California Legislature—2013–14 Regular Session

Assembly Bill No. 2045

Introduced by Assembly Member Rendon

February 20, 2014

An act to add Chapter 12.5 (commencing with Section 25987.1) to Division 15 of the Public Resources Code, relating to energy, and making an appropriation therefor.

LEGISLATIVE COUNSEL’S DIGEST

AB 2045, as introduced, Rendon. Energy improvements: financing.

Existing law requires the State Energy Resources Conservation and Development Commission to implement a program to provide financial assistance for energy efficiency projects.

This bill would enact the Nonresidential Real Property Energy Retrofit Financing Act of 2014 and would require the commission to establish the Nonresidential Real Property Energy Retrofit Financing Program. The program would provide financial assistance, through authorizing the issuance of, among other things, revenue bonds, to owners of eligible real properties, as defined, for implementing energy improvements for their properties. The bill would require that the bonds be secured by the recording of an energy remittance repayment agreement lien, as defined, on the eligible real property for which the improvements are performed. The bill would require a loan servicer to collect installment payments from owners of eligible real properties whose applications have been approved by the commission. The bill would require the State Board of Equalization to collect repayment installments that are delinquent.

The bill would authorize the California Alternative Energy and Advanced Transportation Financing Authority, on behalf of the commission, to issue and renew the negotiable revenue bonds to generate moneys to finance energy improvements for approved applicants.

The bill would establish the Nonresidential Real Property Energy Retrofit Debt Servicing Fund in the State Treasury and the Loan Loss Reserve Account and Administration Account within the fund. The bill would require the commission to deposit the installment payment received from the owners of eligible real properties into the fund and certain fees collected into the specified accounts. The bill would continuously appropriate the moneys in the fund and the accounts to repay the principal and interest on the bonds, and to cover the administrative costs incurred by the authority, the commission, and the State Board of Equalization, thereby making an appropriation.

Vote: majority. Appropriation: yes. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Chapter 12.5 (commencing with Section 25987.1)
is added to Division 15 of the Public Resources Code, to read:

 

Chapter  12.5. Nonresidential Real Property Energy
Retrofit Financing

 

Article 1.  General Provisions and Definitions

 

25987.1.  

This act shall be known, and may be cited, as the
Nonresidential Real Property Energy Retrofit Financing Act of
2014.

25987.2.  

The purpose of this chapter is to facilitate private
financing to enable nonresidential real property owners to invest
in clean energy improvements, renewable energy, and conservation;
to incentivize private equity managers to invest in clean energy
improvements, integrate the smart energy economy, and stimulate
the state economy by directly creating jobs for contractors and
other persons who complete new energy improvements; and to
reinforce the leadership role of the state in the new energy
economy, thereby attracting energy manufacturing facilities and
related jobs to the state.

25987.3.  

The Legislature finds and declares all of the following:

(a) Nonresidential real properties represent a huge opportunity
to significantly increase energy efficiency and reduce greenhouse
gas emissions. To do this, California needs to address the design,
construction, and operation of these buildings.

(b) Investment in building performance upgrades is an intelligent
business decision. Building performance upgrades lower operating
costs, improve occupant comfort, hedge against utility price
increases, demonstrate commitment to tenant well-being, reduce
exposure to regulation, help the environment, and ultimately boost
property values.

(c) It is in the best interest of the state and its citizens to enable
and encourage the owners of eligible nonresidential real property
to invest in new energy improvements, including building energy
efficiency improvements that qualify for investor-owned utility or
publicly owned utility programs, water efficiency improvements,
and renewable energy improvements, by enacting this division to
establish, develop, finance, implement, and administer a new
energy improvement program that provides for both building
energy efficiency improvements and renewable energy
improvements and to assist those owners who choose to participate
in the program to complete new energy improvements to their
properties because of the following:

(1) New energy improvements, including building energy
efficiency improvements and renewable energy improvements,
can provide positive cashflow when the costs of the improvements
are spread out over a long enough time that a building’s cumulative
utility bill cost savings exceed the amount of the liens recorded
on the eligible building to ensure payment for the improvements.

(2) Many owners of eligible nonresidential real properties are
unable to fund a new energy improvement because the owners do
not have sufficient liquid assets to directly fund the improvement
or are unable or unwilling to incur the negative net cashflow likely
to result if the owner uses a typical existing loan program to fund
the improvement.

(d) Reduction in the amount of emissions of greenhouse gases
and environmental pollutants, resulting from increased efficiencies
and the resulting decreased use of traditional nonrenewable fuels,
will improve air quality and may help to mitigate climate change.

