BILL ANALYSIS
AB 44
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Date of Hearing: August 30, 2010
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
AB 44 (Blakeslee) - As Amended: August 19, 2010
SUBJECT : Improvement Act of 1911: contractual assessments.
SUMMARY : Expands the use of voluntary contractual assessments
to include financing electricity purchase agreements.
The Senate amendments delete the Assembly version of this bill,
and instead:
1)Expand 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 an
electricity purchase agreement between the owner of the system
and the owner of the assessed property.
2)Require the electricity purchase agreement to contain all of
the following provisions:
a) The attached system is an eligible renewable energy
resource pursuant to the California Renewables Portfolio
Standard Program;
b) The term of the electricity purchase agreement is at
least as long as the term of the related assessment
contract;
c) The owner of the attached system agrees to install,
maintain, and monitor the system for the entire term of the
electricity purchase agreement;
d) The owner of the attached system cannot remove the
system before the end of the term of the contractual
assessment lien;
e) After installation, the electricity is purchased by a
single payment using the funds from the contractual
assessment program;
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f) The right to receive the electricity from the system 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 or judicial or non-judicial foreclosure or by any
other means;
g) The system must provide electricity to the assessed
property and to no other property or location. The
property owner must not use the electricity generated from
the system for any location other than the assessed
property;
h) The electricity purchase agreement 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; and,
i) The property owner is guaranteed the electric power from
the system, under the public agency criteria.
3)Require a public agency's legislative body to establish
criteria to ensure that a real property owner is guaranteed
the electricity from a distributed generation renewable energy
source if the owner of the system files for bankruptcy, to the
extent permitted by federal law, prior to authorizing public
agency officials and property owners to enter into voluntary
contractual assessments for financing the installation of
distributed generation renewable energy sources attached to a
residential, commercial, industrial, agricultural, or other
real property pursuant to an electricity purchase agreement.
4)Require a public agency's legislative body to find that any
electricity purchase agreement funded with a contractual
assessment is structured, to the extent permitted by federal
law, to provide protections to the property owner in the event
of a bankruptcy of the system's owner; the protections may
include the use of a special purpose entity or other adequate
security.
EXISTING LAW :
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1)Authorizes public agencies, as defined, in California to
designate areas within which legislative bodies and willing
property owners may enter into contractual assessments to
finance the installation of distributed generation renewable
energy sources or energy or water efficiency improvements.
2)States legislative intent that the authorization listed above
should be used to finance the installation of distributed
generation renewable energy sources and energy or water
efficiency improvements that are fixed to residential,
commercial, industrial, agricultural, and other real property.
3)States that for the purpose of financing the installation of
water efficiency improvements, "public agency" means a city,
county, city and county, municipal utility district, community
services district, sanitary district, sanitation district, or
water district.
4)Prohibits the authorization from being used to finance the
purchase or appliances or installations not fixed to real
property.
5)Makes findings and declarations concerning the need for energy
and water efficiency improvements in order to address global
climate change, the deterrent effect of high up-front costs on
making those improvements, and the need to authorize an
alternative procedure for authorizing assessments to finance
the cost of energy efficiency improvements in order to make
them more affordable and promote their installation.
6)Declares that a public purpose will be served by a contractual
assessment program that provides the legislative body of
specified public agencies with the authority to finance the
installation of distributed generation renewable energy
sources or energy or water efficiency improvements to
residential, commercial, industrial, agricultural and other
real property.
7)Authorizes the legislative body to determine that it would be
convenient, advantageous, and in the public interest to
designate an area within the public agencies' jurisdiction,
which may encompass the entire jurisdiction or a lesser
portion, within which authorized legislative body officials
and property owners may enter into contractual assessments to
finance the installation of distributed generation renewable
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energy sources or energy or water efficiency improvements that
are fixed to the property.
8)States that the term "energy efficient improvements" includes,
but is not limited to, the installation of distributed
generation renewable energy resources; and, that any energy
efficiency improvement must be fixed to the real property.
9)Requires that the resolution adopted by the governing body
direct the appropriate city official to prepare a report
including specified provisions.
10)Provides that, upon the written consent of an authorized city
official, the proposed arrangements for financing the program
pertaining to the installation of distributed generation
renewable energy resources, energy or water efficiency
improvements fixed to real property may authorize the property
owner to purchase directly the related equipment and materials
and to contract directly for the work on the property owner's
residential, commercial, industrial, and other real property.
