BILL ANALYSIS Ó
AB 1131
Page 1
Date of Hearing: April 29, 2013
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
AB 1131 (Skinner) - As Amended: April 22, 2013
SUBJECT : Renewable energy and energy efficiency projects:
financial assistance
SUMMARY : Revises and extends the Clean Energy Upgrade Program
(CEUP) administered by the California Alternative Energy and
Advanced Transportation Financing Authority (Authority), which
offers assistance to financial institutions for privately-issued
loans for real property projects, including energy and water
efficiency improvements and renewable distributed generation.
EXISTING LAW :
1)Creates the California Alternative Energy and Advanced
Transportation Financing Authority (Authority) within the
State Treasurer's Office for the purpose of promoting the
development and utilization of alternative energy sources and
the development and commercialization of advanced
transportation technologies. The Authority is authorized to
issue up to $1 billion in revenue or prepayment bonds to fund
projects.
2)Requires the Authority to develop and administer a PACE
Reserve program, to be used to reduce the overall costs to
property owners of PACE bonds issued by a local jurisdiction,
by providing a reserve of no more than 10 percent of the
initial principal amount of the PACE bond. Defines PACE bond
as a bond that is secured by voluntary contractual assessment
on a property or through a voluntary special tax for the
purposes of financing the installation of renewable energy
sources, or energy or water efficiency improvements.
3)Requires the Authority to administer a Clean Energy Upgrade
Program (CEUP) as an alternative to the PACE Reserve Program.
The purpose of the CEUP is to reduce overall costs to property
owners of a loan provided by a financial institution to
finance the installation of distributed generation renewable
energy sources or energy or water efficiency improvements on
real property by providing a reserve or other financial
assistance at a level to be determined by the California
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Energy Commission (CEC) and the Authority.
4)Appropriates up to $50 million, until January 1, 2015, from
the CEC's Renewable Resource Trust Fund (RRTF) to be used by
the Authority for purposes of the PACE Reserve and CEUP
Programs, and authorizes the Authority to spend up to $550,000
for its administrative costs.
THIS BILL :
1)Extends the RRTF appropriation for two years, until January 1,
2017.
2)Repeals a limit on loans of 10 percent of property value.
3)Expands eligible residential properties to include residential
projects four units or fewer and mobilehomes.
FISCAL EFFECT : Unknown
COMMENTS :
1)Background. The Authority consists of five members: the
Director 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, and develop and commercialize advanced
transportation technologies that conserve energy, reduce air
pollution, and promote economic development and jobs.
Under the PACE program, local governments provide funds to
participating homeowners to install energy upgrades, which are
paid back over time in the form of a special assessment on the
property tax. Payments are typically secured by a lien on the
property that gives local governments priority of repayment if
the home goes into foreclosure. PACE removes many of the
barriers of energy efficiency and renewable energy retrofits
that otherwise exist for residential homeowners and
businesses, particularly the high upfront cost of making such
an investment and the long-term ability to reap the benefits
of cost savings. Berkeley was the first city in the nation to
launch a PACE program, using a special assessment district to
establish a financing mechanism in which individual property
owners can voluntarily participate and repay improvements
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through a special property tax assessment.
SB 77 (Pavley), Chapter 15, Statutes of 2010, sought to lower
the costs to local governments and property owners in the
financing of PACE bonds by authorizing the Authority to tap up
to $50 million from the RRTF to fund the PACE Reserve Program.
Prior to SB 77, the primary purpose of the RRTF had been to
fund a new solar home rebate program pursuant to the
California Solar Initiative. However, given the steep decline
in new home construction in California, the RRTF accumulated a
balance (approximately $170 million) that exceeded the near
term demand for solar rebates. A smaller proportion of RRTF
monies (20% or less) are devoted to production incentives for
a handful of existing biomass and solar thermal power plants.
In 2010, PACE programs were dealt a setback when the Federal
Housing Finance Agency (FHFA), which oversees the nation's
largest mortgage finance companies Fannie Mae and Freddie Mac,
issued a statement objecting to local governments holding the
first lien on PACE homes, calling it a significant risk to the
mortgage financier. This caused the mortgage lenders to stop
underwriting loans on properties with PACE assessments and
tighten lending standards in communities with PACE programs.
Efforts by the California Attorney General and others to
overturn the FHFA directives have been unsuccessful.
Meanwhile, the FHFA's action has sidetracked implementation of
PACE programs, including the Authority's PACE Reserve Program.
In the wake of the FHFA action, the CEC adopted Energy
Upgrade California using federal stimulus funds to support
residential and commercial energy improvements, without
relying on the PACE mechanism. ABX1 14 (Skinner), Chapter 9,
Statutes of 2011-12 First Extraordinary Session, repurposed
the Authority's program along the same lines.
2)Author's statement :
In the initial phase of implementing ABX1 14, the Authority
has established a program to provide financial assistance
to participating financial institutions making loans to
property owners for energy efficiency and renewable energy
improvements to their homes. The program is set to expire
on January 1, 2015. Extending the program may encourage
additional financial institutions to participate in the
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program, thereby providing more loans to homeowners and
furthering the state's energy efficiency goals. This bill
extends the program expiration date to January 1, 2017.
Currently, when considering the amounts of loans, the law
says that loans cannot be for more than 10 percent of the
value of the property. In California, property valuations
are based on the value of the property when it was
purchased. But for people who bought their homes before
1975, the value of their home is the 1975 value plus a
small annual increase. Given that housing prices have
risen dramatically in the last couple of decades, the
requirement for loans to be less than 10 percent of the
property value excludes many homeowners who would otherwise
be eligible for energy retrofit loans. This bill removes
the requirement that loan amounts be less than 10 percent
of the property value.
REGISTERED SUPPORT / OPPOSITION :
Support
California Energy Efficiency Industry Council
California Municipal Utilities Association
Union of Concerned Scientists
Renewable Funding
Sierra Club California
State Treasurer Bill Lockyer
Opposition
None on file
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092