shall make
recommendations to the commission regarding the approval or
disapproval of an application.

(b) The commission may approve and accept an applicant into
the program if both of the following conditions are met:

(1) The applicant is a qualified applicant.

(2) Prior to receiving funding for renewable energy improvement
or alternative energy sources, the applicant shall show both of the
following:

(A) Evidence of intent to make feasible energy efficiency
upgrades recommended by the analysis required pursuant to
subdivision (i) of Section 25987.13.

(B) Evidence of intent to enroll in eligible demand response
programs, if appropriate.

(c) The commission shall determine appropriate guarantees
necessary to ensure cost neutrality of the improvements that may
include the requirement that the owner of the eligible building
obtain insurance issued by an A.M. Best “A” or better rated
insurance carrier or a similar product as approved by the
commission.

25987.16.  

(a) Upon the mutual agreement of the participant
and the third-party administrator, the third-party administrator
shall establish an annualized schedule for the repayment required
by the energy remittance repayment agreement, including the
interest charged, administrative cost fee, and loan loss fee.

(b) The board shall collect the repayment installments that
become due and payable.

(c) (1) The period for repayment of the energy remittance
repayment agreement shall not exceed the effective useful life of
the improvements or 20 years, whichever is shorter.

(2) The calculated effective useful life of the building energy
efficiency improvements shall be calculated using methodologies
adopted by the commission, in consultation with the Public Utilities
Commission.

(d) Upon the failure of the participant to pay any installment
toward the repayment of the energy remittance repayment
agreement when the installment becomes due and owing pursuant
to the schedule for repayment, the board shall assess a penalty on
the delinquent payment of 10 percent of the unpaid installment.

(e) Within 60 days of a failure to pay the scheduled energy
remittance payment, the board shall issue a demand letter to the
participant with notice provided to the commission and provide
the participant with 30 days to cure the default.

(f) (1) If the participant fails to cure the default within the time
allotted, the board may declare the entire outstanding energy
remittance repayment agreement balance, including any interest
due, penalties assessed, and costs of collection incurred,
immediately due and owing and foreclose on the energy remittance
repayment agreement by either judicial or nonjudicial foreclosure.

(2) Revenue generated from the sale of the eligible building
shall be distributed to satisfy liens on the eligible building in
accordance with the priority of the liens as provided by law.

(g) Upon the full repayment of the balance of the energy
remittance repayment agreement, and interest and penalties that
had accrued, the board shall notify the commission of that
repayment. Within 30 days of the receipt of the notice, the board
shall record with the county in which the eligible building is located
a release of the energy remittance repayment agreement.

25987.17.  

(a) A participant shall remit repayment installments
due by an electronic funds transfer to the board under procedures
prescribed by the board.

(b) Any participant remitting amounts due pursuant to
subdivision (a) shall perform electronic funds transfers in
compliance with the due dates prescribed in the schedule for
repayment. Payment is deemed complete on the date the electronic
funds transfer is initiated if settlement to the state’s demand account
occurs on or before the banking day following the date the transfer
is initiated. If settlement to the state’s demand account does not
occur on or before the banking day following the date the transfer
is initiated, payment is deemed to occur on the date settlement
occurs.

(c) Any participant who remits a repayment installment by
means other than appropriate electronic funds transfer shall pay a
penalty of 10 percent of the repayment installment incorrectly
remitted.

(d) The board may prescribe, adopt, and enforce guidelines
relating to the collection of the energy remittance repayment
installments. The guidelines adopted pursuant to this section shall
be exempt from the requirements of the Administrative Procedure
Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code).

25987.18.  

(a) Prior to approving an application for inclusion
into a loan portfolio and the recordation of the energy remittance
repayment agreement, or a modification of an approved application,
the commission shall conduct a public meeting on the proposed
application or modification.

(b) The commission shall post a notice of the hearing on the
commission’s Internet Web site and provide the notice, in writing,
to all lienholders of the eligible building no later than 30 days prior
to the public meeting.

(c) The notice shall specify all of the following:

(1) The name of the qualified applicant.

(2) The address of the eligible meeting.

