BILL ANALYSIS Ó
SB 1233
Page 1
Date of Hearing: June 29, 2016
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Susan Talamantes Eggman, Chair
SB
1233 (McGuire) - As Amended June 20, 2016
SENATE VOTE: 35-2
SUBJECT: Joint powers authorities: Water Bill Savings Act.
SUMMARY: Establishes the Water Bill Savings Act, which
authorizes joint powers authorities (JPAs) to finance water
conservation improvements on private property for a customer of
a local agency or its publicly owned utility, to repay by
charges collected on a water bill. Specifically, this bill:
1)Establishes the Water Bill Savings Act, which, notwithstanding
any other law, authorizes 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's property
(residential, commercial, industrial, agricultural, or other
real property owned, leased or licensed for occupancy by the
customer) served by the local agency or its publicly owned
utility.
2)Requires a JPA to adopt a resolution to establish or extend a
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program to provide funding for a customer for a water
efficiency improvement. Requires the resolution to do all of
the following:
a) State the JPA's intent to operate the program;
b) Define the geographical scope of the operation of the
program as an area that is limited to only the territories
within which retail water service is provided by those
local agencies that have requested the JPA to provide
funding for the local agency's customers through the
program;
c) Approve a standardized servicing agreement; and,
d) Authorize one or more designated officials of the JPA to
execute and deliver the servicing agreement on behalf of
the JPA.
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.
4)Authorizes the legislative body of a local agency to provide
funding for its customers through a program established by a
JPA by doing all of the following:
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a) Adopt a resolution of intention, as specified;
b) Conduct a noticed public hearing, as specified; and,
c) Adopt a resolution to authorize the program that does
all of the following:
i) Authorize the JPA to establish or extend a program
within the boundaries of the local agency;
ii) 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;
iii) 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 JPA;
iv) 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 JPA in the event that efficiency
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charges are insufficient;
v) Authorize, if applicable, execution and delivery of
one or more pledge agreements to evidence a pledge; and,
vi) Allow 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 with specified requirements enacted by
this bill.
5)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 was installed.
6)Specifies that the duty to pay the efficiency charge must
arise from and be evidenced by a written agreement executed at
the time of the efficiency improvement's installation among
the customer; the property owner of record, if different than
the customer; the JPA; and, the local agency or its publicly
owned utility.
7)Requires the written agreement to include all of the
following:
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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. Prohibits the period
designated for repayment from exceeding 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. Allows the efficiency charge to 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. Requires a determination in the
agreement that an improvement is an efficiency improvement
to be final and conclusive;
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. Prohibits any
failure of the efficiency improvement by damage, removal,
or other fault of the customer during the useful life of
the efficiency improvement from affecting the customer's
obligation to pay the efficiency charge,
as set forth in the agreement; and,
e) A requirement that any failure of the efficiency
improvement not involving damage, removal, or other fault
of the customer must result in the efficiency charge being
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suspended until the efficiency improvement is repaired and
returned to service. Requires the JPA's decision on the
reasons for failure of the efficiency improvement and its
repair and return to service to be final and conclusive.
8)Provides 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.
9)Authorizes 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.
10) Prohibits a person liable for an efficiency charge
from withholding payment, in whole or in part, of the
efficiency charge for any reason.
11) Requires a customer's obligation to pay the efficiency
charge to 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 receives water service at a property with
installed efficiency measures for the remainder of the
obligation. Prohibits the efficiency charge from transferring
to a subsequent customer and requires the charge to remain an
obligation of the previous customer if the efficiency
improvements were removed or damaged, and not restored to
service, by the previous customer.
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12) 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, pursuant to specified requirements
regarding the form and content of the notice.
13) 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 and removal of the efficiency charge in the
records of the county recorder, as specified.
14) Requires, within 10 days of the JPA's decision not to
repair or return to service a failed efficiency improvement,
when the failure did not involve damage, removal, or other
fault of the customer, the entity responsible for the
collection and servicing of the charge to record a notice of
removal of the efficiency charge in the record of the county
recorder, as specified. Requires the notice of the removal of
the efficiency charge to include a reference to the recorded
notice of the efficiency charge.
15) Requires the 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.
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16) Requires the JPA, local agency, or utility responsible
for the collection of the efficiency charges to ensure that
the contact information in the notice of efficiency charge
recorded in the records of the county recorder, pursuant to
this bill, is accurate so that interested parties may request
and promptly receive a written and accurate payoff amount or
verification of the outstanding charges associated with the
recorded notice of efficiency charge.
