Amended in Assembly March 17, 2016

California Legislature—2015–16 Regular Session

Assembly BillNo. 2693


Introduced by Assembly Member Dababneh

February 19, 2016


An act to amend Sectionbegin delete 167end deletebegin insert 26054 of the Public Resources Code, and to amend Sections 5898.15, 5898.28, and 5898.30end insert of the Streets and Highways Code, relating tobegin delete transportation.end deletebegin insert contractual assessments.end insert

LEGISLATIVE COUNSEL’S DIGEST

AB 2693, as amended, Dababneh. begin deleteTransportation funds. end deletebegin insertContractual assessments: financing requirements: property improvements.end insert

begin insert

Existing law defines “property assessed clean energy bond,” commonly known as a PACE bond, to mean a bond that is secured by a voluntary contractual assessment or by certain special taxes on property, as specified.

end insert
begin insert

This bill would delete the reference to bonds secured by special taxes.

end insert
begin insert

Existing law authorizes the legislative body of a public agency, as defined, to determine that it would be convenient, advantageous, and in the public interest to designate an area within which authorized public agency officials and property owners may enter into voluntary contractual assessments to finance certain improvements, including the installation of distributed generation renewable energy sources or energy or water efficiency improvements that are permanently fixed to real property, as specified. Existing law authorizes the public agency to issue bonds to be repaid by voluntary contractual assessments, and to enter into a relationship with an underwriter or financial institution that allows the sequential issuance of a series of bonds as the need arises. Existing law requires the interest rate on bonds to be fixed at the time each bond is issued, unless the bond is issued to finance improvements to nonresidential private property or residential private property with 4 or more units. Existing law also provides that certain provisions relating to redemption of bonds prior to their scheduled maturity date or refinance of outstanding bonds only apply to nonresidential private property or residential private property with 4 or more units.

end insert
begin insert

This bill, with respect to residential private property, would instead require the interest rate on the bonds, when issued, to be fixed unless the property consists of 5 or more units. The bill would provide that the provisions relating to redemption of bonds prior to their scheduled maturity date, or refinance of outstanding bonds, with respect to residential private property, would apply to property that consists of 5 or more units.

end insert
begin insert

Existing law provides that an assessment under these provisions, and any interest and penalties, until paid, constitute a lien against the property on which the assessment was made. Existing law provides that certain other provisions, including provisions relating to lien priority, apply to liens imposed relative to these assessments.

end insert
begin insert

This bill would delete the reference to the other provisions relating to lien priority, and instead provide that an assessment under these provisions shall have the force, effect, and priority of a judgment lien as established by its date of recordation.

end insert
begin insert

Existing law, if bonds have not been issued by a public agency, authorizes the public agency to transfer its right, title, and interest to voluntary contractual assessments to another party, as specified. Existing law, however, provides that initiation and prosecution of a foreclosure action from a delinquency in the payment of voluntary contractual assessments remains the responsibility of the public agency, which shall retain the sole right to enforce its senior lien status.

end insert
begin insert

This bill would delete the provision that the public agency shall retain the sole right to enforce its senior lien status, and would instead provide that a foreclosure action by the public agency shall have the force, effect, and priority of a judgment lien as established by the date of its recordation.

end insert
begin insert

Existing law prohibits a public agency from permitting a property owner to participate in any program established pursuant to these provisions if the owner’s participation would result in the total amount of any annual property taxes and assessments exceeding 5% of the property’s market value, as determined at the time of approval of the owner’s contractual assessment.

end insert
begin insert

This bill would also prohibit a public agency from permitting a property owner to participate in a program pursuant to these provisions unless the property owner has been provided with a Truth in Lending Act- Real Estate Settlement Procedures Act Integrated Mortgage Disclosure for the obligation being incurred or if the total mortgage-related debt and contractual assessment-related debt on the underlying property exceeds the fair market value of the property at the time of the agreement.

end insert
begin insert

The bill would provide that the failure of a public agency to comply with either of these 2 prohibitions voids the contractual obligations of the property owner for the contractual assessment.

end insert
begin delete

Existing law requires funds in the State Highway Account to be programmed, budgeted, and expended to maximize the use of federal funds and according to a specified sequence of priorities. Existing law requires the Department of Transportation to provide certain information to the Legislature to substantiate the department’s proposed capital outlay support budget.

end delete
begin delete

This bill would make nonsubstantive changes to these provisions.

end delete

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

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

P3    1begin insert

begin insertSECTION 1.end insert  

end insert

begin insertSection 26054 of the end insertbegin insertPublic Resources Codeend insertbegin insert is
2amended to read:end insert

3

26054.  

