BILL ANALYSIS
SENATE LOCAL GOVERNMENT COMMITTEE
BILL NO: SB 1340 HEARING: 8/27/10
AUTHOR: Kehoe FISCAL: Yes
VERSION: 8/23/10 CONSULTANT:
Weinberger
BENEFIT ASSESSMENTS FOR ELECTRIC CAR RECHARGING
Background and Proposed Law
To help electric vehicle owners pay for the costs of
installing electric vehicle charging infrastructure, Senate
Bill 1340 amends statutes governing three financing
programs:
I. Voluntary contractual assessments . A benefit
assessment is an involuntary charge that property owners
pay for a public improvement or service that provides a
special benefit to their property. The amount of the
assessment must be directly related to the amount of the
benefit that the property receives. Benefit assessments
can finance public projects like flood control, street
improvement, streetlights, and public landscaping.
As an alternative to benefit assessments, and only with the
free and willing consent of affected property owners,
public agencies can use "voluntary contractual assessments"
to finance:
Public improvements to developed parcels (SB 837,
McQuorquodale, 1987).
Renewable energy sources or energy efficiency
improvements that are permanently fixed to real
property (AB 811, Levine, 2008).
Water efficiency improvements that are permanently
fixed to real property (AB 474, Blumenfield, 2009).
To use voluntary contractual assessments, a public agency's
legislative body must adopt a resolution, which:
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.
Identifies the kinds of public works which may be
financed.
Describes the area where contractual assessments may
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be used.
Describes the proposed financing arrangements,
including criteria for determining the creditworthiness
of a property owner.
States the time and place for a public hearing.
Directs an official to prepare a detailed report
about the contractual assessment program and consult
with the county auditor and county controller regarding
fees.
The report on the proposed assessment program must contain:
A map of the area where contractual assessments will
be offered.
A draft contract specifying the terms and conditions.
A list of the types of facilities and improvements
which may be financed.
The official authorized to enter into contractual
assessments on behalf of the county or city.
The maximum aggregate dollar amount of contractual
assessments.
A method for prioritizing requests from property
owners for financing.
A plan for raising a capital amount required to pay
for work performed pursuant to contractual assessments.
Information about the county auditor's and county
controller's fees.
The legislative body must give written notice to all water
or electricity providers within a proposed area where
voluntary contractual assessments will be offered. After
holding a public hearing, the legislative body may adopt a
resolution confirming the program as detailed in the
report, may confirm a modified version of the report, or
may abandon the proceedings.
The legislative body must designate an office to:
Prepare the annual roll of assessment obligations on
property subject to a voluntary contractual assessment.
Establish procedures for responding to inquiries
concerning estimated voluntary contractual assessment
liabilities.
The legislative body must provide for documents to be
recorded with the county recorder, providing notice of a
contractual assessment on real property.
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Senate Bill 1340 authorizes the use of contractual
assessments to finance the installation of electric vehicle
charging infrastructure that is permanently fixed to
residential, commercial, industrial, agricultural, or other
real property.
Senate Bill 1340 prohibits a property owner from
participating in a voluntary contractual assessment program
if participation would result in the total amount of annual
property taxes and assessments exceeding 5% of the
property's market value, as determined at the time of
approval of the owner's contractual assessment. Senate
Bill 1340 requires a public agency to adopt a report
containing a statement of policies that include a brief
description of criteria for determining the underwriting
requirements, and safeguards that will be used to ensure
that the total annual property tax and assessments on the
property will not exceed 5% of the property's market value,
as determined at the time of approval for the owner's
contractual assessment. The bill specifies that it does
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 5% of a property's appraised value
after a property owner has entered into a contractual
assessment.
Senate Bill 1340 specifies that, for financing the
installation of electric vehicle charging infrastructure,
"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.
Senate Bill 1340 contains legislative findings and
declarations regarding the need to finance electric vehicle
charging infrastructure using contractual assessments.
II. Property Assessed Clean Energy bond reserve program .
The California Alternative Energy and Advanced
Transportation Financing Authority (CAEATFA), within the
State Treasurer's Office, administers the Property Assessed
Clean Energy (PACE) Bond Reserve Program (SB 77, Pavley,
2010). This new program allows CAEATFA to use a $50
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million fund to finance reserves for PACE bonds, which are
bonds secured by voluntary contractual assessments or
voluntary special taxes to finance the installation of
distributed generation of renewable energy sources or
energy or water efficiency improvements. Additionally,
CAEATFA can pool local PACE bonds by purchasing them from
individual municipalities, combining them with other PACE
bonds, and selling the pooled bonds through public or
negotiated sales. Using the bond reserve fund and bond
pooling, CAEATFA can lower the costs of both PACE bonds and
the underlying PACE loans.
Senate Bill 1340 makes bonds secured by voluntary
contractual assessments or voluntary special taxes to
finance electric vehicle charging infrastructure eligible
for inclusion in the PACE Bond Reserve Program.
III. Alternative and Renewable Fuel and Vehicle Technology
Program . The California Energy Commission (CEC)
administers the Alternative and Renewable Fuel and Vehicle
Technology (ARFVT) Program (AB 118, Nu?ez, 2007). Upon
appropriation by the Legislature, the ARFVT Program
provides revolving loans, loan guarantees, loans, or other
appropriate funding measures to specified entities to
develop and commercialize technologies for renewable and
nonpetroleum fuels that help to achieve the state's climate
change goals.
The ARFVT Program can fund:
Alternative and renewable fuel infrastructure,
fueling stations, and equipment.
Projects to develop and improve vehicle technology
that provide for better fuel efficiency and lower
greenhouse gas emissions.
