BILL ANALYSIS Ó
AB 450
Page 1
ASSEMBLY THIRD READING
AB
450 (McCarty)
As Introduced February 23, 2015
Majority vote
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|Committee |Votes |Ayes |Noes |
| | | | |
| | | | |
|----------------+------+------------------------+--------------------|
|Natural |9-0 |Williams, Dahle, | |
|Resources | |Cristina Garcia, | |
| | |Hadley, Harper, | |
| | |McCarty, Rendon, Mark | |
| | |Stone, Wood | |
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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
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residential energy retrofits, up to 15% of the value of the
home, which homeowners repay as an "assessment" on their
property taxes. The PACE Reserve 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 greenhouse gas
(GHG) emissions limit equivalent to 1990 levels by 2020 and
adopt regulations to achieve maximum technologically feasible
and cost-effective GHG emission reductions. ARB is authorized
to permit the use of market-based compliance mechanisms to
comply with GHG reduction regulations, once specified conditions
are met.
3)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.
4)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.
FISCAL EFFECT: None
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COMMENTS: 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.
To address this concern, in 2013, SB 96 (Budget and Fiscal Review
Committee), Chapter 356, Statutes of 2013, 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 (Ting), Chapter 614, Statutes of
2014, clarified that PACE assessments are special tax assessments,
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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% 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% 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.
Analysis Prepared by:
Lawrence Lingbloom / NAT. RES. / (916) 319-2092
FN: 0000139