“Property Assessed Clean Energy bond” or “PACE
4bond” means a bond that is secured bybegin delete anyend deletebegin insert eitherend insert of the following:

5(a) A voluntary contractual assessment on property authorized
6pursuant to paragraph (2) of subdivision (a) of Section 5898.20 of
7the Streets and Highways Code.

8(b) A voluntary contractual assessmentbegin delete or a voluntary special
9taxend delete
on property to finance the installation of distributed generation
10renewable energy sources, electric vehicle charging infrastructure,
11or energy or water efficiency begin delete improvements that is levied pursuant
12to a chartered city’s constitutional authority under Section 5 of
13Article XI of the California Constitution.end delete
begin insert improvements.end insert

begin delete

14(c) A special tax on property authorized pursuant to subdivision
15(b) of Section 53328.1 of the Government Code.

end delete
P4    1begin insert

begin insertSEC. 2.end insert  

end insert

begin insertSection 5898.15 of the end insertbegin insertStreets and Highways Codeend insertbegin insert is
2amended to read:end insert

3

5898.15.  

(a) A public agency shall not permit a property owner
4to participate in any program established pursuant to this chapter
5if the owner’s participation would result in the total amount of any
6annual property taxes and assessments exceeding 5 percent of the
7property’s market value, as determined at the time of approval of
8the owner’s contractual assessment.

begin insert

9(b) (1) A public agency shall not permit a property owner to
10participate in a program pursuant to this chapter unless the
11property owner has been provided with a federal Truth in Lending
12Act-Real Estate Settlement Procedures Act Integrated Mortgage
13Disclosure for the obligation being incurred that is required for
14mortgages by the federal Consumer Financial Protection Bureau.

end insert
begin insert

15(2) A public agency shall not permit the total mortgage-related
16debt and contractual assessment-related debt on the underlying
17property to exceed the fair market value of the property at the time
18of the agreement.

end insert
begin insert

19(3) Failure to comply with the requirements of either paragraph
20(1) or (2) voids the contractual obligations of a property owner
21for a contractual assessment entered into pursuant to this chapter.

end insert
begin delete

22(b) Nothing

end delete

23begin insert(c)end insertbegin insertend insertbegin insertExcept as provided in subdivision (b), nothing end insertin this chapter
24shall be construed to void or otherwise release a property owner
25from the contractual obligations incurred by a contractual
26assessment on abegin delete property, particularly in the event that the total
27amount of annual property taxes and assessments exceeds 5 percent
28of a property’s market value after the property owner has entered
29into a contractual assessment pursuant to this chapter.end delete
begin insert propertyend insert

30begin insert

begin insertSEC. 3.end insert  

end insert

begin insertSection 5898.28 of the end insertbegin insertStreets and Highways Codeend insertbegin insert is
31amended to read:end insert

32

5898.28.  

(a) A public agency may issue bonds pursuant to this
33chapter, the principal and interest for which would be repaid by
34voluntary contractual assessments. A public agency may advance
35its own funds to finance work to be repaid through voluntary
36contractual assessments, and may from time to time sell bonds to
37reimburse itself for those advances. A public agency may enter
38into a relationship with an underwriter or financial institution that
39would allow the sequential issuance of a series of bonds, each bond
40being issued as the need arose to finance work to be repaid through
P5    1voluntary contractual assessments. The interest rate of each bond
2may be determined by an appropriate index, but shall be fixed at
3the time each bond is issued unless the bond is issued to finance
4improvements to nonresidential private property or residential
5 private property withbegin delete fourend deletebegin insert fiveend insert or more units. Bond proceeds may
6be used to establish a reserve fund for debt service or paying the
7costs of foreclosure on properties participating in the program, to
8fund capitalized interest for a period up to two years from the date
9of issuance of the bonds, to fund the administrative fee required
10for participation in the PACE Reserve Program established
11pursuant to Chapter 4 (commencing with Section 26050) of
12Division 16 of the Public Resources Code, and to pay for expenses
13incidental to the issuance and sale of the bonds. Division 10
14(commencing with Section 8500) shall apply to any bonds issued
15pursuant to this section, insofar as that division is not in conflict
16with this chapter.

