BILL ANALYSIS �
SB 679
Page 1
SENATE THIRD READING
SB 679 (Pavley)
As Amended August 15, 2011
2/3 vote
SENATE VOTE :39-0
NATURAL RESOURCES 6-2 UTILITIES & COMMERCE 12-0
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|Ayes:|Chesbro, Brownley, |Ayes:|Bradford, Fletcher, |
| |Dickinson, Hill, Monning, | |Buchanan, Fong, Fuentes, |
| |Skinner | |Furutani, Beth Gaines, |
| | | |Roger Hern�ndez, Huffman, |
| | | |Nestande, Skinner, |
| | | |Valadao |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Grove, Halderman | | |
| | | | |
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APPROPRIATIONS 15-2
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|Ayes:|Fuentes, Harkey, | | |
| |Blumenfield, Bradford, | | |
| |Charles Calderon, Campos, | | |
| |Davis, Gatto, Hall, Hill, | | |
| |Lara, Mitchell, Norby, | | |
| |Solorio, Wagner | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Donnelly, Nielsen | | |
| | | | |
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SUMMARY : Appropriates $25 million to the Energy Conservation
Assistance Account (ECAA) from $50 million previously
appropriated from the Renewable Resource Trust Fund (RRTF) to
the California Alternative Energy and Advanced Transportation
Financing Authority (Authority) to support Property Assessed
Clean Energy (PACE) programs.
EXISTING LAW :
SB 679
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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 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 California Energy
Commission (CEC) 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, appropriation of $25 million from the RRTF to the
ECAA and cost pressure to make awards for financial assistance
from the ECAA before January 1, 2013.
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 Chair 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. The Authority also provides financing
SB 679
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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. In 2010, 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.
SB 679
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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.
Given that implementation of SB 77 has been frustrated by the
FHFA action, this bill directs half ($25 million) of the SB 77
funds back to the CEC to support low-interest loans up to $3
million and other assistance to local governments and other
public institutions to finance energy efficiency projects
through the ECAA.
According to the CEC, the ECAA program (established in1979) has
made loans to more than 800 entities totaling more than $208
million, with about 58% of the total loan amount going to local
governments, 12% to K-12 public schools, 10 % to public
colleges, 10% to hospitals and public care facilities, and 2% to
special districts. Since 2000, the program has provided $130
million in loan funds for lighting (32%), LED traffic signals
(6%), HVAC (27%), renewables (18%), self-generation (13%) and
other miscellaneous improvements (4%). Funding for ECAA loans
has been from a variety of sources over the years, including the
General Fund, the Petroleum Violation Escrow Account, and
tax-exempt revenue bonds. Funding generally has been adequate
to meet demand for loans. More recently, the American Recovery
and Reinvestment Act of 2009 (ARRA) provided $25 million for
ECAA loans and about $34 million for CEC to award as grants to
279 small cities and counties for energy efficiency projects.
According to CEC staff, cities and counties seeking to leverage
the grant awards have applied for ECAA loans, leading to overall
demand for ECAA loans far exceeding available funds.
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092
FN: 0002245