Alternative and renewable fuel projects to develop,
improve, demonstrate, deploy, produce, and
commercialize alternative and renewable fuels, plus
reduce the overall carbon footprint of these fuels.
Vehicle retrofit projects to create higher fuel
efficiencies.
Infrastructure projects that promote alternative and
renewable fuel infrastructure development for existing
fleets, public transit, and existing transportation
corridors.
Workforce training programs related to alternative
fuels and vehicle technology.
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Block grants administered by not-for-profit
technology consortia for specified purposes.
Analyses and assessments performed by state agencies
to determine the impacts of increasing the use of
low-carbon transportation fuels and technologies.
Senate Bill 1340 allows the ARFVT Program to fund a program
that provides funding for homeowners who purchase an
electric vehicle to offset costs associated with modifying
electrical sources to include an in-home electric vehicle
charging station. Senate Bill 1340 requires the CEC to
consider funding criteria to maximize the public benefit of
the program.
Comments
1. Public benefits, public financing . Because
transportation produces 38% of California's greenhouse gas
emissions, replacing gasoline-fueled vehicles with electric
vehicles is vital to improving air quality and achieving
the state's greenhouse gas reduction goals. However, the
costs of upgrading residential electrical systems and
installing electric vehicle charging stations, which can
range from a few hundred dollars to several thousand
dollars, may deter consumers from buying electric vehicles.
Because commercial loans for electrical upgrades can be
expensive, local officials want to accelerate the
installation of electric vehicle charging infrastructure by
loaning money to private property owners at below-market
rates. SB 1340 provides state and local officials with
additional tools to help property owners pay for electrical
upgrades and infrastructure that improve air quality and
reduce greenhouse gas emissions.
2. Lien on me . Some federal housing finance regulators
worry that voluntary contractual assessment programs may
overburden property owners with debt, raising risks of
default. Mortgage lenders and regulators are concerned
because voluntary contractual assessment financing is
secured with a tax lien that has superior priority over
first mortgages. In a July 6, 2010 statement, the Federal
Housing Finance Agency (FHFA) urged state and local
governments to reconsider and suspend PACE financing
programs because the liens "pose unusual and difficult risk
management challenges for lenders, servicers, and mortgage
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securities investors." Program advocates respond that
financing energy and water improvements may pose less risk
of default than traditional public financing because lower
utility bills offset a property owner's financing costs.
However, SB 1340 authorizes financing for electric vehicle
recharging infrastructure, which do not produce offsetting
cost savings. The Committee may wish to consider whether,
by authorizing voluntary contractual assessment financing
for improvements that don't produce cost savings, SB 1340
invites greater scrutiny by federal regulators and mortgage
lenders.
3. It's not your business . Despite the Legislature's
approval of the Levine and Blumenfield bills, some critics
still say that local governments should not be in the
business of providing public financing for seismic projects
on private property. If private property owners want to
finance the large up-front costs of electrical system
upgrades and infrastructure, they ought to rely on private
sector lenders, just as they would finance roofs, decks,
other types of property improvements. Tax-exempt
financing, backed by priority government liens, to pay for
electrical vehicle charging stations that primarily benefit
private property is inconsistent with the fundamental
purpose of issuing government debt.
4. Too much, too soon ? Many communities are just
beginning to use voluntary contractual assessments for the
energy and water improvements authorized by the Levine and
Blumenfield bills. Legislators can anticipate additional
proposals to expand voluntary contractual assessment
financing in the future. Fire safety improvements or
improvements to access for people with disabilities, for
example, could also provide sufficient public benefits to
justify financing using voluntary contractual assessments.
The Committee may wish to consider waiting to evaluate
local governments' experience financing energy and water
improvements before further expanding the list of
improvements that property owners can finance with
voluntary contractual assessments.
5. Related legislation . At its June 30 hearing, the
Senate Local Government Committee approved three other
bills that expand the use of contractual assessments:
AB 44 (Blakeslee), which lets local officials use
contractual assessments to finance distributed
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generation renewable energy systems attached to real
property pursuant to a power purchase agreement or
lease.
AB 2182 (Huffman), which lets local officials use
contractual assessments to finance sewer and septic
improvements.
AB 1755 (Swanson), which lets local officials use
contractual assessments to finance seismic
strengthening improvements.
6. Assembly amendments . When the Senate passed SB 1340 on
May 28, 2010, the bill authorized ARVFT Program funding for
residential electric vehicle charging stations. The June
17 Assembly amendments allowed the use of contractual
assessment financing for electric vehicle charging
infrastructure and made that financing eligible for the
PACE reserve program. Because this topic was never heard
in the Senate, the Senate Rules Committee has referred the
amended bill under Senate Rule 29.10 to the Senate Local
Government Committee for a hearing on the Assembly's
amendments. At its August 26 hearing, the Committee has
four choices:
Send the bill back to the Senate Floor,
recommending concurrence.
Send the bill back to the Senate Floor,
recommending nonconcurrence.
Send the bill back to the Senate Floor, without
recommendation.
Hold the bill.
7. Double-jointing . Both SB 1340 and AB 1106 (Fuentes)
amend Health and Safety Code 44272, but in different ways.
Both bills contain technical language to avoid one bill
from chaptering-out the changes made by the other bill.
Assembly Actions
Assembly Transportation Committee: 11-1
Assembly Local Government Committee: 7-2
Assembly Appropriations Committee: 12-5
Assembly Floor: 51-26
Support and Opposition (8/27/10)
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Support : American Lung Association, Bay Area Quality
Management District, California Air Pollution Control
Officer's Association, Electric Transportation Coalition,
Nissan North America, Pacific Gas and Electric, Sacramento
Municipal Utility District, Sierra Club California,
Southern California Edison, Union of Concerned Scientists.
Opposition : Unknown.