BILL ANALYSIS �
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CONCURRENCE IN SENATE AMENDMENTS
AB 14 X1 (Skinner)
As Amended July 1, 2011
2/3 vote
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|ASSEMBLY: |58-12|(March 25, |SENATE: |33-7 |(July 7, 2011) |
| | |2011) | | | |
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Original Committee Reference: NAT. RES.
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.
The Senate amendments direct the Authority to adopt regulations
to govern implementation of the bill and authorize those
regulations to be adopted as emergency regulations.
EXISTING LAW :
1)Creates the Authority within the State Treasurer's Office for
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 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.
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4)Appropriates up to $50 million from the California Energy
Commission's (CEC) 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.
AS PASSED BY THE ASSEMBLY , this bill:
1)Created 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 CEC and the Authority.
2)Increased the cap on administrative costs from $300,000 to
$550,000.
FISCAL EFFECT : According to the Senate Appropriations
Committee, $50 million from the RRTF for providing financial
support under the CEUP program.
COMMENTS : The Authority consists of five members: the Director
of Finance, the Chairman of the CEC, 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,
and 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
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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.
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.
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.
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: 0001587
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