11)Specifies that assessments may be levied only with the free
and willing consent of the owner of each lot or parcel on
which an assessment is levied at the time the assessment is
levied.
12)States that assessments levied pursuant to this chapter, and
the interest and any penalties thereon shall constitute a lien
against the lots and parcels of land on which they are made
until they are paid.
13)Requires that a specified city official enter into
consultations with the office of the county auditor or
controller in order to reach agreement on what additional
fees, if any, will be charged to the city or county for
incorporating the proposed contractual assessments into the
assessments of the general taxes of the city or county on real
property, and to include a report on the results of these
consultations in the report to be submitted to the legislative
body of the city.
14)Requires a legislative body to publish notice of a hearing
regarding contractual assessments.
15)Defines "city" for purposes of these sections as a city,
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county, or city and county.
16)Defines "water district" as any district or other political
subdivision, other than a city or county, a primary function
of which is the irrigation, reclamation, or drainage of land
or the diversion, storage, management, or distribution of
water primarily for domestic, municipal, agricultural,
industrial, recreation, fish and wildlife enhancement, flood
control, or power production purposes.
17)Specifies for the purpose of financing the installation of
distributed generation renewable energy sources or energy
efficiency improvements, "public agency" means a county, city,
city and county, or a municipal utility district, an
irrigation district, or public utility district that owns and
operates an electric distribution system.
18)Authorizes, under the Mello-Roos Community Facilities Act of
1982, a community facilities district to pay for work deemed
necessary to bring buildings or real property, including
privately owned buildings or real property, into compliance
with seismic safety standards or regulations. Only work
certified as necessary to comply with seismic safety standards
or regulations by local building officials may be financed.
AS PASSED BY THE ASSEMBLY , this bill created incentives for
investor owned utilities and non-utility companies to build
energy storage devices that store energy produced from renewable
facilities.
FISCAL EFFECT : Unknown
COMMENTS : AB 811 (Levine), Chapter 159, Statutes of 2008,
proposed to further the public interest of addressing climate
change through energy conservation efforts by authorizing cities
to provide up-front financing to property owners to install
solar or other renewable energy-generating devices or make
specified energy efficiency improvements to their properties
through a system of contractual assessments. Prior to AB 811,
contractual assessments were only authorized for certain types
of public works projects. Under contractual assessments, the
property owner or owners within a designated area choose to
assess themselves for the cost of energy efficiency improvements
or public works projects (i.e., under grounding of power lines
or installation of streetlights). The local government then
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provides the up-front funds for the project, and the property
owners pay an annual assessment until those funds, plus
interest, are repaid. The underlying purpose is to create a
means by which a project that provides both a public benefit and
an incidental benefit to particular property owners can be
financed without imposing the cost on property owners in other
parts of the city who derive no benefit.
AB 474 (Blumenfield), Chapter 444, Statutes of 2009, added water
efficiency improvements to the list of improvements that can be
paid for through a contractual assessment between a willing
property owner and a public agency. 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.
Support arguments: Supporters state that the cost associated
with purchasing renewable energy improvements can be very cost
prohibitive for many property owners. Even with the use of
contractual assessments many property owners still cannot make
the costs and the projected savings pencil out. Supporters
believe that by allowing the third-party provider to own the
actual system, where they are able to receive the bulk tax
credits and discounts, more property owners will be able to
participate in renewable energy programs. Supporters argue that
providing additional options for the financing of these
important projects is vital to reducing the use of electricity
from the grid.
Opposition arguments: Opposition could argue that this measure
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adds yet another improvement to the laundry list of improvements
that a local government can finance through contractual
assessments; the Legislature may wish to consider whether it is
prudent to continue to authorize local governments to become a
glorified bank to help pay for on-site property improvements.
The Legislature may also wish to consider if it would be wise to
place some type of cap on the amount of contractual assessments
a local government may enter into at any one time in order to
reduce the financial risk for the local agency.
REGISTERED SUPPORT / OPPOSITION :
Support
SunRun [SPONSOR]
County of San Luis Obispo
Natural Resources Defense Council
Solar Alliance
Opposition
None on file
Analysis Prepared by : Katie Kolitsos / L. GOV. / (916)
319-3958