17) Requires, in the event that the servicing agent or
entity responsible for the collection of the efficiency charge
changes, a new notice of efficiency charge to be recorded
within 10 days.
18) Allows any party requesting written payoff or amount
verification of outstanding charges from the JPA, local
agency, or utility identified as the contact on the recorded
notice to rely upon the written payoff amount or verification
as being accurate for 45 days from the receipt of this written
information. Authorizes any party, if the JPA, local agency,
or utility provides a written amendment to the written payoff
amount or verification, to rely on the written amendment for
45 days from receipt of the written amendment.
19) Requires moneys collected as an efficiency charge to
be held in trust, as specified.
20) Requires the local agency or its publicly owned
utility, in the service agreement, to contract with the JPA
that the local agency or its publicly owned utility will
continue to operate its utility system to provide service to
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customers, as specified.
21) Requires the servicing agreement to provide that the
obligation to pay the efficiency charge shall remain
associated with the meter at the customer's property on which
the efficiency improvement is located, until the JPA is fully
repaid.
22) Authorizes the local agency or its publicly owned
utility, in the servicing agreement, to agree that the timely
and complete payment of all efficiency charges by a customer
that has agreed to pay an efficiency charge shall be a
condition of receiving service from the publicly owned
utility, and that the local agency or its publicly owned
utility shall use their established collection policies, all
rights and remedies provided by law, to enforce payment and
the collection of the efficiency and charge.
23) Requires the local agency or its publicly owned
utility, in its servicing agreement, to agree that in the
event of default by the local agency or its publicly owned
utility, in payment of revenues for the efficiency charge,
that the JPA will order the sequestration and payment to the
beneficiaries of revenue, as specified.
24) Authorizes 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.
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25) 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 (CDIAC).
26) Authorizes a JPA to pledge one or more efficiency
charges as security for the bonds.
27) Authorizes 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.
Allows a local agency to 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.
28) Requires a local agency that pledges water enterprise
revenues to establish a debt service reserve fund for the
bond, as required by the purchaser of the bond.
29) 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.
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30) 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.
31) Requires a JPA that issues bonds, pursuant to this
bill, to establish a debt service reserve fund for the bond to
the extent required by the purchaser of the bond.
32) 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.
33) Defines numerous terms that are used throughout the
bill.
34) 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.
35) Makes findings and declarations, including that
efficiency charges levied under the bills provisions are not
taxes, assessments, fees, or charges for the purposes of
Articles XIII
C and XIII
D of the California Constitution and therefore the provisions
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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.
36)States that it is the intent of the Legislature to make water
efficiency improvements more affordable and promote the
acquisition, installation, and repair of those improvements by
allowing local agencies to establish a mechanism by which they
may help their water customers acquire install, and repair
water efficiency improvements on privately owned customer
properties.
FISCAL EFFECT: None
COMMENTS:
1)Marks-Roos. The Marks-Roos Local Bond Pooling Act of 1985
authorizes two or more public agencies to exercise their
common powers by signing joint powers agreements. This
agreement can create a JPA which allows local agencies to use
JPAs to finance infrastructure. The Marks-Roos Act authorizes
JPAs to issue bonds and loan the capital to local agencies to
finance public capital improvements, working capital,
liability, insurance needs, or other projects. Bonds issued
under Marks-Roos are secured by a variety of repayment
sources.
2)Bill Summary. This bill establishes the Water Bill Savings
Act which authorizes JPAs to provide funding to customers of a
local agency or its publicly owned utility for water
efficiency improvements on the customer's private property.
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This bill creates the process for establishing a financing
program; specifies the information that must be included in
the written agreement between a customer, a local agency or
its locally owned utility, and a JPA; provides reporting
requirements for outstanding efficiency charges; requires a
local agency or its publicly owned utility to enter into a
servicing agreement with a JPA; and, provides for the bond
issuance. Under this bill, following the establishment of a
financing program, a JPA would provide the customer of a local
agency or its publicly owned utility up front financing for a
water efficiency improvement that the customer would then
repay by an efficiency charge on the water bill. JPAs would
be authorized to pool revenues generated by water efficiency
charges paid by participating customers to issue bonds,
pursuant to the Marks-Roos Act. This bill is
author-sponsored.