17(b) (1) Notwithstanding any provision of this division or the
18Improvement Act of 1915 (Division 10 (commencing with Section
198500)), a public agency may transfer its right, title, and interest in
20and to any voluntary contractual assessments, if bonds have not
21been issued pursuant to subdivision (a). The public agency and
22the transferee shall enter into an agreement that, among other
23things, identifies the specific period of time during which the
24transfer of voluntary contractual assessments will be operative,
25not to exceed three years. Except as provided in paragraph (2), a
26transfer of any voluntary contractual assessments under this
27subdivision shall be treated as a true and absolute transfer of the
28asset so transferred for the period of the transfer and not as a pledge
29or grant of a security interest by the public agency for any
30borrowing. The characterization of the transfer of any of those
31assets as an absolute transfer by the public agency shall not be
32negated or adversely affected by the fact that only a portion of any
33voluntary contractual assessment is transferred, nor by any
34characterization of the transferee for purposes of accounting,
35taxation, or securities regulation, nor by any other factor
36whatsoever. As used in this section, “transfer” means sale,
37assignment, or other transfer.

38(2) Nothing in this subdivision shall be construed to authorize
39the transferee to initiate and prosecute a foreclosure action resulting
40from a delinquency in the payment of the voluntary contractual
P6    1assessment. Initiation and prosecution of a foreclosure action shall
2remain the responsibility of the public agency, which shallbegin delete retain
3the sole right to enforce its senior lien status.end delete
begin insert have the force, effect,
4and priority of a judgment lien as established by the date ofend insert
begin insert its
5recordation.end insert

6(c) Division 10 (commencing with Section 8500) shall apply to
7any bonds issued pursuant to this section, insofar as that division
8is not in conflict with this chapter. Notwithstanding Part 16
9(commencing with Section 8880) of Division 10, if any reserve
10fund is established in whole or in part with legally available
11moneys of one or more public agencies other than bond proceeds,
12the public agency or agencies may provide that a property owner
13who prepays all or a portion of the assessment shall not be credited
14with the public agency moneys in the reserve fund and there shall
15be no reduction in the assessment pursuant to Sections 8884 or
168881, and the public agency moneys in the reserve account shall
17not be used to redeem bonds pursuant to Section 8885 and any
18public agency moneys remaining in the reserve fund at the maturity
19of the bonds shall be disbursed to the public agency free and clear
20of the lien of the issuing instrument. Any excess bond proceeds
21may be used to pay principal of and interest on the bonds in
22addition to any other use permitted by Division 10 (commencing
23with Section 8500).

24(d) Notwithstanding any other law, the public agency may
25conclude that it is in the public interest for bonds issued by the
26public agency pursuant to this chapter to not be subject to
27redemption prior to their scheduled maturity date except as a result
28of the prepayment in whole or in part of contractual assessments.
29Notwithstanding any other limitations set forth in law, and with
30respect to bonds issued to finance improvements to nonresidential
31property or residential property withbegin delete fourend deletebegin insert fiveend insert or more units, the
32redemption premium associated with a redemption of bonds as a
33result of a contractual assessment prepayment shall be determined
34by agreement of the public agency issuing the bonds, the property
35owner, and the initial purchaser of the bonds.

36(e) (1) Without the prior written approval of the property owner,
37and notwithstanding any other law, a public agency may issue
38bonds pursuant to this chapter to refinance outstanding bonds
39payable from contractual assessments levied pursuant to this
40chapter if all of the following are true:

P7    1(A) The total interest cost to maturity on the refunding bonds
2is less than the total interest cost to maturity on the bonds to be
3refunded.

