Amended in Senate August 2, 2016

Amended in Senate June 22, 2016

Amended in Senate June 6, 2016

Amended in Assembly May 10, 2016

Amended in Assembly April 28, 2016

Amended in Assembly April 11, 2016

Amended in Assembly March 17, 2016

California Legislature—2015–16 Regular Session

Assembly Bill No. 2693

Introduced by Assembly Member Dababneh

(Coauthors: Assembly Members Travis Allen, Hadley, and Linder)

February 19, 2016

An act to amend Section 53328.1 of the Government Code, and to amend Section 5898.15 of, to amend, renumber, and add Section 5898.16 of, and to add Section 5898.17 to, the Streets and Highways Code, relating to property improvements.

LEGISLATIVE COUNSEL’S DIGEST

AB 2693, as amended, Dababneh. Financing requirements: property improvements.

(1) 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 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.

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 satisfies certain conditions and the property owner is given the right to cancel the contractual assessment at any time prior to midnight on the 3rd business day after certain events occur without penalty or obligation, consistent with certain requirements. The bill would require a financing estimate document or a substantially equivalent document to be completed and delivered to a property owner at least 3 business days before the property owner consummates a voluntary contractual assessment pursuant to one of these programs. The bill would prohibit a public agency or other party to a voluntary contractual assessment pursuant to one of these programs to make any representations to a property owner regarding the effect the financed improvements will have on the market value of the property unless the public agency or other party derives its estimates of market value using specified methods.

This bill would limit these provisions to a property owner who seeks to participate in a program established to finance the installation of distributed generation renewable energy sources or energy or water efficiency improvements that are permanently fixed to real property pursuant to these provisions for a residential property with 4 or fewer units.

(2) The Mello-Roos Community Facilities Act of 1982 specifies the requirements for the establishment of a community facilities district, including, among other things, a petition, a hearing, the establishment of the boundaries of the community facilities district, and an election on the question. Existing law authorizes a community facilities district formed pursuant to an alternative procedure under which the district initially consists solely of territory proposed for annexation to the community facilities district in the future and territory is annexed and subjected to special taxes only upon unanimous approval of the owners, to finance and refinance the acquisition, installation, and improvement of energy efficiency, water conservation, and renewable energy improvements.

This bill would require a legislative body to comply with the requirements described above prior to the annexation of a parcel or parcels to a community facilities district formed pursuant to the alternative procedure. The bill would prohibit a parcel or parcels from being annexed to a community facilities district formed pursuant to the alternative procedure unless the parcel satisfies specified conditions.

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

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

SECTION 1.  

(a) The Legislature finds and declares all of the
following:

(1) The Property Assessed Clean Energy program has been
promoted in California widely as an innovative and alternative
form of financing for environmental improvements for the benefit
of the public and California’s environment.

(2) The promotion of the Property Assessed Clean Energy
financing is now a popular and widespread form of alternative
financing for consumers seeking solar energy, water conservation,
energy efficiency, and earthquake retrofitting improvements to the
benefit of all Californians.

(3) The consumer obligation to repay voluntary contractual
assessments created by the Property Assessed Clean Energy
program is sometimes misunderstood and may affect the
consumer’s ability to refinance their loan or sell their property.

(4) Making residential real estate secured loans to consumers
through Property Assessed Clean Energy financing for home
improvements has grown rapidly, raising questions as to whether
the Property Assessed Clean Energy program is adequately
supported by government regulation.

(5) The passage of this act is essential to promote standardized
disclosures and protections for consumers to ensure that the
Property Assessed Clean Energy program can continue to be widely
used to offset the adverse impacts of years of climate change.

(b) This act shall be known, and may be cited, as the PACE
Preservation and Consumer Protections Act.

SEC. 2.  

Section 53328.1 of the Government Code is amended
to read:

53328.1.  

