BILL ANALYSIS
Bill No: AB
1873
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2009-2010 Regular Session
Staff Analysis
AB 1873 Author: Huffman
As Amended: June 23, 2010
Hearing Date: June 29, 2010
Consultant: Art Terzakis
SUBJECT
Property Assessed Clean Energy Bonds
DESCRIPTION
AB 1873 authorizes the State Treasurer, the California
Public Employees' Retirement System (CalPERS), and the
State Compensation Insurance Fund (SCIF) to invest in
Property Assessed Clean Energy (PACE) bonds. Specifically,
this measure:
1. Authorizes the State Treasurer, CalPERS, and the SCIF
to purchase PACE bonds.
2. Adds a new provision to the Joint Exercise of Powers
Act authorizing a joint powers authority (JPA) to
purchase, and a local agency to sell, the right, title,
and interest in an assessment contract pursuant to an
agreement between the JPA and the local agency.
EXISTING LAW
Existing law 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.
Existing law declares legislative intent that the
AB 1873 (Huffman) continued
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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. Existing law
prohibits the authorization from being used to finance the
purchase of appliances or installations not fixed to real
property.
Existing law requires the Treasurer to invest or make
deposits in banks and savings and loan associations of
revenues in the Pooled Money Investment Account in
accordance with designations specified by the Pooled Money
Investment Board.
The Board of Administration of CalPERS is authorized to
make any investment authorized by law, including, among
others, an investment in real property.
The SCIF is authorized to purchase general obligation bonds
or other evidence of indebtedness issued by the state.
The Joint Exercise of Powers Act authorizes any separate
entity created pursuant to that act to invest any money in
the treasury that is not required for the immediate
necessities of the agency or entity, as the agency or
entity determines is advisable.
BACKGROUND
PACE Program: This program permits local public agencies
and utility districts to provide up-front financing to
property owners to install solar or other renewable
energy-generating devices or make specified water or energy
efficiency improvements to their properties. This financing
mechanism was first used by the City of Berkeley through
its Charter Cities authority, and then authorized statewide
by AB 811 (Levine), Chapter 159 of 2008 and AB 474
(Blumenfield), Chapter 444 of 2009. Under the program, a
city, county, or other public agency issues bonds and uses
the proceeds to make loans to property owners to finance
energy retrofits. These loans are repaid by the property
owner over 20-30 years via an annual assessment on the
owner's property tax bill. The assessment remains on the
property even if it is sold or transferred. From the
property owner's perspective, the added property tax
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assessments are partly or fully offset by energy savings
resulting from the retrofit. The loan repayments from the
property owners are dedicated by the municipalities to the
repayment of the revenue bonds.
Purpose of AB 1873: According to the author's office, this
measure is simply intended to expand the AB 811 (Levine)
program throughout the state by authorizing the State
Treasurer, CalPERS and the SCIF to purchase local PACE
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. In addition this measure would allow a JPA to
act as a conduit for the loans, allowing local governments
to sell the loans to the private market. The author's
office points out that Prop. 13 prohibits a local
government from selling loans directly to a private
investor (e.g., bank) so this would set up a process
whereby they can be transferred to an existing JPA and then
sold to private investors.
Proponents contend that this measure will make contractual
assessments more attractive to local governments and
homeowners by reducing the cost of the loans made to
homeowners to finance energy and water efficiency
improvements. Proponents also emphasize that making these
loan programs more attractive and encouraging local
governments to use them will expand job growth at a time we
most need it and also help the state meet its energy
efficiency and renewable energy goals.
PRIOR/RELATED LEGISLATION
SBX8 26 (Pavley) Eighth Extraordinary Session of 2010.
Would have established a state-financed
reserve for the PACE program by transferring funds from the
Renewable Resource Trust Fund. (Failed Passage on Assembly
Floor)
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.
AB 811 (Levine) Chapter 159, Statutes of 2008. Authorized
cities to provide up-front financing to property owners to
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install solar or other renewable energy-generating devices
or make specified energy efficiency improvements to their
properties through a system of contractual assessments.
SUPPORT: As of June 25, 2010:
Environmental Defense Fund (co-sponsor)
Sonoma County (co-sponsor)
Breathe California
Sierra Club
California Chamber of Commerce
California Building Industry Association
California Business Properties Association
Planning and Conservation League
State Building & Construction Trades Council
City of Palm Desert
Sonoma County Water Agency
Vote Solar
OPPOSE: None on file as of June 25, 2010.
FISCAL COMMITTEE: Senate Appropriations Committee
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