BILL ANALYSIS Ó
AB 2693
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CONCURRENCE IN SENATE AMENDMENTS
AB
2693 (Dababneh)
As Amended August 19, 2016
Majority vote
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|ASSEMBLY: |75-0 |(May 23, 2016) |SENATE: | 39-0 |(August 24, |
| | | | | |2016) |
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Original Committee Reference: B. & F.
SUMMARY: Creates the PACE Preservation and Consumer Protections
Act by adding consumer protections to California's Property
Assessed Clean Energy (PACE) Program. Specifically, this bill:
1)Prohibits a local agency from permitting the owner of a
residential property with four or fewer units from
participating in a voluntary contractual assessment program if
the owner's parcel or property does not comply with specified
statutory requirements.
2)Prohibits a local agency from permitting the owner of a
residential property with four or fewer units from
participating in a voluntary contractual assessment program
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unless both of the following apply:
a) The property owner has been provided with a completed
financing estimate document or a substantially equivalent
document that displays the same information in a
substantially similar format.
b) The property owner is given the right to cancel the
contractual assessment on or before midnight on the third
business day after whichever of the following events occurs
last:
i) The date on which the property owner signed the
contractual assessment;
ii) The date the property owner received the Financing
Estimate and Disclosure; or,
iii) The date the property owner received the notice of
the right to cancel.
The property owner must receive the right to cancel
document as specified in state law, or a substantially
similar document that displays the same information in
substantially similar format.
3)Requires that a Financing Estimate and Disclosure document
must be delivered to a property owner of a residential
property with four or fewer units. Specifies that the
disclosure document should be provided to the property owner
as a printed copy unless the property owner agrees to an
electronic copy.
4)Requires that, before annexing a parcel or parcels to a
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community facilities district (CFD) formed pursuant to an
alternative process by which a local government can form a CFD
to finance energy efficiency, water conservation, and
renewable energy improvements, the legislative body of a local
agency must comply with the same requirements that apply to a
property owner who seeks to participate in a voluntary
contractual assessment program for a residential property of
four or fewer units.
5)Prohibits a public agency or other party to a voluntary
contractual assessment or a special tax from making any
monetary or percentage representations of increased value to a
property owner regarding the effect that 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 a specified methodology.
6)Specifies that for the purposes of the bill's provisions, the
term "property owner" includes all owners of record.
7)Provides that the provisions of this act are in addition to
any rights or remedies of property owners or borrowers under
any other law.
The Senate amendments:
1)Add a findings and declarations section declaring the measure
as the PACE Preservation and Consumer Protections Act.
2)Create a right to cancel form.
3)Add a customer service toll-free telephone number and email
shall be included in the disclosure document.
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4)Clarify that the requirements in this measure only pertain to
residential property with four or fewer units.
5)Specify that the disclosure document should be provided to the
property owner as a printed copy unless the property owner
agrees to an electronic copy.
6)Prohibit a public agency or other party to a voluntary
contractual assessment or a special tax from making any
monetary or percentage representations of increased value to a
property owner regarding the effect that 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 a specified methodology.
7)Add a section to the disclosure document that a property owner
must initial stating "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."
8)Specify that "property owner" shall include all owners of
record.
9)Provide that the provisions of this act are in addition to any
rights or remedies of property owners or borrowers under any
other law.
10)Make other technical and clarifying changes.
11)Add double-jointing language.
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EXISTING LAW:
1)Defines "Property Assessed Clean Energy bond" or "PACE bond"
as a bond that is secured by any of the following:
a) A voluntary contractual assessment on property
authorized pursuant to paragraph (2) of the Streets and
Highways Code Section 5898.20(a);
b) A voluntary contractual assessment or a voluntary
special tax on property to finance the installation of
distributed generation renewable energy sources, electric
vehicle charging infrastructure, or energy or water
efficiency improvements that is levied pursuant to a
chartered city's constitutional authority under the
California Constitution Article XI Section 5; or,
c) A special tax on property authorized pursuant to
Government Code Section 53328.1(b). (Public Resources Code
Section 26054)
2)Authorizes cities, counties, and other local public agencies
and utility districts to provide up-front financing to
property owners to install renewable energy-generating
devices, make specified water or energy efficiency
improvements, or install electric vehicle charging
infrastructure on their properties through a system of
voluntary contractual assessments which is repaid, with
interest, through property tax assessments. The programs are
commonly referred to as the PACE programs. (Streets and
Highways Code Section 5898.10 et seq.)
