BILL ANALYSIS
AB 1873
Page 1
Date of Hearing: April 19, 2010
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
AB 1873 (Huffman) - As Amended: April 5, 2010
SUBJECT : Contractual assessments: financing bonds:
improvements.
SUMMARY : Authorizes the Air Resources Board (ARB) to use AB 32
fee revenues to purchase bonds issued to finance the
installation of distributed generation renewable energy sources
or energy or water efficiency improvements through local
property assessed clean energy (PACE) programs, upon
appropriation, and makes related findings.
EXISTING LAW :
1)Requires ARB, pursuant to California Global Warming Solutions
Act (AB 32), to adopt a statewide GHG emissions limit
equivalent to 1990 levels by 2020 and adopt regulations to
achieve maximum technologically feasible and cost-effective
GHG emission reductions. Among its provisions, AB 32
authorizes ARB to adopt fees to be paid by the sources of GHG
emissions regulated pursuant to AB 32. Fee revenues must be
deposited in the Air Pollution Control Fund and may be spent
for purposes of carrying out AB 32.
2)Authorizes cities, counties and other public agencies 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.
3)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.
Prohibits the authorization from being used to finance the
purchase of appliances or installations not fixed to real
property.
4)Makes findings and declarations concerning the need for energy
and water efficiency improvements in order to address global
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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.
FISCAL EFFECT : Unknown
COMMENTS :
1)Background on AB 32 fees. AB 32 authorizes ARB to adopt via
regulation "a schedule of fees to be paid by the sources of
greenhouse gas emissions" and deposit revenues into the Air
Pollution Control Fund. AB 32 also authorizes, but does not
require, the use of market-based mechanisms to achieve GHG
emission reductions, provided specified conditions are met.
Thus far, ARB has proposed only to use its fee authority for
the limited purpose of funding its own and other state
agencies' AB 32 implementation costs, and to repay loans of
other state funds that previously have been approved by the
Legislature for these purposes. The fee revenue necessary for
these purposes is estimated at $55 million per year. It's
possible that a more expansive fee on GHG emitters, the
auction of GHG emission allowances, or another market
mechanism will produce significantly higher revenues over the
course of AB 32 implementation.
2)Background on PACE programs. Under PACE programs, the
property owner or owners within a designated area choose to
assess themselves for the cost of energy efficiency
improvements or distributed renewable energy, such as solar.
The local government then 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.
Charter cities have broad authority to create special
assessment districts. Berkeley was the first city in the
nation to launch a PACE program and used a special assessment
district to establish a financing mechanism in which
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individual property owners can voluntarily participate and
repay improvements through a special property tax assessment.
AB 811 (Levine), Chapter 159, Statutes of 2008, authorized
general law 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 (e.g., under
grounding of power lines or installation of streetlights).
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.
3)Purpose of the bill. According to the author:
This bill authorizes ARB to use proceeds of AB 32 auction to
purchase local AB 811 bonds, thereby lowering the interest
rates that local governments must charge homeowners, while
simultaneously creating a new, secure income stream for the
state of California. These local bonds have an extremely low
default rate and therefore represent a good investment for the
state. Because the assessment liens that secure the bonds
have the same super priority as property tax liens, this is a
very secure investment for the state.
However, the bill authorizes the use of AB 32 fee revenues,
rather than hypothetical revenues that may result from the
auction of emissions allowances under a future cap and trade
program. While auction revenues represent a potentially very
large source of revenue, the existing fee revenue is too small
to provide for purchasing bonds, which may also be considered
an inappropriate, or illegal, use of the fee. To be
consistent with the author's intent, the author and the
committee may wish to consider amending the bill to authorize
ARB to use revenues collected pursuant to a market-based
compliance mechanism adopted pursuant to AB 32, rather than
fee revenues.
The bill also excludes Berkeley First and other PACE programs
adopted by charter cities by referencing only the provision of
existing law authorizing contractual assessments used by
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general law cities, counties and other public agencies. The
author and the committee may wish to consider amending the
bill to permit ARB to purchase PACE bonds issued by charter
cities.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
None on file
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092