4(B) The final maturity date of the refunding bonds is not later
5than the final maturity date of the refunded bonds, except that if
6the bonds to be refunded are variable rate bonds, the final maturity
7date of the refunding bonds may extend to, but not beyond, the
8useful life of the financed improvements.

9(C) The total interest component of the scheduled contractual
10assessment installments to maturity, after issuance of the refunding
11bonds, is less than the total interest component of the scheduled
12contractual assessment installments to maturity prior to issuance
13of the refunding bonds.

14(2) For purposes of this section, in connection with the issuance
15of fixed rate bonds to refinance variable rate bonds, the interest
16rate on the refunded bonds for purpose of demonstrating
17compliance with this section may be assumed to be the maximum
18possible interest rate on the bonds to be refunded as long as the
19legislative body concludes that the public interest will be served
20by issuing fixed rate bonds to refinance the outstanding variable
21rate bonds. In connection with an issuance of refunding bonds
22under this chapter, the legislative body may direct that an
23amendment to the document required by subdivision (d) of Section
245898.24 be recorded to reflect the revised contractual assessment
25installment schedule.

26(f) With the prior written approval of the owner of nonresidential
27property or residential property withbegin delete fourend deletebegin insert fiveend insert or more units, and
28notwithstanding any other law, a public agency may issue bonds
29pursuant to this chapter to refinance outstanding bonds payable
30from contractual assessments levied pursuant to this chapter
31without complying with subdivision (e). The final maturity date
32of the refunding bonds issued pursuant to this subdivision may be
33later than the final maturity date of the bonds being refunded as
34long as the final maturity date of the refunding bonds does not
35extend beyond the useful life of the financed improvements.

36begin insert

begin insertSEC. 4.end insert  

end insert

begin insertSection 5898.30 of the end insertbegin insertStreets and Highways Codeend insertbegin insert is
37amended to read:end insert

38

5898.30.  

Assessments levied pursuant to this chapter, and the
39interest and any penalties thereon shall constitute a lien against
40the lots and parcels of land on which they are made, until they are
P8    1paid. Division 10 (commencing with Section 8500), insofar as
2those provisions are not in conflict with this chapter, Article 13
3(commencing with Section 53930) of, and Article 13.5
4(commencing with Section 53938) of, Chapter 4 of Part 1 of
5Division 2 of Title 5 of the Government Codebegin insert shall onlyend insert apply to
6thebegin delete imposition andend delete collection of assessments contracted for
7pursuant to this chapter,begin delete including, but not limited to, provisions
8related to lien priority, the collection of assessmentsend delete
begin insert which may
9be collectedend insert
in the same manner and at the same time as the general
10taxes of the city or county on real begin delete property, unless another
11procedure has been authorized by the legislative body or by statute,
12and any penalties and remedies in the event of delinquency and
13default.end delete
begin insert property. Any assessment levied pursuant to this chapter
14shall have the force, effect, and priority of a judgment lien as
15established by the date of its recordation.end insert

begin delete
16

SECTION 1.  

Section 167 of the Streets and Highways Code
17 is amended to read:

18

167.  

(a) Funds in the State Highway Account in the State
19Transportation Fund shall be programmed, budgeted subject to
20Section 163, and expended to maximize the use of federal funds
21and shall be based on the following sequence of priorities:

22(1) Operation, maintenance, and rehabilitation of the state
23highway system.

24(2) Safety improvements where physical changes, other than
25adding additional lanes, would reduce fatalities and the number
26and severity of injuries.

27(3) Transportation capital improvements that expand capacity
28or reduce congestion, or do both.

29(4) Environmental enhancement and mitigation programs.

30(b) With respect to the funds in the State Highway Account, in
31the Public Transportation Account, and in the Passenger Rail Bond
32Fund, the proposed budget shall be organized on a program basis.
33The proposed budget shall list the proposed expenditures for the
34transportation program under the following program elements:

35(1) Administration.

36(2) Program development.

