BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1233|
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THIRD READING
Bill No: SB 1233
Author: McGuire (D), et al.
Amended: 5/4/16
Vote: 21
SENATE GOVERNANCE & FIN. COMMITTEE: 5-1, 4/27/16
AYES: Hertzberg, Beall, Hernandez, Lara, Pavley
NOES: Nguyen
NO VOTE RECORDED: Moorlach
SUBJECT: Joint powers authorities: Water Bill Savings Act
SOURCE: Author
DIGEST: This bill enacts the Water Bill Savings Act, which
allows joint powers authorities to finance water conservation
improvements to private property paid for by charges collected
through water bills.
ANALYSIS:
Existing law:
1) Allows public agencies, with the free and willing consent of
affected property owners, to use voluntary contractual
assessments or parcel taxes to finance water efficiency
improvements that are permanently fixed to real property.
2) Allows, pursuant to the Joint Exercise of Powers Act, two or
more public agencies to exercise their common powers by
signing joint powers agreements, which sometimes create a
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Page 2
joint powers authority (JPA).
3) Allows, pursuant to the Marks-Roos Local Bond Pooling Act,
public agencies to use JPAs to finance infrastructure.
This bill:
1) Enacts the Water Bill Savings Act which, notwithstanding any
other law, allows a JPA that meets specified requirements to
provide funding for a customer of a local agency or its
publicly owned utility to acquire, install, or repair a water
efficiency improvement on a customer property served by the
local agency or its publicly owned utility.
2) Requires that a JPA, to establish or extend a program to
provide funding for a customer of a local agency or its
publicly owned utility to acquire, install, or repair a water
efficiency improvement on a customer property served by the
local agency or its publicly owned utility, must adopt a
resolution that:
a) Identifies the geographic area in the state in which
the authority intends to operate the program.
b) Approves a standardized servicing agreement.
c) Authorizes one or more designated officials of the
authority to execute and deliver the servicing agreement
on behalf of the authority.
3) Allows a JPA to make a final and conclusive determination
that its proceedings to establish or extend a program were
valid and in conformity with specified requirements enacted
by the bill.
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Page 3
4) Allows the legislative body of a local agency to provide
funding for its customers through a program established by a
JPA by adopting a resolution of intention, conducting a
noticed public hearing, and adopting a resolution to
authorize the program. The resolution of intention must
contain specified information about the public hearing and
must make a specified declaration if the local agency wishes
to pledge its water enterprise revenue as security for the
payment of the bonds issued by a JPA in the event that
efficiency charges are insufficient for those purposes. The
resolution authorizing the establishment or extension of a
program within a local agency's boundaries must:
a) Declare that the operation of the program by the JPA
in the local agency's geographic boundaries would provide
significant public benefits in accordance with specified
statutory criteria.
b) Approve the standardized servicing agreement and
authorize one or more designated officials of the local
agency to execute and deliver the servicing agreement with
the authority.
c) Approve, if applicable, the pledge of water enterprise
revenue as security for the payment of the principal of,
and interest and redemption premium on, bonds issued by
the authority in the event that efficiency charges are
insufficient.
d) Authorize, if applicable, execution and delivery of
one or more pledge agreements to evidence a pledge.
5) Allows a local legislative body, in the resolution, to make
a final and conclusive determination that its proceedings to
establish or extend a program were valid and in conformity
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Page 4
with specified requirements enacted by the bill.
6) Requires a customer to repay the JPA for the costs of water
efficiency improvements through an efficiency charge on the
customer's water bill that is established and collected by
the local agency or its publicly owned utility upon
verification that the efficiency improvement had been
installed.
7) Specifies that the duty to pay the efficiency charge must
arise from and be evidenced by a written agreement among: the
customer; the property owner, if different than the customer;
the JPA; and the local agency or its publicly owned utility.
8) Requires that the written agreement must include:
a) An agreement by the customer to pay an efficiency
charge for the period and in the amount specified in the
agreement unless the efficiency charge is prepaid in the
manner set forth in the agreement. The period designated
for repayment must not exceed the estimated useful life of
the funded efficiency improvements.
b) A description of the financial calculation, formula,
or other method that the authority used to determine the
efficiency charge. The efficiency charge may include a
component for reasonable administrative expenses incurred
by the local agency or its publicly owned utility and the
authority in connection with the program and the funding.
c) A description of the efficiency improvement funded
with the efficiency charge. A determination in the
agreement that an improvement is an efficiency improvement
must be final and conclusive.