3)Requires the California Alternative Energy and Advanced
Transportation Financing Authority (CAEATFA) to develop and
administer a PACE Reserve program to reduce overall costs to
the property owners of PACE bonds issued by an applicant by
providing a reserve of no more than 10% of the initial
principal amount of the PACE bond. Requires the CAEATFA to
develop and administer a PACE risk mitigation program for PACE
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financing to increase its acceptance in the marketplace and
protect against the risk of default and foreclosure. [Public
Resources Code Section 26060]
4)Allows a community facilities district to finance and
refinance the acquisition, installation, and improvement of
energy efficiency, water conservation, and renewable energy
improvements that are affixed, as specified in Civil Code
Section 660, to or on real property and in buildings, whether
the real property or buildings are privately or publicly
owned. Energy efficiency, water conservation, and renewable
energy improvements financed by a district may only be
installed on a privately owned building and on privately owned
real property with the prior written consent of the owner or
owners of the building or real property. This chapter shall
not be used to finance installation of energy efficiency,
water conservation, and renewable energy improvements on a
privately owned building or on privately owned real property
in connection with the initial construction of a residential
building unless the initial construction is undertaken by the
intended owner or occupant. [Government Code Section 53313.5]
FISCAL EFFECT: None.
COMMENTS: This bill provides enhanced consumer protections by
requiring a public agency to provide property owners
participating in the PACE program with a "Financing Estimate and
Disclosure" document. This disclosure will provide much needed
information to property owners regarding the financial terms and
obligations of the PACE loan.
This bill establishes uniform disclosures that must be provided
to each homeowner when participating in a PACE program. Under
this bill, each homeowner must receive a completed financing
estimate document, which contains products and costs, financing
costs, other terms, and notification to the homeowner about
making payments via the property tax bill, and the potential
requirement to pay the remaining balance of the assessment upon
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sale or refinance. The measure also provides that a property
owner is given the right to cancel the PACE loan without penalty
or obligation.
Background:
In 2008, California enacted the first statewide PACE program
through AB 811 (Levine), Chapter 159. Since 2008, at least 31
other states have created their own programs with variations.
Not all PACE programs carry super-lien status. 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.
PACE:
Generally, PACE programs begin with a local public agency (such
as a city, county or municipal utility district) adopting a
resolution to create a Joint Power Authority (JPA) to authorize
the creation of a PACE loan program. The JPA administers the
program directly or may contract with a private entity to
administer it. The JPA may authorize either local governments
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or third parties to make loans to homeowners for the
conservation improvements.
When created, it was presumed that public agencies would run the
PACE program themselves; instead the majority of cities or
counties have contracted out the services to new unregulated
private entities to administer the PACE program. Only two
programs run their own PACE program internally: Sonoma County
and Placer County.
The programs are funded by either private or public sources, or
a combination of both. For example, Sonoma County has generally
used public funds for their residential PACE program. The
residential PACE program in Sonoma County, Sonoma County Energy
Independence Program, borrows money from the County, which is
then paid back with interest as the lien is paid off by the
homeowner. In other areas, it is primarily private funding. In
PACE programs administered by private entities the bonds are
typically issued to private investors to pay the cost of the of
the conservation improvements.
How does PACE work? Although details vary between the programs,
generally a homeowner who is interested in adding a conservation
improvement to his or her home is first advised and sometimes
required to have an energy audit conducted on the property to
identify areas of potential conservation improvements. After
that, a homeowner contacts a contractor, who typically has to be
approved or certified by the PACE program to be eligible to work
on the project. The contractor provides an estimate of the
costs of the conservation improvement(s) the homeowner wishes to
add. The homeowner then applies to the program for approval.
Typically there are costs associated with the application. Only
once the improvement application is approved, will the work
begin.
If the project is approved, the entity administering the program
will enter into an agreement with the property owner where the
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entity agrees to pay the cost of the improvement. An assessment
lien is placed on the property for the amount owed plus
interest. After the work is performed, the PACE program entity
pays the contractor. The property owner repays the entity for
the improvements as a special tax assessment on the property tax
bill, generally over a five to 20 year period. The property
owner pays the lien in the same manner as he or she would pay
property taxes.
Who uses PACE? PACE financing is available to property owners
in certain cities or counties that have adopted a program. In
California, over 400 cities and counties participate in PACE.
To qualify, homeowners need to have equity in their home. The
homeowner must have no judgment liens or federal or state tax
liens. The homeowner cannot be in bankruptcy. The property
cannot be subject to a bankruptcy proceeding. The homeowner
must not be delinquent on any mortgages.
Analysis Prepared by:
Kathleen O'Malley / B. & F. / (916) 319-3081
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