(a) As an alternate and independent procedure for
forming a community facilities district, the legislative body may
form a community facilities district that initially consists solely
of territory proposed for annexation to the community facilities
district in the future, with the condition that a parcel or parcels
within that territory may be annexed to the community facilities
district and subjected to the special tax only with the unanimous
approval of the owner or owners of the parcel or parcels at the
time that the parcel or parcels are annexed. In that case, the
legislative body shall follow the procedures set forth in this article
for the formation of a community facilities district, with the
following exceptions:

(1) The legislative body shall not be obligated to specify the
rate or rates of special tax in the resolution of intention or the
resolution of formation, provided that both of the following are
met:

(A) The resolution of intention and the resolution of formation
include a statement that the rate shall be established in an amount
required to finance or refinance the authorized improvements and
to pay the district’s administrative expenses.

(B) The maximum rate of special tax applicable to a parcel or
parcels shall be specified in the unanimous approval described in
this section relating to the parcel or parcels.

(2) The legislative body shall not be obligated to specify in the
resolution of intention the conditions under which the obligation
to pay the specified special tax may be prepaid and permanently
satisfied. Instead, a prepayment provision may be included in the
unanimous approval of the owner or owners of each parcel or
parcels at the time that the parcel or parcels are annexed to the
community facilities district.

(3) In lieu of approval pursuant to an election held in accordance
with the procedures set forth in Sections 53326, 53327, 53327.5,
and 53328, the appropriations limit for the community facilities
district, the applicable rate of the special tax and the method of
apportionment and manner of collection of that tax, and the
authorization to incur bonded indebtedness for the community
facilities district shall be specified and be approved by the
unanimous approval of the owner or owners of each parcel or
parcels at the time that the parcel or parcels are annexed to the
community facilities district. No additional hearings or procedures
are required, and the unanimous approval shall be deemed to
constitute a unanimous vote in favor of the appropriations limit
for the community facilities district, the authorization to levy the
special tax on the parcel or parcels, and the authorization to incur
bonded indebtedness for the community facilities district.

(4) Notwithstanding Section 53324, this paragraph establishes
the applicable protest provisions in the event a local agency forms
a community facilities district pursuant to the procedures set forth
in this section. If 50 percent or more of the registered voters, or
six registered voters, whichever is more, residing within the
territory proposed to be annexed to the community facilities district
in the future, or if the owners of one-half or more of the area of
land proposed to be annexed in the future and not exempt from
the special tax, file written protests against establishment of the
community facilities district, and protests are not withdrawn so as
to reduce the protests to less than a majority, no further proceedings
to form the community facilities district shall be undertaken for a
period of one year from the date of decision of the legislative body
on the issues discussed at the hearing. If the majority protests of
the registered voters or of the landowners are only against the
furnishing of a specified type or types of facilities or services
within the district, or against levying a specified special tax, those
types of facilities or services or the specified special tax shall be
eliminated from the resolution of formation.

(5) The legislative body shall not record a notice of special tax
lien against any parcel or parcels in the community facilities district
until the owner or owners of the parcel or parcels have given their
unanimous approval of the parcel’s or parcels’ annexation to the
community facilities district, at which time the notice of special
tax lien shall be recorded against the parcel or parcels as set forth
in Section 53328.3.

(b) Notwithstanding the provisions of Section 53340, after
adoption of the resolution of formation for a community facilities
district described in subdivision (a), the legislative body may, by
ordinance, provide for the levy of the special taxes on parcels that
will annex to the community facilities district at the rate or rates
to be approved unanimously by the owner or owners of each parcel
or parcels to be annexed to the community facilities district and
for apportionment and collection of the special taxes in the manner
specified in the resolution of formation. No further ordinance shall
be required even though no parcels may then have annexed to the
community facilities district.

(c) The local agency may bring an action to determine the
validity of any special taxes levied pursuant to this chapter and
authorized pursuant to the procedures set forth in this section
pursuant to Chapter 9 (commencing with Section 860) of Title 10
of Part 2 of the Code of Civil Procedure. Notwithstanding Section
53359, if an action is brought by an interested person pursuant to
Section 863 of the Code of Civil Procedure to determine the
validity of any special taxes levied against a parcel pursuant to
this chapter and authorized pursuant to the procedures set forth in
this section, the action shall be brought pursuant to Chapter 9
(commencing with Section 860) of Title 10 of Part 2 of the Code
of Civil Procedure, but shall, notwithstanding the time limits
specified in Section 860 of the Code of Civil Procedure, be
commenced within 15 days after the date on which the notice of
special tax lien is recorded against the parcel. Any appeal from a
judgment in any action or proceeding described in this subdivision
shall be commenced within 30 days after entry of judgment.

