BILL ANALYSIS
SB 77
Page 1
( Without Reference to File )
SENATE THIRD READING
SB 77 (Pavley)
As Amended March 22, 2010
2/3 vote. Urgency
SENATE VOTE : Vote not relevant
APPROPRIATIONS 10-3
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|Ayes:|Fuentes, Ammiano, | | |
| |Bradford, Coto, De Leon, | | |
| |Hall, Nielsen, Skinner, | | |
| |Solorio, Torlakson | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Conway, Miller, Norby | | |
| | | | |
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SUMMARY : Creates a state Property Assessed Clean Energy (PACE)
Reserve program to assist local jurisdictions in financing the
installation of distributed generation of renewable energy
sources or energy or water efficiency improvements.
Specifically, this bill :
1)Requires the California Alternative Energy and Advanced
Transportation Financing Authority (CAEATFA) to develop and
administer a PACE Reserve program.
2)Specifies that the PACE Reserve program is to be used to
reduce the overall costs to property owners of PACE bonds
issued by a local jurisdiction.
3)Defines PACE bond as a bond that is secured by voluntary
contractual assessment on a property or through a voluntary
special tax, which is levied through a charter city's charter
authority, for the purposes of financing the installation of
renewable energy sources, or energy or water efficiency
improvements.
4)Establishes the following criteria for participation in the
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PACE Reserve program:
a) The interest rate on the PACE bond shall not exceed a
percentage as determined by the CAEATFA;
b) Minimum legal local structure and credit underwriting
criteria as determined by the CAEATFA are met;
c) Proceeds of the PACE bonds are used to finance qualified
energy and water efficiency and clean energy improvements;
and,
d) The improvement financed is for a residential project of
three or fewer units, or a commercial project that costs
less than $25,000.
5)Requires a local jurisdiction applicant to submit to CAEATFA
an application providing a detailed description of the PACE
program and a description of the transactional costs
associated with the PACE bond issuance, including
transactional costs.
6)Requires CAEATFA to evaluate the following conditions when
determining eligibility of an applicant's PACE program:
a) Loan recipients are legal owners of underlying property;
b) Loan recipients are current on mortgage and property tax
payments;
c) Loan recipients are not in default or in bankruptcy
proceedings;
d) Loans are for less than 10% of the value of the
property;
e) The property is within the geographical boundaries of
the PACE program;
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f) The program offers financing for energy efficiency
improvements; and,
g) Improvements financed by the program follow applicable
standards for energy efficiency retrofit work, including
any guidelines adopted by the Energy Resources Conservation
and Development Commission.
7)Requires CAEATFA to adopt best practices for the PACE program.
8)Requires CAEATFA to consider the following factors when
evaluating an application:
a) The use of PACE best practices to qualify eligible
properties for participation in underwriting the PACE
program;
b) The cost efficiency of the local jurisdiction's PACE
program, including bond issuance;
c) The projected number of jobs created by the PACE
program;
d) The local jurisdiction's PACE program requirements for
quality assurance and consumer protection as related to
achieving efficiency and clean energy production;
e) The mechanism by which savings produced by this program
are passed onto the property owners; and,
f) Any other factors deemed appropriate by CAEATFA.
9)Requires CAEATFA to review a local jurisdiction's PACE bond
issuance, including, but not limited to, indenture, trust
agreement, and bond documents.
10)States that when CAEATFA is satisfied that the bond documents
are consistent with the requirements of the PACE Reserve
program, CAEATFA shall advance to the local jurisdiction
applicant or the applicant's bond trustee the amount approved
by CAEATFA for use in the PACE bond reserve fund held by the
local jurisdiction.
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11)Requires CAEATFA to enter into an agreement with the local
jurisdiction applicant regarding the creation and operation of
the reserve fund, including the manner in which the Authority
will be repaid for the moneys disbursed.
12)Appropriates $50 million through January 1, 2015, from the
Renewable Resource Trust Fund to fund the program.
13)Specifies that the moneys appropriated shall remain in the
Renewable Resources Trust Fund until the funds are needed by
CAEATFA.
14)Authorizes up to $300,000 to be used by CAEATFA to cover
administrative costs.
15)Specifies that all repayments of money disbursed shall be
deposited to the Renewable Resources Trust Fund.
16)Requires CAEATFA to report back to the Legislature annually
on the progress of the PACE Reserve fund program.
17)Authorizes CAEATFA to purchase, with proceeds of its bonds or
its revenue, PACE bonds issued by a local jurisdiction.
18)Specifies that bonds purchased by CAEATFA may be held by
CAEATFA or sold off to other public or private entities.
19)Contains an urgency clause allowing this bill to take effect
immediately.
EXISTING LAW :
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,
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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 CAEATFA 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
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.
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9)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.
10)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.
11)Specifies that the collection of assessments in the same
manner and at the same time as the general taxes of the city
on real property are payable.
12)Creates CAEATFA for the purpose of promoting the development
and utilization of alternative energy sources and the
development and commercialization of advanced transportation
technologies. It is authorized to issue up to $1 billion in
revenue or prepayment bonds to fund projects.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)Appropriates $50 million from the Renewable Resources Trust
Fund [special fund] for the PACE Reserve program [special
fund].
2)CAEATFA estimates annual costs of $300,000 to administer the
program. Initial costs would be funded from the Renewable
Resources Trust Fund and ongoing costs would be recovered from
fees paid by municipalities participating in the reserve
program.
COMMENTS : CAEATFA was originally created in 1980 with an
authorization of $200 million in revenue bonds to finance
projects utilizing alternative sources of energy, such as
cogeneration, wind and geothermal power. In 1994 its charge was
expanded to include the financing of "advanced transportation"
technologies.
During the energy crisis of 2001, CAEATFA's authority was again
expanded, this time to provide financial assistance to public
power entities, independent generators, and others for new and
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renewable energy sources, and to develop clean distributed
generation.
CAEATFA consists of five members: the Director of Finance, the
Chairman of the California Energy Commission, the President of
the Public Utilities Commission, the State Controller, and the
State Treasurer. Its current mission is to provide financing
for facilities that use alternative energy sources and
technologies. CAEATFA also provides financing for facilities
needed to develop and commercialize advanced transportation
technologies that conserve energy, reduce air pollution, and
promote economic development and jobs.
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
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.
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 individual property
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owners can voluntarily participate and repay improvements
through a special property tax assessment.
According to the author's office, the goal of this measure is to
lower the costs to local governments and property owners in the
financing of PACE bonds. The author also believes that the bill
will enhance receptivity of the PACE bonds for the investors and
the attractiveness of PACE improvements to home and business
owners by creating a state program to standardize the programs
and lower financing costs.
This bill would allow CAEAFTA to purchase locally-issued PACE
bonds. This will allow local jurisdictions to sell bonds to
CAEAFTA at a lower rate and then CAEAFTA could pool all the
bonds together and sell those out into the market at lower
rates.
This bill appropriates $50 million from the Renewable Resources
Trust Fund (Fund) to CAEAFTA to fund the PACE Reserve Program.
Currently the Fund provides funding for placing solar panels on
new home construction projects. However, given the steep
decline in new home construction in California this Fund has sat
stagnant for the past few years. Under statute this Fund is set
to sunset in 2012. The Fund receives its revenues from payments
received from utility users.
Analysis Prepared by : Katie Kolitsos / L. GOV. / (916)
319-3958 FN:
0003842