(3) The amount required to be repaid by the energy remittance
repayment agreement proposed to be recorded on the eligible
building.

(4) The date and place of the public meeting.

(5) The schedule for repayment of the contractual energy
remittance and associated costs as agreed upon between the
qualified applicant and the commission.

(6) The interest rate assessed pursuant to the energy remittance
repayment agreement.

(7) A detailed description of the proposed modification, if
applicable.

(d) The notice shall inform the lienholder that any complaints
or objections to either the approval of the application and the
recordation of the energy remittance repayment agreement on the
eligible building or the modification of an approved application
shall be submitted, in writing, to the commission not less than 10
days prior to the public meeting.

25987.19.  

In evaluating the eligibility of an applicant, the
commission shall consider the creditworthiness of the applicant
and the effectiveness of the improvements applying the following
criteria, which may include, but not be limited to, all of the
following:

(a) Whether applicants are legal owners of the underlying
property.

(b) Whether applicants are current on any outstanding mortgage
and property tax payments.

(c) Whether applicants are in default or in bankruptcy
proceedings.

(d) Whether applicants have applied for incentives available
through the energy efficiency programs offered by an electrical or
gas corporation.

(e) Whether improvements financed by the program follow
applicable standards including any guidelines adopted by the
commission.

25987.20.  

(a) The commission shall approve an application
at a business meeting. Upon approval of an application, the
commission shall authorize a recording of the energy remittance
repayment agreement on the deed of the eligible building.

(b) The commission shall specify the amount required to be
paid to the board pursuant to the energy remittance repayment
agreement, the schedule of repayment, and the interest rate charged.

(c) The commission shall approve a modification of an approved
application at a business meeting.

25987.21.  

(a) The energy remittance repayment agreement
that is secured by a lien recorded pursuant to this section, shall
have the force, effect, and priority of a judgment lien, and shall be
subordinate to any and all secured mortgage liens recorded against
the deed of the eligible building at the time of recording of the
energy remittance repayment agreement.

(b) Except as otherwise required by law, the energy remittance
repayment agreement shall be superior in priority to all subsequent
liens recorded on the deed of the eligible building except where
the first mortgage is refinanced, in which case the energy
remittance repayment agreement shall remain secondary to the
primary mortgage.

(c) The sale of the eligible building to enforce the payment of
general ad valorem taxes shall not extinguish the energy remittance
repayment agreement recorded on the eligible building.

(d) In the event of foreclosure, the energy remittance repayment
agreement installments shall not be due and owing during such
time when the building is owned by a financial institution taking
title by way of foreclosure. The installments owing pursuant to
the energy remittance repayment agreement shall, however,
continue to accrue and shall become due 60 days after a new,
nonfinancial owner takes title.

(e) Notwithstanding any other law, in the event of a foreclosure
of the property, the energy remittance repayment agreement shall
not be extinguished, unless the outstanding balance of the energy
remittance repayment agreement, including the interest accrued
and all penalties and fees assessed prior to the foreclosure, is fully
paid through the foreclosure proceeding.

25987.22.  

(a) No later than 30 days after the approval of an
application, the commission shall forward the agreement and any
other information necessary to collect the installment repayments
to the board which shall record with the county in which the
eligible building is located the energy remittance repayment
agreement on the deed of the eligible building. The board shall
notify the commission upon the recordation of the energy
remittance repayment agreement.

(b) Within 60 days of the notice of recording of the energy
remittance repayment agreement, the commission shall include
the approved application in a portfolio posted on the commission’s
Internet Web site.

25987.23.  

(a) The board shall deposit into the Nonresidential
Building Energy Retrofit Debt Servicing Fund established pursuant
to Section 25987.38 any moneys collected pursuant to this chapter.

(b) The board may charge a program administration cost fee on
the owner of an eligible building to cover its costs as well as the
authority’s and the commission’s costs in implementing this
chapter.

(c) Nothing in this chapter shall be construed to require investor
owned utilities or municipal utilities to serve in the role as a
third-party private guarantor or loan servicer or otherwise provide
credit support for the loan program.

25987.24.  