(d) A community facilities district formed pursuant to this
section may only finance facilities pursuant to subdivision (l) of
Section 53313.5.

(e) (1) The legislative body shall comply with the requirements
specified in Sections 5898.16 and 5898.17 of the Streets and
Highways Code prior to the annexation of a parcel or parcels to a
community facilities district formed pursuant to this section.

(2) A parcel or parcels shall not be annexed to a community
facilities district formed pursuant to this section unless the parcel
complies with the conditions specified in subdivision (a) of Section
26063 of the Public Resources Code and in subdivision (b) of
Section 10081 of Title 4 of the California Code of Regulations.

(f) In connection with formation of a community facilities
district and annexation of a parcel or parcels to the community
facilities district pursuant to this section, and the conduct of an
election on the proposition to authorize bonded indebtedness
pursuant to the alternate procedures set forth in Section 53355.5,
the local agency may, without additional hearings or procedures,
designate a parcel or parcels as an improvement area within the
community facilities district. After the designation of a parcel or
parcels as an improvement area, all proceedings for approval of
the appropriations limit, the rate and method of apportionment and
manner of collection of special tax and the authorization to incur
bonded indebtedness for the parcel or parcels shall apply only to
the improvement area.

(g) In connection with a community facilities district formed
under this section, as an alternate and independent procedure for
making the changes described in Section 53330.7, the changes
may be made with the unanimous approval of the owner or owners
of the parcel or parcels that will be affected by the change and
with the written consent of the local agency. No additional hearings
or procedures are required, and the unanimous approval shall be
deemed to constitute a unanimous vote in favor of the proposed
changes. If the proceeds of a special tax are being used to retire
any debt incurred pursuant to this chapter and the unanimous
approval relates to the reduction of the special tax rate, the
unanimous approval shall recite that the reduction or termination
of the special tax will not interfere with the timely retirement of
that debt.

SEC. 3.  

Section 5898.15 of the Streets and Highways Code is
amended to read:

5898.15.  

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

(b) Nothing in this chapter shall be construed to void or
otherwise release a property owner from the contractual obligations
incurred by a contractual assessment on a property, particularly in
the event that the total amount of annual property taxes and
assessments exceeds 5 percent of a property’s market value after
the property owner has entered into a contractual assessment
pursuant to this chapter.

(c) This section applies to a property owner who seeks to
participate in a program established pursuant to this chapter for
types of property not subject to the requirements of Sections
5898.16 and 5898.17.

SEC. 4.  

Section 5898.16 of the Streets and Highways Code is
amended and renumbered to read:

5898.18.  

All references to financing in this chapter shall be
deemed to also refer to refinancing, except that with respect to
refinancing, the legislative body shall conclude that providing the
refinancing will result in an increased adoption of the
improvements authorized to be financed by this chapter. This
section does not constitute a change in, but is declaratory and a
clarification of existing law.

SEC. 5.  

Section 5898.16 is added to the Streets and Highways
Code, to read:

5898.16.  

(a) A public agency shall not permit a property owner
to participate in any program established pursuant to this chapter
for the purposes specified in paragraph (2) of subdivision (a) of
Section 5898.20 if any of the following apply:

(1) The property owner’s participation would result in the total
amount of the annual property taxes and assessments exceeding 5
percent of the property’s market value, as determined at the time
of approval of the property owner’s contractual assessment.

(2) The property does not comply with the conditions specified
in subdivision (a) of Section 26063 of the Public Resources Code
and in subdivision (b) of Section 10081 of Title 4 of the California
Code of Regulations.

(b) A public agency shall not permit the property owner to
participate in any program established pursuant to this chapter for
the purposes specified in paragraph (2) of subdivision (a) of Section
5898.20 unless the property owner is given the right to cancel the
contractual assessment without penalty or obligation, consistent
with the following:

(1) The property owner shall receive two copies of the right to
cancel document set forth below or a substantially similar
document that displays the same information in a substantially
similar format.

