BILL ANALYSIS �
AB 14 X1
Page 1
ASSEMBLY THIRD READING
AB 14 X1 (Skinner, et al.)
As Amended March 1, 2011
2/3 vote
NATURAL RESOURCES 6-3 APPROPRIATIONS 11-5
-----------------------------------------------------------------
|Ayes:|Chesbro, Brownley, |Ayes:|Fuentes, Blumenfield, |
| |Dickinson, Huffman, | |Bradford, Charles |
| |Monning, Skinner | |Calderon, Campos, Davis, |
| | | |Gatto, Hill, Lara, |
| | | |Mitchell, Solorio |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Knight, Grove, Halderman |Nays:|Harkey, Donnelly, |
| | | |Nielsen, Norby, Wagner |
-----------------------------------------------------------------
SUMMARY : Expands the purpose of the California Alternative
Energy and Advanced Transportation Financing Authority's
(Authority) Property Assessed Clean Energy (PACE) program to
permit the Authority to offer financial assistance to financial
institutions for privately-issued loans for real property
projects including energy and water efficiency improvements and
renewable distributed generation. Specifically, this bill :
1)Creates an alternative to the PACE Reserve Program, requiring
the Authority to also administer a Clean Energy Upgrade
Program (CEUP). The purpose of the CEUP is to reduce overall
costs to property owners of a loan provided by a financial
institution to finance the installation of distributed
generation renewable energy sources or energy or water
efficiency improvements on real property by providing a
reserve or other financial assistance at a level to be
determined by the California Energy Commission (CEC) and the
Authority.
2)Increases the cap on administrative costs from $300,000 to
$550,000.
EXISTING LAW :
1)Creates the Authority within the State Treasurer's Office for
AB 14 X1
Page 2
the purpose of promoting the development and utilization of
alternative energy sources and the development and
commercialization of advanced transportation technologies.
The Authority is authorized to issue up to $1 billion in
revenue or prepayment bonds to fund projects.
2)Requires the Authority to develop and administer a PACE
Reserve program, to be used to reduce the overall costs to
property owners of PACE bonds issued by a local jurisdiction,
by providing a reserve of no more than 10% of the initial
principal amount of the PACE bond.
3)Defines PACE bond as a bond that is secured by voluntary
contractual assessment on a property or through a voluntary
special tax for the purposes of financing the installation of
renewable energy sources, or energy or water efficiency
improvements.
4)Appropriates up to $50 million from the CEC's Renewable
Resource Trust Fund (RRTF) to be used by the Authority for
purposes of the PACE Reserve Program, and authorizes the
Authority to spend up to $300,000 for its administrative
costs.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, expands authorized use by the Authority of a $50
million appropriation from the RRTF to include use as financial
assurance for the CEUP program. Increases, from $350,000 to
$500,000, the amount available from the $50 million RRTF
appropriation that the Authority may use for program
administration. Negligible costs to CEC to assist the Authority
in administering the CEUP program.
COMMENTS : The Authority was 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, its authority
was again expanded, this time to provide financial assistance to
public power entities, independent generators, and others for
new and renewable energy sources, and to develop clean
distributed generation. The Authority consists of five members:
the Director of Finance, the Chairman of the CEC, the President
AB 14 X1
Page 3
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. The Authority 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.
Under the PACE program, local governments provide funds to
participating homeowners to install energy upgrades, which are
paid back over time in the form of a special assessment on the
property tax. Payments are typically secured by a lien on the
property that gives local governments priority of repayment if
the home goes into foreclosure. PACE removes many of the
barriers of energy efficiency and renewable energy retrofits
that otherwise exist for residential homeowners and businesses,
particularly the high upfront cost of making such an investment
and the long-term ability to reap the benefits of cost savings.
Berkeley was the first city in the nation to launch a PACE
program, using a special assessment district to establish a
financing mechanism in which 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. 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. SB 77 (Pavley), Chapter 15, Statutes of 2010,
sought to lower the costs to local governments and property
owners in the financing of PACE bonds by authorizing the
Authority to tap up to $50 million from the RRTF to fund the
PACE Reserve Program. Prior to SB 77, the primary purpose of
the RRTF had been to fund a new solar home rebate program
pursuant to the California Solar Initiative. However, given the
steep decline in new home construction in California, the RRTF
accumulated a balance (approximately $170 million) that exceeded
the near term demand for solar rebates. A smaller proportion of
RRTF monies (20% or less) are devoted to production incentives
for a handful of existing biomass and solar thermal power
plants.
AB 14 X1
Page 4
Last year, PACE programs were dealt a setback when the Federal
Housing Finance Agency (FHFA), which oversees the nation's
largest mortgage finance companies Fannie Mae and Freddie Mac,
issued a statement objecting to local governments holding the
first lien on PACE homes, calling it a significant risk to the
mortgage financier. This caused the mortgage lenders to stop
underwriting loans on properties with PACE assessments and
tighten lending standards in communities with PACE programs.
The California Attorney General and several local governments
are pursuing court action to overturn the FHFA directives. The
United States District Court for the Northern District of
California is currently considering whether to require FHFA to
initiate public notice and comment procedures. Meanwhile, the
FHFA's action has sidetracked implementation of PACE programs,
including the Authority's PACE Reserve Program. In the wake of
the FHFA action, the CEC adopted Energy Upgrade California using
federal stimulus funds to support residential and commercial
energy improvements, without relying on the PACE mechanism.
This bill would repurpose the Authority's program along the same
lines.
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092
FN: 0000038