(a) A local government that has issued revenue
bonds pursuant to a program providing financial assistance to
nonresidential buildings owners undertaking a renewable energy,
water efficiency, or energy efficiency retrofit improvement on the
buildings may apply to the commission for participation in the
program.

(b) Upon the approval of an application submitted by the local
government for the building or buildings in which that jurisdiction
is located, the authority may purchase all those outstanding revenue
bonds issued by the local government.

(c) Upon the purchase of the revenue bonds issued by the local
government by the authority, the authority succeeds to all rights
conferred upon the bondholder by those revenue bonds and the
local government shall remit revenue that is used to secure those
revenue bonds to the board.

25987.25.  

(a) To the extent that the commission determines
necessary to effectively complete the duties specified by this
chapter, the commission shall do all of the following:

(1) (A) Analyze and evaluate standards for nonresidential
energy building retrofits previously developed by various national
and international organizations to provide uniformity and
transparency for financial institutions evaluating loan proposals
for energy improvements to nonresidential buildings. To the extent
that the commission determines necessary, this evaluation shall
be completed not later than January 1, 2014.

(B) The evaluation shall review existing protocols or a
combination of elements of existing measurement protocols and
shall be made available in an electronic format to financial
institutions and local governments initiating loans pursuant to this
chapter.

(2) Establish those standards, guidelines, and procedures,
through regulation, including, but not limited to, standards of credit
worthiness for qualification of program applicants, that are
necessary to ensure the financial stability of the program and
otherwise prevent fraud and abuse.

(3) Establish those measurement and verification standards
necessary to ensure that the building energy efficiency
improvements financed pursuant to this chapter are realized at a
level specified by the commission.

(4) Consider reliance on existing trade certifications or licensing
requirements applicable to occupations that perform the work
contemplated under this chapter.

(5) Establish qualifications for the certification of contractors
to construct or install building energy efficiency improvements.

(6) Contract with a party, public or private, to do any of the
following:

(A) Ensure that appropriate and reasonable steps are taken to
monitor and verify the quality and longevity of building energy
efficiency improvements financed pursuant to this division and
measure the total energy savings achieved by the program.

(B) Monitor the total number of program participants.

(C) Determine the average amount, in aggregate, paid to
contractors and financial institutions pursuant to the program.
Notwithstanding the California Public Records Act (Chapter 3.5
(commencing with Section 6250) of Division 7 of Title 1 of the
Government Code), upon a finding pursuant to Section 6255 of
the Government Code that the public interest is served by not
disclosing information clearly outweighs the public interest served
by disclosing information, the commission shall not disclose
payments made by an applicant or a program participant to
individual contractors or financial institutions.

(D) Calculate the number of jobs created by the program, the
number of defaults by program participants, and the total losses
from the defaults, and calculate the total dollar amount of bonds
issued by the authority to reimburse program participants.

(7) Develop a model energy aligned lease provision that
modifies, upon the agreement between the owner and tenants of
an eligible building, a commercial lease agreement allowing the
owners to recover the costs of the renewable energy, water
efficiency, or energy efficiency retrofit improvements that result
in operational savings based on the useful life of the retrofit while
protecting tenants from underperformance of the building energy
efficiency improvements.

(8) Develop a request for proposal to contract with one or more
financial institutions to secure a short-term, revolving credit facility
(warehouse line of credit) for the purpose of creating an interim
financing mechanism for the loans that would be aggregated for
the purposes of issuance of a revenue bond pursuant to Section
25987.29. The warehouse line of credit shall be drawn by the
third-party administrator for origination of direct loans to qualified
applicants.

(9) Adopt a standard notice and disclosure form for the purposes
of Section 25987.27.

(b) In implementing this chapter, the commission shall do all
of the following:

(1) Consult with the Public Utilities Commission, representatives
from the investor-owned and publicly owned utilities, local
governments, real estate licensees, commercial builders,
commercial property owners, small businesses, financial
institutions, commercial property appraisers, energy rating
organizations, and other entities the commission deems appropriate.

(2) Hold at least one public hearing.