3)Author's Statement. According to the author, "This bill will
create a broad scale regional response to California's water
supply issues by adding Section 6588 of the California
Government Code to extend existing Marks Roos Local Bond
Pooling Act authority used by JPAs to fund utility projects to
voluntary customer water efficiency projects installed on
private property and paid for by participants.
"The legislation will enable JPAs to fund project installation
with pooled revenue bonds, with debt service provided through
meter charges aggregated from participating properties rather
than all ratepayers. Just like a charge for water service,
individual meter charges are tied to the specific efficiency
services delivered at the meter location. Meter charges
designed to be less than the estimated utility bill savings
delivered by the associated project create immediate net cost
savings at a participating property.
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"Pay As You Save (PAYS) pilots established by the Bay Area
Regional Energy Network (BayREN) have already demonstrated the
potential for this water efficiency model, saving 20-33% of
participating customers' water use. Building upon these
successes, SB 1233 seeks to allow Local Governments the option
to: 1) Pool JPA Member Utilities into a single entity able to
raise capital; 2) Deliver centralized administration and
operation services to Member Utilities and their customers,
and; 3) Allow Member Utilities to aggregate customer on-bill
surcharges to repay the program for services received."
4)Financing Programs for Water Efficiencies. Under existing
law, local governments have several options to respond to
concerns about the barriers to the upfront costs of water
efficiency improvements on private property.
Modeled after a financing program in the City of Berkeley, in
2008, the Legislature granted the statutory authority to
cities and counties to provide up-front financing to property
owners to install renewable energy sources or energy
efficiency improvements that are permanently fixed to their
properties, which is repaid through the property tax bill.
The Legislature has expanded PACE (Property Assessed Clean
Energy) for residential and commercial property owners as an
option to pay for renewable energy upgrades, energy and water
efficiency retrofits, water efficiency improvements, and other
specified improvements for their homes or buildings. Local
agencies create PACE assessment districts or establish a
Community Facilities District (CFD), allowing the local agency
to issue bonds to finance the up-front costs of improvements.
In turn, property owners enter into a voluntary contractual
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assessment agreement with the local agency or agree to annex
their property into a CFD to re-pay the bonds via an
assessment or special tax, secured by a priority lien, on
their property tax bill. The intent of the program is that
the assessment or parcel tax remains with the property, even
if it is sold or transferred, and the improvements must be
permanently fixed to the property.
In California, there are several models available to local
governments in administering a PACE program. Only the
counties of Sonoma and Placer administer their own PACE
programs. The majority of local governments contract with a
private third-party or join a JPA, which contracts with a
private third-party to carry out their PACE programs.
Additionally, AB 2636 (Gatto), Chapter 825, Statutes of 2014,
created the CalConserve Water Use Efficiency Revolving Fund,
administered by the Department of Water Resources, to be a
sustainable funding source for water use efficiency projects.
The Legislature allocated $10 million to provide loans to
local agencies to provide water efficiency updates to eligible
residents at no upfront costs, and to local agencies to
implement water use efficiency loan programs through on-bill
financing.
5)Policy Considerations: The Committee may wish to consider the
following:
a) Existing Programs. When faced with the barriers of
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up-front costs for water efficiency improvements, local
agencies and homeowners have options to offer PACE or apply
to participate in the CalConserve Water Use Efficiency
Revolving Fund. Additionally, local agencies, like Windsor
or East Bay Municipal Utility District, may provide their
own on-bill financing programs or rebate programs. The
Committee may wish to ask the author to explain why these
existing programs are not sufficient.
b) Water Efficiency Improvements. This bill defines an
efficiency improvement to mean a water efficiency
improvement, as defined by the JPA. The only prohibition
is that an efficiency improvement cannot include living
vegetation. The Committee may wish to consider if
parameters should be established around what types of water
efficiency improvements that may be financed by this
program, especially in absence of any cost limitations or
requirements around a customer's ability to repay. The
Committee may
wish to consider if DWR should play a role in determining the
types of improvements eligible for the program, similar to
those available in the CalConserve Water Use Efficiency
Revolving Fund.
c) Consumer Protections. This bill does not include any
requirements that ensure a customer's ability to repay nor
any assurances that the savings realized on a customer's
utility bill, as a result of the improvement, will be equal
to or greater than the amount necessary to repay the loan.