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Page 5
d) A representation by the customer that the customer
intends to acquire, install, or repair and use the
efficiency improvement on the customer's property for the
useful life of the efficiency improvement. Any failure of
the efficiency improvement by damage, removal, or other
fault of the customer during the useful life of the
efficiency improvement must not affect the customer's
obligation to pay the efficiency charge as set forth in
the agreement.
9) Specifies that the timely and complete payment of an
efficiency charge by a customer that has agreed to pay an
efficiency charge may be a condition of receiving water
service from the local agency or its publicly owned utility.
10) Allows a local agency and its
publicly owned utility to use their established collection
policies and all rights and remedies provided by law to
enforce payment and collection of the efficiency charge.
11) Prohibits a person liable for an
efficiency charge from withholding payment, in whole or in
part, of the efficiency charge for any reason.
12) Requires that a customer's
obligation to pay the efficiency charge must remain until the
efficiency charge related to the efficiency improvement has
been repaid in full or the efficiency charge has been
transferred to a subsequent customer who assumes
responsibility for the remainder of the obligation.
13) Requires a local agency or its
publicly owned utility to record, no later than 10 days after
funding an efficiency improvement, a notice of the efficiency
charge in the records of the county recorder of the county in
which the customer's property is located, pursuant to
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specified requirements regarding the form and content of the
notice.
14) Requires the entity responsible
for collecting and servicing the efficiency charge to record,
within 10 days of full repayment of the outstanding charges,
a notice of the full repayment of the efficiency charge in
the records of the county recorder in which the customer's
property is located.
15) Specifies that any failure by the
local agency or its publicly owned utility to record that
notice must not excuse an owner of the customer property on
which the funded improvement is located from the obligation
to pay the efficiency charge.
16) Contains a legislative finding
and declaration that efficiency charges levied under the
bills provisions are not taxes, assessments, fees, or charges
for the purposes of Articles XIIIC and XIIID of the
California Constitution and therefore the provisions of
Articles XIII C and XIII D and
Article 4.6 (commencing with Section 53750) of Chapter 4 of
Part 1 of Division 2 of Title 5 are not applicable to those
efficiency charges.
17)Allows a JPA to issue bonds for the purpose of providing
funds for the acquisition, installation, and repair of an
efficiency improvement on customer property pursuant to the
bill's provisions. Specifically, this bill:
a) Specifies information that a JPA issuing a bond must
include in its preliminary notice and final report for the
bonds submitted to the California Debt and Investment
Advisory Commission.
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b) Allows a JPA to pledge one or more efficiency charges
as security for the bonds.
c) Allows a local agency to pledge water enterprise
revenue as security for the payment of the principal of,
and interest and redemption premium on, bonds issued by
the JPA if the efficiency charges are insufficient for
that purpose. The local agency may execute one or more
pledge agreements, pursuant to state law, for the benefit
of the JPA or for the exclusive benefit of the persons
entitled to the financing costs to be paid from the
efficiency charges.
d) Requires a JPA and a local agency or its publicly
owned utility to enter into a servicing agreement for the
collection of one or more efficiency charges and requires
the local agency or its publicly owned utility to act as a
servicing agent for purposes of collecting the efficiency
charge.
e) Imposes requirements on the handling of funds
collected by a servicing agent and specifies provisions
that must be included in a servicing agreement to help
ensure the collection of efficiency charges and repayment
of JPA debts.
f) Requires a JPA that issues bonds pursuant to the Water
Bill Savings Act to establish a debt service reserve fund
for the bond to the extent required by the purchaser of
the bond.
g) Requires a local agency that pledges water enterprise
revenues as security for a bond issued pursuant to the
Water Bill Savings Act to establish a debt reserve fund
for the bond to the extent required by the purchaser of
the bond.
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18)Specifies the manner in which its provisions will continue
to be enforced if a local agency for which bonds have been
issued and remain outstanding ceases to operate a water
utility, either directly or through its publicly owned
utility.
19)Defines numerous terms that are used throughout the bill.
20)Exempts a local agency, its publicly owned utility, and the
JPA, if they have complied with procedures specified in the
bill, from complying with existing statutes that would
otherwise prohibit a JPA from authorizing bonds to construct,
acquire, or finance a public capital improvement unless:
a) The authority reasonably expects that the public
capital improvement is to be located within the geographic
boundaries of one or more local agencies of the authority
that is not itself an authority.
b) A local agency that is not itself an authority, within
whose boundaries the public capital improvement is to be
located, has approved the financing of the public capital
improvement and made a finding of significant public
benefit in accordance with the criteria specified state
law after a public hearing held by that local agency
within each county or city and county where the public
capital improvement is to be located after notice of the
hearing is published once at least five days prior to the
hearing in a newspaper of general circulation in each
affected county or city and county.
c) A notice is sent by certified mail at least five
business days prior to the hearing to the Attorney General
and to the California Debt and Investment Advisory
Commission, containing specified information.