(3) Adopt guidelines and standards for the purposes of
implementing this chapter at a publicly noticed meeting offering
all interested parties an opportunity to comment. For the initial
adoption of the guidelines and standards, the commission shall
provide a written public notice at least 30 days prior to the meeting.
For the adoption of any substantive change to the guidelines and
standards, the commission shall provide a written public notice at
least 10 days prior to the meeting. Notwithstanding any other law,
guidelines, or standards adopted pursuant to this section shall be
exempt from the requirements of Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code.

25987.26.  

Credit issued under the warehouse line of credit
shall not be deemed to constitute a debt or liability of the state or
of any political subdivision thereof, or a pledge of the full faith
and credit of the state or of any political subdivision, but shall be
payable solely from the funds provided therefor. All credit
instruments shall contain a statement to the following effect:

“Neither the faith and credit nor the taxing power of the State
of California is pledged to the payment of principal and interest
on this credit instrument.”

25987.27.  

(a) From the date upon which financial assistance
is approved by the commission pursuant to Section 25987.20 and
for all subsequent transactions entered into pursuant to this chapter,
a seller of real property subject to an energy remittance repayment
agreement shall deliver to the buyer an energy remittance
repayment agreement notice and disclosure as adopted by the
commission pursuant to paragraph (9) of subdivision (a) of Section
25987.25.

(b) (1) Upon the delivery of the completed notice and disclosure
form to the buyer of real property, the seller and his or her agent
is not required to provide additional information relative to the
energy remittance repayment agreement.

(2) The information in the notice and disclosure form is deemed
sufficient to provide notice to the buyer of the existence of the
energy improvements, the energy remittance repayment agreement,
and the repayment obligation that will be assigned to, and assumed
by, the buyer upon taking title.

25987.28.  

No later than June 30, 2014, and no later than June
30 of every fifth year thereafter, the State Auditor shall conduct,
or cause to be conducted, a performance audit of the program. The
State Auditor shall prepare a report and recommendations on each
audit conducted and present the report and recommendations to
the President pro Tempore of the Senate and the Speaker of the
Assembly.

 

Article 3.  Nonresidential Building Energy Retrofit Bond

 

25987.29.  

The authority, on behalf of the commission, may
incur indebtedness and issue and renew negotiable bonds, notes,
debentures, or other securities of any kind or class. All
indebtedness, however evidenced, shall be payable solely from
moneys received pursuant to this chapter and the proceeds of its
negotiable bonds, notes, debentures, or other securities and shall
not exceed the sum of two billion dollars ($2,000,000,000).

25987.30.  

The Legislature may, by statute, authorize the
authority to issue bonds, as defined in Section 25987.31 in excess
of the amount provided in Section 25987.29.

25987.31.  

(a) On a semiannual basis, the authority shall
conduct a meeting for the purpose of authorizing the issuance of,
by the adoption of a resolution, negotiable bonds, notes, debentures,
or other securities (collectively called “bonds”) for the purposes
of generating sufficient moneys to fund the approved applications
in the portfolio at the time of the meeting or to repay an outstanding
balance of the participant on whose behalf the commission has
provided funds through the warehouse line of credit. In anticipation
of the sale of bonds as authorized by Section 25987.29, or as may
be authorized pursuant to Section 25987.30, the authority, on behalf
of the commission, may issue negotiable bond anticipation notes
and may renew the notes from time to time. The bond anticipation
notes may be paid from the proceeds of sale of the bonds of the
authority in anticipation of which they were issued. Notes and
agreements relating to the notes and bond anticipation notes
(collectively called “notes”) and the resolution or resolutions
authorizing the notes may contain any provisions, conditions, or
limitations that a bond, agreement relating to the bond, and bond
resolution of the authority may contain. However, a note or renewal
of the note shall mature at a time not exceeding two years from
the date of issue of the original note.

(b) Every issue of its bonds, notes, or other obligations shall be
general obligations of the authority payable from revenues or
moneys received pursuant to this chapter. Notwithstanding that
the bonds, notes, or other obligations may be payable from a special
fund, they are for all purposes negotiable instruments, subject only
to the provisions of the bonds, notes, or other obligations for
registration.