37(3) Maintenance.

38(4) State highway operation and protection.

39(5) Local assistance.

40(6) Interregional improvements.

P9    1(7) Regional improvements.

2(8) Environmental enhancement and mitigation programs.

3(c) State operations expenditure amounts of the department for
4interregional and regional transportation improvement projects
5shall be listed as required by subdivision (b) of Section 14529 of
6the Government Code, but those amounts other than those for the
7acquisition of rights-of-way, construction, and construction support
8shall not be subject to allocation by the commission.

9(d) To align the annual budget with the adopted state
10transportation improvement program, the department may submit
11to the Department of Finance revised capital outlay support and
12capital outlay budget estimates as part of its May Revision process.
13Budget proposals related to these changes shall be provided to the
14Legislature no later than May 1.

15(e) The budget shall not include specific appropriations for
16specific transportation improvement projects, and the Legislature
17shall not enact legislation containing specific individual
18transportation projects.

19(f) The basis for defining major and minor capital outlay projects
20shall be established by the commission.

21(g) The Legislative Analyst shall prepare an analysis of the
22proposed expenditures for each program element as a part of the
23budget analysis.

24(h) The department shall submit to the Legislative Analyst, the
25Senate Committee on Budget and Fiscal Review, and the Assembly
26Committee on Budget, on an annual basis, supplemental
27information to substantiate the department’s proposed capital outlay
28support budget. The information shall be provided no later than
29May 1 of each year, and may be provided at an earlier date. The
30information shall include, but not be limited to, the following:

31(1) A list of projects for which the department will perform
32capital outlay support work in the budget year. For each project,
33the department shall include all of the following:

34(A) The planned project support budget for support of
35environmental, design, right-of-way, and construction phases.

36(B) The planned capital costs, including construction capital
37costs and right-of-way capital costs.

38(C) The estimated or actual construction start date and
39completion date.

P10   1(D) The name and year of the state transportation program in
2which the project is programmed, if applicable.

3(E) Total prior fiscal year expenditures for capital outlay support.

4(F) The number of full-time equivalent positions requested to
5perform support of environmental, design, right-of-way, and
6construction work in the fiscal year of the budget request.

7(G) Milestones of project work by phases that are planned to
8be completed in the fiscal year of the budget request.

9(H) The ratio of support to capital costs based on current
10programming.

11(2) The capital-to-support ratio for all projects completed in the
12prior fiscal year in each program in each district.

13(3) The current total number of authorized and vacant positions
14in the capital outlay support program in headquarters and in each
15district.

16(4) A five-year projection of the department’s staffing needs to
17support the state’s transportation capital programs and any
18workload performed by the department related to federal or local
19funding for highway capital projects.

20(5) The average cost of a personnel-year equivalent in each
21district based on the department’s existing contracts for capital
22outlay support work performed by a private company under
23contract with the department. For each average cost, the department
24 shall provide a description of what factors are included in that cost.

25(6) The average cost of a state staff personnel-year in the capital
26outlay support program in each district and in headquarters. The
27cost shall include the salary and wages, benefits, program overhead,
28administrative overhead, and other associated costs. The
29department shall provide a description of each component of the
30average cost.

31(7) A summary of expected capital outlay support workload for
32the budget year that includes the following:

33(A) The total full-time equivalents requested for each type of
34the following activities: environmental, design, right-of-way, and
35construction.

36(B) The total full-time equivalents requested for each type of
37project, including, but not limited to, the state transportation
38improvement program, the state highway operation and protection
39program, bond programs, regional and local agency partnership
40workload, and any other program.

P11   1(8) The total number of projects with requested resources, as
2well as the number of projects in which the department is limited
3to an oversight role.

4(9) The number of milestones scheduled, including
5environmental, design, right-of-way, and construction deliverables,
6as well as the number of projects expected to begin construction
7and reach completion.

8(10) A summary for the most recently completed fiscal year for
9the following:

10(A) Full-time equivalents and related funding expended,
11including support of environmental, design, right-of-way, and
12construction activities.

13(B) Approved and filled positions as of the end of the fiscal
14year.

end delete


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