BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 44|
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THIRD READING
Bill No: AB 44
Author: Blakeslee (R)
Amended: 8/19/10 in Senate
Vote: 21
SENATE LOCAL GOVERNMENT COMMITTEE : 3-2, 6/30/10
AYES: Cox, Kehoe, DeSaulnier
NOES: Aanestad, Price
ASSEMBLY FLOOR : Not relevant
SUBJECT : Improvement Act of 1911: contractual
assessments
SOURCE : SunRun
DIGEST : This bill expands the use of voluntary
contractual assessments to include financing electricity
purchase agreements by expanding the definition of
"permanently fixed to real property" to include systems
attached to a residential, commercial, industrial,
agricultural, or other real property pursuant to a power
purchase agreement or lease between the owner of the system
and the owner of the assessed property. The electricity
purchase agreement must contain specified provisions.
Senate Floor Amendments of 8/19/10 (1) add leases to the
types of agreements that can be financed with contractual
assessment, (2) clarify the bill's cap on property taxes
and assessments, (3) ensure that property owners receive
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electric power over the life of a lien, and (4) avoid
potential chaptering-out conflicts with other bills.
ANALYSIS : Existing law authorizes only with the free and
willing consent of affected property owners, public
agencies to use "voluntary contractual assessments" to
finance:
1. Public improvements to developed parcels (SB 837
[McQuorquodale], Chapter 1385, Statutes of 1987).
2. Renewable energy sources or energy efficiency
improvements that are permanently fixed to real property
(AB 811 [Levine], Chapter 159, Statutes of 2008).
3. Water efficiency improvements that are permanently fixed
to real property (AB 474 [Blumenfield], Chapter 444,
Statutes of 2009).
To use voluntary contractual assessments, a public agency's
legislative body must adopt a resolution, which:
1. Determines that it would be convenient, advantageous,
and in the public interest to designate an area within
which officials and property owners may enter into
contractual assessments and make related financing
arrangements.
2. Identifies the kinds of public works which may be
financed.
3. Describes the area where contractual assessments may be
used.
4. Describes the proposed financing arrangements, including
criteria for determining the underwriting requirements.
5. States the time and place for a public hearing.
6. Directs an official to prepare a detailed report
about the contractual assessment program and consult
with the county auditor and county controller
regarding fees.
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This bill prohibits a property owner's participating in a
voluntary contractual assessment program if participation
would result in the total amount of annual property taxes
and assessments exceeding five percent of the property's
market value, as determined at the time of approval of the
owner's contractual assessment.
This bill clarifies that the statute's provisions do not
void or otherwise release a property owner from voluntary
contractual assessment obligations, particularly in the
event that the total amount of annual property taxes and
assessments exceeds five percent of a property's appraised
value after a property owner has entered into a contractual
assessment.
This bill expands the use of voluntary contractual
assessments to include financing electricity purchase
agreements by expanding the definition of "permanently
fixed to real property" to include systems attached to a
residential, commercial, industrial, agricultural, or other
real property pursuant to a power purchase or lease
agreement between the owner of the system and the owner of
the assessed property. The electricity purchase agreement
must contain these provisions:
1. The attached system is an eligible renewable energy
resource pursuant to the California Renewables Portfolio
Standard Program.
2. The term of the electricity purchase agreement is at
least as long as the term of the related assessment
contract.
3. The owner of the attached system agrees to install,
maintain, and monitor the system for the entire term of
the electricity purchase agreement.
4. The owner of the attached system cannot remove the
system before the end of the term of the contractual
assessment lien.
5. After installation, the power purchase agreement or
lease is paid in full using the funds from the
contractual assessment program.
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6. The right to receive the electricity from the system
through a power purchase agreement or lease or the right
to the system itself, is tied to the ownership of the
assessed real property and must be automatically
transferred with the title to the real property whether
the title is transferred by voluntary sale, judicial or
nonjudicial foreclosure or by any other means.
7. The power purchase agreement or lease identifies the
public agency that is a party to the assessment contract
on the real property as a third-party beneficiary of the
electricity purchase agreement until the assessment lien
is fully paid and, only until then, prohibits amendments
to the electricity purchase agreement without the public
agency's consent.
8. Specifies that power purchase agreements or leases must
include two provisions to ensure that a property owner
is guaranteed electric power from the system for the
length of the lien:
A. The system cannot be removed if the owner of the
attached system is not performing obligations under
the contract.
B. The owner of the attached system must be a
bankruptcy remote special purpose entity that is
bankruptcy remote and meets all of the following
conditions:
(1) It does not engage in any business
other than owning the attached systems and
entering into electricity contracts with the
homeowner.
(2) It has no material debt.
(3) Its contracts are either entered into
with unrelated third parties or have terms
negotiated at arms length.
Comments
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Since the 2008 Levine bill took effect, communities
throughout California have developed financing programs to
help property owners pay for renewable energy improvements.
Financing solar power through electricity purchase
agreements offers significant advantages over financing
individually-owned solar systems. Electricity purchase
agreements alleviate the property owner's responsibility
for maintaining the system and provide incentives for the
third-party service-provider to operate systems at maximum
efficiency. Third-party providers can also take full
advantage of federal tax credits and accelerated
depreciation schedules, significantly reducing the costs of
solar systems. Economies of scale also allow third-party
providers to deliver solar power at lower costs. This bill
improves on the Levine bill's success and benefits property
owners by combining voluntary contractual assessment
programs' low-cost financing with electricity purchase
agreements' advantages over individually-owned solar
systems.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 8/20/10)
SunRun (source)
AGB:do 8/22/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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