(e) The owners of nonresidential real properties who participate
in the program established pursuant to this division shall do so
voluntarily.

25987.4.  

Unless the context otherwise requires, for the purposes
of this chapter, the following terms have the following meanings:

(a) (1) “Alternative energy sources” means energy from
renewable cogeneration or gas-fired cogeneration technology that
meets the greenhouse gas emissions and efficiency standards
applicable to the Self-Generation Incentive Program in effect at
the time of the application, energy storage technologies, or energy
from solar, biomass, wind, or geothermal systems, or fuel cells,
the efficient use of which will reduce the use of conventional
energy fuels.

(2) The system shall be sized appropriately to offset part or all
of the applicant’s own energy demand for the permanent fixtures
that consume energy, as if all cost-effective energy efficiency
measures have been installed, and shall be located on the same
property where the eligible real property is located.

(b) “Applicant” means a person, or an entity or group of entities,
engaged in business or operations in the state, whether organized
for profit or not for profit that owns a nonresidential real property
and applies for financial assistance from the commission for the
purpose of implementing a project in a manner prescribed by the
commission.

(c) “Authority” means the California Alternative Energy and
Advanced Transportation Financing Authority established pursuant
to Section 26004.

(d) “Board” means the State Board of Equalization.

(e) “Building energy efficiency improvement” means one or
more installations or modifications that are permanently affixed
to the building or located on the premises of the building site, for
which a building permit is issued after January 1, 2015, to an
eligible building that either qualifies for an investor-owned utility
or publicly owned utility energy efficiency program or is designed
to reduce the energy consumption of the building, and that may
include, but is not limited to, all of the following to the extent they
qualify:

(1) High-efficiency mechanical equipment.

(2) High-efficiency electrical equipment.

(3) Capturing or reducing heat gain or solar shading, including
the roof and south and west walls, and not just glazing.

(4) High-efficiency water heating.

(5) Insulation in walls, roofs, floors, and foundations and in
heating and cooling distribution systems.

(6) Fenestration and door replacements, and door modifications
that reduce energy consumption.

(7) Automatic energy control systems.

(8) Heating, ventilating, or air conditioning and distribution
system modifications or replacements.

(9) Caulking and weather stripping.

(10) Replacement or modification of luminaries to increase the
energy efficiency of the system, or additional lighting controls to
reduce electric lighting during periods of vacancy.

(11) Energy recovery systems.

(12) Daylighting systems and associated lighting controls for
daylight harvesting.

(13) Building commissioning or retrocommissioning.

(f) “Conventional energy fuel” means any of the following:

(1) A fuel derived from petroleum deposits, including, but not
limited to, oil, heating oil, gasoline, and fuel oil.

(2) Natural gas, including liquefied natural gas, other than that
used in cogeneration gas-fired technology.

(3) Nuclear fissionable materials.

(4) Coal.

(g) “Delinquent repayment installment” means a due and payable
repayment installation that was not paid within the time specified
in the schedule for repayment.

(h) “Demand response” means reductions or shifts in electricity
consumption by customers in response to either economic or
reliability signals.

(i) “Due and payable” means the date as specified in the
schedule for repayment for each repayment installment.

(j) “Eligible real property” means a nonresidential building that
completed construction on or before January 1, 2015, and is located
within the boundaries of the state.

(k) “Energy remittance repayment agreement” means a
contractual agreement between an owner of an eligible real property
and the commission, secured by a lien, as described in Section
25987.21, recorded in the county where the property is situated
and on an eligible real property specially benefited by the project
for which the commission will make reimbursement or a direct
payment to the party financing the project, and “contractual energy
remittance” means that reimbursement or direct payment. The
amount to be repaid pursuant to the energy remittance repayment
agreement shall include the costs necessary to finance the project
less any rebates, grants, and other direct financial assistance
received by the owner pursuant to other law, a loan loss reserve
fee, in an amount to be established by the third-party administrator
in consultation with the commission and any warehouse financier
under contract entered into pursuant to paragraph (3) of subdivision
(a) of Section 25987.25, to insure against nonperformance of the
loan and other losses of the program, and a program administrative
cost fee.

(l) “Energy efficiency specialist” means an individual or
business authorized or certified by rules of the commission to
analyze, evaluate, or install a project.

(m) “Financial assistance” means either of the following:

(1) Loans, loan loss reserves, interest rate reductions, secondary
loan purchase, insurance, guarantees or other credit enhancements
or liquidity facilities, contributions of money, property, labor, or
other items of value, or any combination thereof, as determined
and approved by the commission.