 

Right to Cancel
Property Owner:  [Owner Full Name], [Phone], [Email]
Property Address:  [Property Address]
Your Right to Cancel:
You are entering into a contractual assessment with [Provider] for financing that will result in a lien on the property at [Property Address]. You may cancel this transaction, without cost, until midnight on the third business day after whichever of the following events occurs last:  (1) The date on which you signed the contractual assessment.  (2) The date you received your Financing Estimate and Disclosure.  (3) The date you received this notice of your right to cancel.   If you cancel the transaction, [Provider], within 20 calendar days after [Provider] receives notice of cancellation, must take the steps necessary to reflect the fact that, if recorded, the lien on your property has been discharged begin delete or reconveyed, end delete begin insert and removed from the tax rolls, end insert and [Provider] must return to you any money you have given in connection with your application, not including the application processing fee. After [Provider] has done the things mentioned above, you must return any money paid to you or on your behalf, whether to your contractor or any other person. All money must be returned to the address below.
If you cancel the transaction:
● You will not be charged a cancellation fee; and
● You will be refunded any money you have given, excluding application and processing fees as applicable.
To cancel this transaction, you may submit this form to [Provider] in writing at:
Provider: __________
Attn: Right to Cancel Notification
begin insert Email: end insert begin insert   end insert begin insert __________ end insert
begin insert Fax number: end insert begin insert   end insert begin insert __________ end insert
Address: __________
Deadline to Cancel:
If you want to cancel this transaction, you must submit this form on or before [Insert date].
You may use any written statement that is signed and dated by you and states your intention to cancel, or you may use this notice by dating and signing below. If you cancel by mail, fax, or email, you must send the notice no later than midnight of the third business day following the date on which you signed the contractual assessment. If you send or deliver your written notice to cancel some other way, it must be delivered to the above address no later than the begin delete time end delete begin insert date end insert indicated above.
I WISH TO CANCEL
Property Owner	Date

 

(2) The property owner is deemed to have given notice of
cancellation at the moment that the property owner sends the notice
by mail, email, or fax or at the moment that the property owner
otherwise delivers the notice, as applicable.

(c) This section only applies to a property owner who seeks to
participate in a program established pursuant to this chapter for
the purposes specified in paragraph (2) of subdivision (a) of Section
5898.20 for a residential property with four or fewer units.

(d) For the purposes of this section, “property owner” shall
include all begin delete persons listed on the title to the property. end delete begin insert owners of
record. end insert

SEC. 6.  

Section 5898.17 is added to the Streets and Highways
Code, to read:

5898.17.  

(a) The disclosure set forth below, or a substantially
equivalent document that displays the same information in a
substantially similar format, shall be completed and delivered to
a property owner at least three business days before the property
owner consummates a voluntary contractual assessment described
in this chapter for purposes specified in paragraph (2) of
subdivision (a) of Section 5898.20 or a special tax described in
Section 53328.1 of the Government Code. The disclosure shall be
provided to the property owner as a printed copy, if requested by
the property owner. A sample of the disclosure set forth below
shall be maintained on a public Internet Web site available to
property owners.

(b) This section only applies to disclosure to a property owner
who seeks to participate in a program established pursuant to this
chapter for the purposes specified in paragraph (2) of subdivision
(a) of Section 5898.20 for a residential property with four or fewer
units.

 