(c) Subject to the limitations in Sections 25987.29 and 25987.30,
the bonds may be issued as serial bonds or as term bonds, or the
authority in its discretion, may issue bonds of both types. The
bonds shall be authorized by resolution of the authority and shall
bear the date or dates, mature at the time or times, not exceeding
30 years from their respective dates, bear interest at the rate or
rates, be payable at the time or times, be in the denominations, be
in the form, either coupon or registered, carry the registration
privileges, be executed in a manner, be payable in lawful money
of the United States of America at a place or places, and be subject
to terms of redemption, as the resolution or resolutions may
provide. The sales may be a public or private sale, and for the price
or prices and on the terms and conditions, as the authority shall
determine after giving due consideration to the recommendations
of any participating party to be assisted from the proceeds of the
bonds or notes. Pending preparation of the definitive bonds, the
authority may issue interim receipts, certificates, or temporary
bonds that shall be exchanged for the definitive bonds. The
authority may sell bonds, notes, or other evidence of indebtedness
at a price below their par value. However, the discount on a security
sold pursuant to this section shall not exceed 6 percent of the par
value.

(d) A resolution or resolutions authorizing bonds or an issue of
bonds may contain provisions that shall be a part of the contract
with the holders of the bonds to be authorized, as to all of the
following:

(1) Pledging the moneys collected pursuant to this chapter from
the portfolio of approved applications that are funded by the bonds,
to secure the payment of the bonds or of any particular issue of
bonds, subject to the agreements with bondholders as may then
exist.

(2) The setting aside of reserves or sinking funds, and the
regulation and disposition of the reserves or sinking funds.

(3) Limitations on the right of the authority or the commission
or their agent to restrict and regulate the use of the project or
projects to be financed out of the proceeds of the bonds or any
particular issue of bonds.

(4) Limitations on the purpose to which the proceeds of sale of
an issue of bonds then or thereafter to be issued may be applied
and pledging those proceeds to secure the payment of the bonds
or the issue of the bonds.

(5) Limitations on the issuance of additional bonds, the terms
upon which additional bonds may be issued and secured, and the
refunding of outstanding bonds.

(6) The procedure, if any, by which the terms of a contract with
bondholders may be amended or abrogated, the amount of bonds
the holders of which must consent to the amendment or abrogation,
and the manner in which that consent may be given.

(7) Limitations on expenditures for operating, administrative,
or other expenses of the authority or commission.

(8) Defining the acts or omissions to act that constitute a default
in the duties of the authority or commission to holders of its
obligations and providing the rights and remedies of the holders
in the event of a default.

(e) The authority, the commission, and any person executing
the bonds or notes shall not be liable personally on the bonds or
notes or be subject to personal liability or accountability by reason
of the issuance of the bond or note.

(f) The authority shall have power out of any funds available
for these purposes to purchase its bonds or notes. The authority
may hold, pledge, cancel, or resell those bonds, subject to and in
accordance with agreements with bondholders.

(g) The commission, the authority, and the board may enter into
a memorandum of understanding providing for the transfer of
energy remittance payments between the three agencies in
furtherance of this chapter.

(h) Should there be insufficient project valuation or insufficient
demand for the revenue bonds authorized by this chapter, the board
shall continue to collect the energy remittance payments and
service the loans. Failure to sell the revenue bonds shall not create
any liability for the state.

25987.32.  

In the discretion of the authority, any bonds issued
under the provisions of this article may be secured by a trust
agreement by and between the authority and a corporate trustee
or trustees, which may be the authority or any trust company or
bank having the powers of a trust company within or without the
state. Such trust agreement or the resolution providing for the
issuance of such bonds may pledge or assign the revenues to be
received pursuant to this chapter, to be financed out of the proceeds
of such bonds. Such trust agreement or resolution providing for
the issuance of such bonds may contain such provisions for
protecting and enforcing the rights and remedies of the bondholders
as may be reasonable and proper and not in violation of law,
including particularly such provisions as have herein above been
specifically authorized to be included in any resolution or
resolutions of the commission authorizing bonds thereof. Any bank
or trust company doing business under the laws of this state which
may act as depositary of the proceeds of bonds or of revenues or
other moneys may furnish such indemnifying bonds or pledge such
securities as may be required by the authority. Any such trust
agreement may set forth the rights and remedies of the bondholders
and of the trustee or trustees, and may restrict the individual right
of action by bondholders. In addition to the foregoing, any such
trust agreement or resolution may contain such other provisions
as the authority may deem reasonable and proper for the security
of the bondholders. Notwithstanding any other law, the authority
shall not be deemed to have a conflict of interest by reason of
acting as trustee pursuant to this chapter.

