BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 679 (Pavley)
Hearing Date: 05/26/2011 Amended: As introduced
Consultant: Brendan McCarthy Policy Vote: EU&C 10-0
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BILL SUMMARY: SB 679 reappropriates up to $50 million for energy
conservation projects, from funds originally appropriated in SB
77 (Pavley, 2010).
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Energy efficiency loansUp to $25,000 General
*
* Renewable Resources Trust Fund.
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STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
Under current law, funds in the Energy Conservation Assistance
Account are used to provide loans to schools, hospitals, and
local governments. The loans are used to finance energy
conservation projects. The savings generated by the energy
conservation projects are used to repay the loan, typically over
ten years. After that, the borrower keeps the savings.
Also under current law, local governments are authorized to
create Property Assessed Clean Energy (PACE) programs. In a PACE
program, commercial or residential property owners borrow money
from a local government entity to pay for energy efficiency
improvements or renewable energy projects (such as rooftop solar
systems). The debt service associated with the loan is attached
to the property tax bill. Typically, local governments that
operate PACE projects sell municipal bonds to finance the loans
made to property owners and the bonds are paid off with the debt
service payments made by property owners via their property tax
bills.
SB 679 (Pavley)
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SB 77 (Pavley, 2010) established a PACE reserve program, to be
implemented by the California Alternative Energy and Advanced
Transportation Financing Authority (Authority). The Authority is
authorized to provide a reserve up to ten percent of any PACE
bond issued by the local government. The reserve provided by the
Authority would be held in an escrow account against any
possible default by a property owner that might interrupt debt
service payments by the local government agency. SB 77 also
appropriated $50 million from the Renewable Resource Trust Fund
(a fund used by the Energy Commission to support the use of
renewable energy) to the new account.
In July 2010, the federal Housing Finance Authority issued a
directive to the federal residential lending agencies (such as
Fannie May) prohibiting them from lending on properties
encumbered by PACE loans. The concern of federal regulators is
that PACE loans, because they are attached to property tax
bills, have priority over loans secured against the property.
The directive effectively halted all PACE financing activity in
the state.
SB 679 appropriates all unencumbered funds originally
appropriated in SB 77 to the Energy Conservation Assistance
Account. Because PACE programs were effectively halted shortly
after enactment of SB 77, almost all of the $50 million
appropriation (less minor administrative costs incurred before
the program was halted) is available for reappropriation.
Staff notes that the Energy Conservation Assistance Account is
set to sunset on January 1, 2013, and it is not clear whether
the Energy Commission will be able to expend all of the funds
appropriated in this bill before then.
The proposed Committee amendments would reduce the appropriation
in the bill to $25 million and make technical corrections.