Financing Estimate and Disclosure
Notice to Property Owner: You have the right to request that a hard copy of this document be provided to you before and after reviewing and signing. The financing arrangement described below will result in an assessment against your property which will be collected along with your property taxes and will result in a lien on your property. You should read and review the terms carefully, and if necessary, consult with a tax professional or attorney.
Customer Service Toll-Free telephone number and email: In the event you have a consumer complaint, questions about your financing obligations related to the contractual assessment or your contractual rights under the terms of this contract, you can contact either this toll-free telephone number or email address provided below and receive a response within 24 hours or one business day.   Toll-Free telephone number: ___________ Customer service email address: ___________
Products and Costs
Product costs (including labor/installation)	$________
Description 1. 2. 3.
Financing Costs
Application fees and costs Prepaid Interest Other Costs Total Amount Financed	$________   $________   $________   $________
Annual Percentage Rate (APR)   Simple Interest Rate   Total Annual Principal, Interest, and Administrative Fees		______%     ______%  $______
Note: If your property taxes are paid through an impound account, your lender may apportion the amount and add it to your monthly payment.
See “Other important considerations,” below
Total Amount you will have paid over the life of the begin delete loan end delete begin insert financing end insert	$________
Other Costs Appraisal Fees Bond related costs Annual Administrative fees Estimated closing costs Credit Reporting Fees Recording Fees	$________  $________  $________    $________  $________  $________
Total Financing Costs and Closing Costs	$________
Estimated Cash (out of pocket) to close	$________
Other Terms Prepayment fee Assumable by new owner	◻ No ◻ No	◻ Yes ______ ◻ Yes ______
Additional Information About These Financing Comparisons [Use this information to compare to other financing options]
begin delete In 10 years end delete begin insert Over the term of the financing end insert	$________ Principal you will have paid off.  $________ Amount of interest you have paid.  $________ Amount of financing and other costs         you will have paid.  $________ Total you will have paid.
Annual Percentage Rate	______%
Total Interest Paid (as a percentage of all the payments you have made)		______%
Other Important Considerations
Assumption by New Buyer		◻ Yes - Allowed on original terms ◻ No - Not Allowed on original terms
I understand that begin delete if I refinance my home, end delete my mortgage company may require me to pay off the full remaining balance of this begin delete obligation, unless I request that the lien be subordinated to an existing mortgage and the holder of the lien agrees to subordinate (allow the mortgage lien to take a higher priority). end delete begin insert obligation before I can refinance my home. end insert If I sell my home, the buyer or their mortgage company may require me to pay off the full remaining balance of this begin delete obligation. end delete begin insert obligation before the home may be sold. You should consider consulting with your mortgage company or an attorney. end insert
		_______________    [Borrower initials]
Monthly Mortgage Payments
Your payments will be added to your property tax bill. Whether you pay your property taxes through your mortgage payment, using an impound account, or if you pay them directly to the tax collector, you will need to save an estimated $_______ for your first tax installment. If you pay your taxes through an impound account you should notify your lender, so that your monthly mortgage payment can be adjusted by your lender to cover your increased property tax bill.
		_______________    [Borrower initials]
Tax Benefits: Consult your tax advisor regarding tax credits, credits and deductions, tax deductibility, and other tax benefits available. Making an appropriate application for the benefit is your responsibility.
		_______________    [Borrower initials]
begin insert Statutory Penalties: If your property tax payment is late, the amount due will be subject to a 10% penalty, late fees, and 1.5% per month interest penalty as established by state law, and your property may be subject to foreclosure. end insert
		begin insert end insert begin insert    _______________ end insert begin insert    [Borrower initials] end insert
Three Day Right to Cancel You, the property owner, may cancel the contract at any time prior to midnight on the third business day after the date of the transaction to enter into the agreement without any penalty or obligation. To cancel this transaction, you may mail or deliver a signed and dated copy of the contract with notice of cancellation to:   ___________ [name of business] at ___________ [address] You may also cancel the contract by sending notification of cancellation by email to the following email address: _________________[email address of business].    _______________    [Borrower initials]
Confirmation of Receipt This confirms the receipt of the information in this form. You do not have to accept this financing just because you acknowledge that you have received or signed this form, and it is NOT a contract.
__________________________ [Property Owner Signature - Date]		__________________________ [Property Owner Signature - Date]

 

(c) A public agency or other party to a voluntary contractual
assessment described in this chapter for the purposes specified in
paragraph (2) of subdivision (a) of Section 5898.20 or a special
tax described in Section 53328.1 of the Government Code shall
not make any representations to a property owner regarding the
effect the financed improvements will have on the market value
of the property unless that public agency or other party derives its
estimates of the market value using one of the following:

(1) An automated valuation model, which is a computerized
property valuation system that is used to derive a real property
value.

(2) A broker’s price opinion conducted by a real estate broker
licensed pursuant to Part 1 (commencing with Section 10000) of
Division 4 of the Business and Professions Code.

(3) An appraisal conducted by a state licensed real estate
appraiser licensed pursuant to Part 3 (commencing with Section
11300) of Division 4 of the Business and Professions Code.

(d) For the purposes of this section, “property owner” shall
include all begin delete persons listed on the title to the property. end delete begin insert owners of
record. end insert