25987.33.  

Bonds issued under the provisions of this article
shall not be deemed to constitute a debt or liability of the state or
of any political subdivision thereof, other than the authority, or a
pledge of the faith and credit of the state or of any such political
subdivision, but shall be payable solely from the funds herein
provided therefor. All such bonds shall contain on the face thereof
a statement to the following effect: “Neither the faith and credit
nor the taxing power of the State of California is pledged to the
payment of the principal of or interest on this bond.” The issuance
of bonds under the provisions of this article shall not directly or
indirectly or contingently obligate the state or any political
subdivision thereof to levy or to pledge any form of taxation
whatever therefor or to make any appropriation for their payment.
Nothing contained in this section shall prevent or be construed to
prevent the authority from pledging its full faith and credit to the
payment of bonds or issue of bonds authorized pursuant to this
chapter.

25987.34.  

(a) The authority is hereby authorized to provide
for the issuance of bonds of the authority for the purpose of
refunding any bonds, notes, or other securities of the authority
then outstanding, including the payment of any redemption
premium thereon and any interest accrued or to accrue to the
earliest or subsequent date of redemption, purchase, or maturity
of such bonds.

(b) The proceeds of any such bonds issued for the purpose of
refunding outstanding bonds, notes, or other securities may, in the
discretion of the authority, be applied to the purchase or retirement
at maturity or redemption of such outstanding bonds either on their
earliest or any subsequent redemption date or upon the purchase
or retirement at the maturity thereof and may, pending such
application, be placed in escrow to be applied to such purchase or
retirement at maturity or redemption on such date as may be
determined by the authority.

(c) Pending such use, any such escrowed proceeds may be
invested and reinvested by the authority in obligations of, or
guaranteed by, the United States of America, or in certificates of
deposit or time deposits secured by obligations of, or guaranteed
by, the United States of America, maturing at such time or times
as shall be appropriate to ensure the prompt payment, as to
principal, interest, and redemption premium, if any, of the
outstanding bonds to be so refunded. The interest, income, and
profits, if any, earned or realized on any such investment may also
be applied to the payment of the outstanding bonds to be so
refunded. After the terms of the escrow have been fully satisfied
and carried out, any balance of such proceeds and interest, income,
and profits, if any, earned or realized on the investments thereof
may be returned to the authority for use by it in any lawful manner.

(d) All such bonds shall be subject to the provisions of this
division in the same manner and to the same extent as other bonds
issued pursuant to this chapter.

25987.35.  

Bonds issued by the authority are legal investments
for all trust funds, the funds of all insurance companies, banks,
both commercial and savings, trust companies, savings and loan
associations, and investment companies, for executors,
administrators, trustees, and other fiduciaries, for state school
funds, and for any funds which may be invested in county,
municipal, or school district bonds, and such bonds are securities
which may properly and legally be deposited with, and received
by, any state or municipal officer or agency or political subdivision
of the state for any purpose for which the deposit of bonds or
obligations of the state, is now, or may hereafter be, authorized by
law, including deposits to secure public funds if, and only to the
extent that, evidence of indebtedness or debt securities of the
participating party receiving financing through the issuance of
such bonds qualify or are eligible for such purposes and uses.

25987.36.  

The state hereby pledges and agrees with the holders
of the bonds and with a participant with an approved application
that the state will not limit, alter, restrict, or impair the rights vested
in the authority or the commission or the rights or obligations of
a person or entity with which the commission contracts to fulfill
the terms of an agreement made pursuant to this chapter. The state
further agrees that it will not in any way impair the rights or
remedies of the holder of the bonds until the bonds have been paid
or until adequate provision for payment has been made. The
authority may include this provision and undertaking for the
authority in its bonds.