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21)Declares that its provisions are severable.
Background
Property assessed clean energy (PACE) financing programs offer
government loans to private property owners to cover the initial
costs of renewable energy, energy efficiency, and water
efficiency improvements. Property owners repay the loans
through voluntary annual assessments or parcel taxes, which are
secured by priority liens, on their property tax bills. With
the free and willing consent of affected property owners, state
law lets public agencies use voluntary contractual assessments
or parcel taxes to finance water efficiency improvements that
are permanently fixed to real property (AB 474, Blumenfield,
Chapter 444, Statutes of 2009 and SB 555, Hancock, Chapter 493,
Statutes of 2011).
The Joint Exercise of Powers Act allows two or more public
agencies to exercise their common powers by signing joint powers
agreements. Sometimes an agreement creates a JPA. The
Marks-Roos Local Bond Pooling Act allows public agencies to use
JPAs to finance infrastructure. These JPAs issue Marks-Roos Act
bonds and loan the capital to local agencies for public works,
for working capital, and for insurance programs.
Building upon the precedent set by PACE financing programs, some
local officials want to be able to use charges that appear on a
water customer's water bill to help finance renewable water
efficiency improvements on private property. They want the
Legislature to authorize a process by which water customers can
voluntarily use public financing to install water efficiency
improvements that will be repaid through water efficiency charge
on their water bills. They also want the Legislature to
authorize JPAs to issue bonds, pursuant to the Marks-Roos Act,
to finance water efficiency improvements by pooling the
voluntary water efficiency charges collected from participating
water customers.
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Comments
Purpose of the bill. In response to the recent drought and
growing concerns about the effects of climate change on
California's long-term water supply, local governments are
looking for ways to help their residents use less water. The
initial installation costs of some types of water efficiency
improvements like high-efficiency toilets or drip irrigation
systems can deter property owners from making those
improvements. The Legislature recently authorized so-called
PACE programs, which allow local governments to offer property
owner financing for water-efficiency improvements which are
repaid through voluntary charges on their property tax bills.
This bill builds on this precedent by providing local
governments with a new tool to help promote the widespread
installation of water efficiency improvements on private
property. This bill allows JPAs to offer consumers competitive
financing costs for these improvements by pooling the revenues
generated by voluntary water efficiency charges paid by
participating property owners. This new tool could help JPAs
pay for regional responses to California's water supply
challenges through the installation of improvements that will
significantly reduce individual consumers' water use.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified5/4/16)
Association of Bay Area Governments
Bay Area Regional Energy Network
California Apartment Association
California Association of Realtors
California Building Industry Association
California Business Properties Association
California Chamber of Commerce
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Center for Climate Protection
Mayors Councilmembers' Association of Sonoma County
Nexus eWater, Inc.
School Project for Utility Rate Reduction
Sierra Club California
Sonoma County Water Agency
Sonoma Regional Climate Protection Authority
StopWaste
Town of Windsor
OPPOSITION: (Verified5/4/16)
California Land Title Association
ARGUMENTS IN SUPPORT: The bill's proponents argue that
widespread adoption of water efficiency measures will benefit
California by expanding water supply, mitigating the effects of
droughts, reducing greenhouse gas emissions, and decreasing
costs of water utility services. Because up-front costs are an
obstacle to many California residents' installing improvements
like water efficient appliances and irrigation, the state needs
to make more financing options available to allow people to
invest in these types of improvements. This bill offers local
governments a flexible, regionally efficient, financially
sustainable tool to promote more widespread adoption of water
efficiency measures.
ARGUMENTS IN OPPOSITION: The bill's opponents argue that
this bill creates risks for new homebuyers and problems
affecting real property sales transactions and the accuracy of
real property records. Specifically, the opponents cite
concerns that this bill imposes new point of sale requirements
on homebuyers and their agents, may run afoul of Federal Housing
Financing Agency loan underwriting guidelines, and may create a
"superpriority" lien for efficiency charges.
Prepared by:Brian Weinberger / GOV. & F. / (916) 651-4119
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