(2) Other types of assistance the commission determines are
appropriate.

(n) “Loan balance” means the outstanding principal balance of
loans secured by a mortgage or deed of trust with a first or second
lien on eligible real property.

(o) “Loan loss reserve fee” means a fee that serves as collateral
in the event of a loan default.

(p) “Nonresidential Real Property Energy Retrofit Bond” means
a bond issued pursuant to Section 25987.31 that is secured by an
energy remittance repayment agreement lien on real property and
is entered into voluntarily to finance the project.

(q) “Participant” means a person, or an entity or group of
entities, engaged in business or operations in the state, whether
organized for profit or not for profit, that, as a qualified applicant,
is approved for financial assistance pursuant to Article 2
(commencing with Section 25987.5) and has entered into an energy
remittance repayment agreement with the commission for the
purpose of implementing a project in a manner prescribed by the
commission. “Participant” includes a subsequent owner taking
title to real property subject to an energy remittance repayment
agreement lien.

(r) “Portfolio” means an aggregation of approved applications.

(s) “Program” means the Nonresidential Real Property Energy
Retrofit Financing Program established by the commission in
accordance with Section 25987.7.

(t) “Program administration cost fee” means a fee imposed for
the costs incurred by the commission, the authority, and the State
Board of Equalization to administer the program.

(u) “Project” means an improvement to an eligible real property
that constitutes a water efficiency improvement, renewable energy
improvement, or building energy efficiency improvement.

(v) “Qualified applicant” means a person or business entity who
does all of the following:

(1) Owns an eligible real property that has a ratio of loan balance
to its appraised value not to exceed 85 percent, which is subject
to adjustment by the program administrator at the time the person’s
program application is approved, as shown in the records of the
county assessor, unless the holder of the deed of trust or mortgage
recorded against the eligible real property that has priority over
all other deeds of trust or mortgages recorded against the eligible
real property has consented in writing to the recording of an energy
remittance repayment agreement lien pursuant to this division
against the eligible real property.

(2) Timely submits to the commission a complete application,
which notes the existence of any priority mortgage or deed of trust
on the eligible property and the identity of the holder of the
mortgage or deed of trust, to join the program and consents to the
levying of a lien in the amount of the energy remittance repayment
agreement on the real property pursuant to this chapter.

(3) Meets standard of credit worthiness that the commission
may establish.

(w) “Renewable energy” means heat, processed heat, space
heating, water heating, steam, space cooling, refrigeration,
mechanical energy, electricity, fuel cells, or energy in any form
convertible to these uses, and including energy storage
technologies, that does not expend or use conventional energy
fuels, and that uses any of the following electrical generation
technologies:

(1) Biomass.

(2) Solar thermal.

(3) Photovoltaic.

(4) Wind.

(5) Geothermal.

(x) “Renewable energy improvement” means one or more
fixtures, products, systems, or devices, or an interacting group of
fixtures, products, systems, or devices, that use an alternative
energy source, are permanently affixed to, or located on, the real
property, and directly benefit an eligible real property or that are
installed on the customer side of a meter of an eligible real property
and that produce renewable energy from renewable resources,
including, but not limited to, photovoltaic, solar thermal, small
wind, biomass, fuel cells, or geothermal systems, such as ground
source heat pumps, as may be approved by the commission.

(y) “Repayment installation” means the monthly amount
specified pursuant to the agreed schedule for repayment approved
by the commission.

(z) “Third-party administrator” means an entity selected by the
commission through a request for a proposal to manage project
applications and make recommendations to the commission as to
an individual project’s compliance with this chapter.

(aa) “Warehouse financier” means a financial entity, bank, or
pension fund, chosen by the commission through a request for
proposal to provide an ongoing and revolving source of financing
for applications approved pursuant to Section 25987.20.

 

Article 2.  Nonresidential Real Property Energy Retrofit
Financing Program

 

25987.5.  

The purpose of the Nonresidential Real Property
Energy Retrofit Financing Program is to help provide the special
benefits of water efficiency improvements, renewable energy
improvements, and building energy efficiency improvements to
owners of eligible real properties who voluntarily participate in
the program by establishing, developing, financing, and
administering a program to assist those owners in completing
improvements.

25987.6.  

The commission shall have and exercise all rights
and powers necessary or incidental to or implied from the specific
powers granted to the commission by this chapter. Those specific
powers shall not be considered as a limitation upon any power
necessary or appropriate to carry out the purposes and intent of
this chapter.