The Committee may wish to consider if this should be a
requirement for participation in the financing program.
d) Written Agreement. This bill requires a written
agreement with the customer to include a description of the
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financial calculation used to determine the efficiency
charge, which may include a component of reasonable
administrative expenses incurred by the local agency or the
JPA. The Committee may wish to consider if the
administrative expense should be explicitly disclosed to
the consumer.
e) Oversight and Reporting. This bill requires a JPA to
report to CDIAC on debt issuance. Absent any additional
reporting requirements, the Committee may wish to consider
a requirement for participating JPAs to produce an annual
report, and to consider if additional oversight and
reporting requirements should be included in this financing
program.
f) Complaint Process. Under this bill, if a customer does
not pay an efficiency charge, the local agency or its
publicly owned utility are authorized to use their
established collection policies, including turning off
water service. This bill also authorizes the suspension of
payment, in the case of any failure of the improvement that
is not the fault of the customer, until an efficiency
improvement is repaired and returned to service. This bill
requires the JPA's decision on the reasons for failure of
the improvement to be final and conclusive. The Committee
may wish to consider if it should be the determination of
the local agency or, instead, its publicly owned utility
and if some type of process should be established by the
local agency or its publicly owned utility to consider
complaints.
6)Committee Amendments. Due to the policy considerations raised
above, the Committee may wish to ask the author to accept the
following Committee amendments to ensure consumer protections:
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a) DWR. The Committee may wish to consider lessons learned
from PACE, another voluntary financing program, which
authorizes local agencies to opt into a financing program
administered by a JPA. To provide additional oversight,
the Committee may wish to ask the author to accept an
amendment to place oversight of this financing program with
DWR. Additionally, Committee amendments would direct DWR
to utilize the work performed for the CalConserve program
to establish a list of eligible water efficiency
improvements, and to provide ongoing oversight and
monitoring of JPAs administering a financing program,
pursuant to this bill. The Committee may wish to ask the
author to accept amendments that would require JPAs to
report the creation of a financing program and direct DWR
to compile annual reporting requirements for the JPAs,
which would include, but not be limited to, the
participating local agencies,
number of written agreements entered into, water savings
achieved, the amount of up front financing provided, the
amount of revenues collected, water efficiency savings
achieved, and a copy of the CDIAC report, the complaint
process for customers and local agencies or publically
owned utilities, and the oversight mechanism for
contractors and marketing.
b) Resolution. For transparency purposes, the Committee
may wish to require both the legislative body and the JPA
in their resolutions to establish the program to identify
the types of water efficiency improvements offered.
c) Bill Neutrality. The Committee may wish to consider an
amendment to require the local agency or its publicly owned
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utility to exemplify to the customer, based on recent
billing history, that the savings achieved will be equal to
or greater than the cost of the loan repayment. This
requirement does not need to ensure future neutrality, as
conditions like usage by the customer may change, but
should be a requirement at the point the local agency or
its publicly owned utility enter into the written
agreement.
d) Disclosures. The Committee may wish to consider adding
explicit language to require that any administrative
expenses must be listed separately on the written agreement
to provide transparency. Additionally, the Committee may
wish to require that the written agreement include the
authorization granted to the local agency or its publicly
owned utility to use collection policies and all rights and
remedies, under existing law, which includes discontinuing
water service.
e) Determining Fault for an Improvement. The Committee may
ask the author to accept an amendment to provide the local
agency or its publicly owned utility, instead of the JPA,
the right to determine failure of a water efficiency
improvement.
7)Arguments in Support. Supporters argue that this bill is a
voluntary program and will create another tool for local
governments to respond to drought that is regionally
efficient, financially sustainable, and available to all
municipal utilities, large and small. Additionally, this bill
will help people save money on water, while reducing wasted
water, and provide a voluntary tool to meet state conservation
mandate.
8)Arguments in Opposition. None on file.
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REGISTERED SUPPORT / OPPOSITION:
Support
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
Mayors and Councilmembers' Association of Sonoma County
Nexus eWater, Inc.
School Project for Utility Rate Reduction
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Sierra Club California
Sonoma County Board of Supervisors
Sonoma County Regional Climate Protection Authority
Sonoma County Water Agency
StopWaste
Town of Windsor
Opposition
None on file
Analysis Prepared by:Misa Lennox / L. GOV. / (916)
319-3958
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