25987.37.  

(a) Bonds issued pursuant to this division shall be
exempt from all taxation and assessment imposed pursuant to state
law.

(b) No later than February 1, 2013, the commission shall apply
to the United States Department of the Treasury under the Energy
Tax Incentives Act of 2005 (Title XIII of Public Law 109-58) for
the authority to issue tax advantage bonds under the federal Clean
Renewable Energy Bonds program or any other applicable
programs.

 

Article 4.  Nonresidential Building Energy Retrofit Debt
Servicing Fund

 

25987.38.  

(a) The Nonresidential Building Energy Retrofit
Debt Servicing Fund is hereby established in the State Treasury.
Notwithstanding Section 13340 of the Government Code, the
moneys in the fund are hereby continuously appropriated to the
authority without regard to fiscal year for the purposes of paying
the principal and interest on bonds issued by the authority pursuant
to Section 25987.29, servicing the warehouse line of credit, and
defraying any direct and indirect costs incurred by the Treasurer
in executing duties required by this chapter.

(b) All interest and income derived from the deposit and
investment of moneys in the fund shall be credited to the fund,
and all unexpended and unencumbered moneys in the fund at the
end of any fiscal year shall remain in the fund.

25987.39.  

The Loan Loss Reserve Account is hereby
established in the Nonresidential Building Energy Retrofit Debt
Servicing Fund. The board shall deposit the portion of the
contractual energy remittance that is the loan loss reserve fee into
the account. Notwithstanding Section 13340 of the Government
Code, the moneys in the account are hereby continuously
appropriated to the authority without regard to fiscal year for the
purposes of paying outstanding balances due under an energy
remittance repayment agreement on a building that has been
foreclosed upon if the proceeds generated from the foreclosure
proceedings are insufficient to pay any past due payments past due
under the energy remittance repayment agreement, including
accrued interest, penalties, and fees. All interest and income derived
from the deposit and investment of moneys in the account shall
be credited to the account, and all unexpended and unencumbered
moneys in the account at the end of any fiscal year shall remain
in the account.

25987.40.  

The Administration Account is hereby established
in the Nonresidential Building Energy Retrofit Debt Servicing
Fund. The authority shall deposit into the account the program
administration fee collected pursuant to subdivision (b) of Section
25987.23 and penalties collected pursuant to Section 25987.16.
Notwithstanding Section 13340 of the Government Code, moneys
in the account shall be continuously appropriated to the authority,
the commission, and the board for the costs of implementing this
chapter.

25987.41.  

(a) The Director of Finance shall transfer, as a loan,
up to one million dollars ($1,000,000) from the General Fund to
the board to implement this chapter.

(b) The Director of Finance shall transfer, as a loan, up to seven
million dollars ($7,000,000) from the General Fund to the
commission to implement this chapter.

(c) Any loan made pursuant to this section shall be repaid on
or before January 1, 2023, with interest at the pooled money
investment rate, from energy remittance repayment collected
pursuant to this chapter.

(d) If the fees authorized for collection pursuant to subdivision
(b) of Section 25987.23 are not sufficient to support the loans made
pursuant to this section, the Director of Finance shall discuss
alternative repayment terms with the borrowing agencies.

25987.42.  

(a) The commission, the board, and the authority
shall be authorized to promulgate necessary regulations to
implement and administer this chapter.

(b) Guidelines for the purposes of implementing this chapter
shall be adopted by the commission, board, or authority at a
publicly noticed meeting offering all interested parties an
opportunity to comment. For the initial adoption of the guidelines
and standards, the commission, board, or authority shall provide
a written public notice at least 30 days prior to the meeting. For
the adoption of any substantive change to the guidelines and
standards, the commission, board, or authority shall provide a
written public notice at least 10 days prior to the meeting.
Notwithstanding any other law, guidelines or standards adopted
pursuant to this section shall be exempt from the requirements of
Chapter 3.5 (commencing with Section 11340) of Part 1 of Division
3 of Title 2 of the Government Code.