BILL ANALYSIS Ó
AB 1131
Page 1
ASSEMBLY THIRD READING
AB 1131 (Skinner)
As Amended April 22, 2013
2/3 vote
NATURAL RESOURCES 9-0 APPROPRIATIONS 16-1
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|Ayes:|Chesbro, Grove, Bigelow, |Ayes:|Gatto, Harkey, Bigelow, |
| |Garcia, Muratsuchi, | |Bocanegra, Bradford, Ian |
| |Patterson, Skinner, | |Calderon, Campos, Eggman, |
| |Stone, Williams | |Gomez, Hall, Ammiano, |
| | | |Linder, Pan, Quirk, |
| | | |Wagner, Weber |
| | | | |
|-----+--------------------------+-----+--------------------------|
| | |Nays:|Donnelly |
| | | | |
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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.
Specifically, this bill:
1)Extends the appropriation to support the CEUP from the
Renewable Resource Trust Fund (RRTF) for two years, until
January 1, 2017.
2)Repeals a limit on CEUP loans of 10% of property value.
3)Expands eligible residential properties to include residential
projects four units or fewer and mobilehomes.
EXISTING LAW :
1)Creates the 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.
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2)Requires the Authority to develop and administer the Property
Assessed Clean Energy (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 the 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 Energy
Commission (CEC) and the Authority.
4)Appropriates up to $50 million, until January 1, 2015, from
the 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.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, this bill would likely make RRTF funds unavailable
for the New Solar Homes Partnership (NSHP). This bill redirects
the remainder of the funds in the RRTF appropriated for the CEUP
and other programs, approximately $25 million that under current
law would revert to the NSHP, also administered by the CEC
COMMENTS : 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
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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 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. AB 14 X1 (Skinner), Chapter 9, Statutes of 2011-12
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First Extraordinary Session, repurposed the Authority's program
along the same lines.
According to the author, in the initial phase of implementing AB
14 X1, 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 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% 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% 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% of the property value.
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092
FN: 0000981