BILL ANALYSIS Ó
AB 450
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Date of Hearing: April 13, 2015
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Das Williams, Chair
AB 450
(McCarty) - As Introduced February 23, 2015
SUBJECT: Greenhouse gas: energy efficiency: financing
SUMMARY: Specifies that moneys appropriated from the Greenhouse
Gas Reduction Fund (GGRF) may be used for implementation of the
Property Assessed Clean Energy (PACE) Reserve Program.
EXISTING LAW:
1)Establishes the PACE Reserve Program to provide financing for
residential energy retrofits, up to 15 percent of the value of
the home, which homeowners repay as an "assessment" on their
property taxes. The Program is administered by the California
Alternative Energy and Advanced Transportation Financing
Authority (CAEATFA), which is authorized to support
alternative energy projects by issuing revenue bonds (without
voter approval), making loans, and authorizing sales tax
exemptions.
2)Requires the Air Resources Board (ARB), pursuant to California
Global Warming Solutions Act of 2006 [AB 32 (Núñez), Chapter
488, Statutes of 2006], to adopt a statewide GHG emissions
limit equivalent to 1990 levels by 2020 and adopt regulations
to achieve maximum technologically feasible and cost-effective
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GHG emission reductions.
3)Authorizes ARB to permit the use of market-based compliance
mechanisms to comply with GHG reduction regulations, once
specified conditions are met.
4)Establishes the GGRF and requires all moneys, except for fines
and penalties, collected by ARB from the auction or sale of
allowances pursuant to a market-based compliance mechanism
(i.e., the cap-and-trade program adopted by ARB under AB 32)
to be deposited in the GGRF and available for appropriation by
the Legislature.
5)Establishes the GGRF Investment Plan and Communities
Revitalization Act [AB 1532 (John A. Pérez), Chapter 807,
Statutes of 2012] to set procedures for the investment of GHG
allowance auction revenues. AB 1532 authorizes a range of GHG
reduction investments, including energy efficiency and
renewable energy generation, but does not specifically mention
PACE.
6)Requires the investment plan to allocate: 1) a minimum of 25%
of the available moneys in the fund to projects that provide
benefits to identified disadvantaged communities; and, 2) a
minimum of 10% of the available moneys in the fund to projects
located within identified disadvantaged communities [SB 535
(De Leon), Chapter 830, Statutes of 2012].
FISCAL EFFECT: Non-fiscal
AB 450
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COMMENTS:
Background. PACE is an innovative financing tool that
residential or commercial property owners can use to pay for
renewable energy upgrades, energy, or water efficiency, or
electric vehicle charging stations for their homes or buildings.
Local agencies create PACE assessment districts in their
jurisdictions via a resolution of their legislative body,
allowing the local agency to issue bonds to finance the up-front
costs of improvements. In turn, property owners enter into a
voluntary contractual assessment agreement with the local agency
to re-pay the bonds via an assessment on their property tax
bill. The assessment remains with the property even if it is
sold or transferred, and the improvements must be permanently
fixed to the property.
PACE programs typically are more attractive to borrowers and
lenders because they can offer a longer pay-back period (up to
20 years) with smaller payments than other types of loans, and
they are securitized by the property assessment rather than the
borrower. In addition, the contractual assessment can get lower
interest rates on bond issues and, in turn, this is extended to
the consumer. Property owners own the improvements, allowing
them to claim tax benefits and rebates. PACE can also offer a
financing option that doesn't inhibit a property owner's credit.
In 2010, the Federal Housing Finance Agency (FHFA) raised
concerns that residential PACE financing could pose a risk for
Fannie Mae and Freddie Mac, because PACE assessments are a
first-priority lien in the case of foreclosure and lenders would
have to pay outstanding PACE assessments before paying mortgage
costs. The FHFA's action triggered many local governments to
suspend their residential PACE programs.
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To address this concern, in 2013, SB 96 authorized the PACE Loss
Reserve Program administered by CAEATFA, which is a reserve fund
to keep mortgage lenders whole during a foreclosure or a forced
sale. Last year, AB 2597 clarified that PACE assessments are
special tax assessments, rather than loans, and updated the
value of eligible improvements financed PACE to up to 15% of the
home value.
The 2014-15 Budget Act allocates cap-and-trade revenues for the
2014-15 fiscal year and establishes a long-term plan for the
allocation of cap-and-trade revenues beginning in fiscal year
2015-16. The Budget continuously appropriates 35 percent of
cap-and-trade funds for investments in transit, affordable
housing, and sustainable communities. Twenty-five percent of
the revenues are continuously appropriated to continue the
construction of high-speed rail. The remaining 40 percent will
be appropriated annually by the Legislature for investments in
programs that include low-carbon transportation, energy
efficiency and renewable energy, and natural resources and waste
diversion. No funds have been specifically appropriated for
PACE.
REGISTERED SUPPORT / OPPOSITION:
Support
California Energy Efficiency Industry Council
California State Association of Counties
Renewable Funding
AB 450
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Renovate America
Sacramento Municipal Utility District
AB 450
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Opposition
None on file
Analysis Prepared by:Lawrence Lingbloom / NAT. RES. / (916)
319-2092