25987.7.  

(a) The commission shall establish, develop, finance,
and administer, consistent with Section 25987.9, the Nonresidential
Building Real Property Retrofit Financing Program. The
commission shall provide general direction and oversight to the
authority and board as they complete duties specified in this
chapter. The program shall be designed to provide financial
assistance for an owner of an eligible real property to use one or
more energy efficiency specialists to retrofit or benefit the property
with one or more renewable energy improvements, building energy
efficiency improvements, or water efficiency improvements, by
applying to the commission for inclusion of the owner’s project
in a portfolio that will be financed through the use of the revenue
bonds issued pursuant to this chapter. These bonds shall be secured
by revenues generated through energy remittance repayment
agreement liens recorded against the real properties benefited by
the projects in the portfolio.

(b) The program shall provide financial assistance for projects
when the total energy and water cost savings realized by the real
property owner, and any successor or successors to the real property
owner, during the useful life of the improvements, as determined
by an analysis required pursuant to subdivision (i) of Section
25987.13 are expected to equal or exceed the total costs incurred
by the owner pursuant to the program.

(c) In developing rules to certify an energy efficiency specialist,
the commission shall consult with the Public Utilities Commission,
the investor-owned utilities, the contractor community, and other
entities the commission deems appropriate and consider existing
trade certifications or licensing requirements applicable to
occupations that perform work contemplated pursuant to this
chapter.

(d) (1) Within six months after the first two years of
implementation of the program established pursuant to subdivision
(a) or after the expenditure of the first two hundred fifty million
dollars ($250,000,000) of proceeds authorized pursuant to Section
25987.29, whichever occurs earlier, the commission shall prepare
and make publicly available a report on the efficacy of the program
in achieving the purposes of the program as specified in Section
25987.5 and recommendations that would enhance the ability of
the program to achieve those purposes.

(2) The commission shall post the report on its Internet Web
site.

(3) Prior to the additional expenditure of the proceeds authorized
pursuant to Section 25987.29, the commission shall hold at least
one public hearing and take public comments on the report.

25987.8.  

To receive financial assistance pursuant to this
chapter, a qualified applicant shall contractually agree to the
recording of an energy remittance repayment agreement lien on
the eligible real property that is being retrofitted or benefited.

25987.9.  

By July 1, 2015, the commission shall develop a
request for proposal to develop the program by a third-party
administrator. The third-party administrator shall administer the
program and establish an automated, asset-based underwriting
system for all eligible real properties in the state. The third-party
administrator shall provide consultation to the commission in
developing guidelines for the program. The third-party
administrator shall provide an independent energy advisor to assist
owners of real properties in evaluating projects. The third-party
administrator shall provide a loan servicer to service the loans.
The party selected as the third-party administrator shall only be
selected if the program proposal submitted by the party requires
all costs, including startup costs of the program, to be covered by
the loan recipients, the administrator, the bond purchasers, or some
combination thereof. The program selected shall not include
General Fund costs or liabilities.

25987.10.  

The third-party administrator shall establish
underwriting guidelines that consider an applicant’s qualifications,
and other appropriate factors, including, but not limited to, credit
reports and loan-to-value ratios, consistent with good and
customary lending practices, necessary for the authority to obtain
a bond rating for bonds issued pursuant to Article 3 (commencing
with Section 25987.29) for a successful bond sale.

25987.11.  

The third-party administrator shall disclose to an
owner of an eligible real property all fees imposed pursuant to this
chapter, including the loan loss reserve fee, the program
administration cost fee, and the interest rate charged, prior to the
submission of an application by the owner.

25987.12.  

(a) An owner of an eligible real property undertaking
a project shall submit to the third-party administrator an application
to participate in the program.

(b) The submission of an application is deemed to be a voluntary
agreement by the owner for the commission to record the energy
remittance repayment agreement lien against the eligible real
property upon the approval of the application.

(c) The application form developed by the third-party
administrator shall include a statement in no less than 12-point
type stating the following:

SUBMISSION OF THIS APPLICATION CONSTITUTES THE
VOLUNTARY CONSENT OF THE APPLICANT FOR THE
RECORDATION OF THE ENERGY REMITTANCE
REPAYMENT AGREEMENT LIEN AGAINST THE ELIGIBLE
REAL PROPERTY. UPON THE APPROVAL BY THE
COMMISSION OF THE APPLICATION AND THE
RECORDATION OF THE ENERGY REMITTANCE
REPAYMENT AGREEMENT LIEN, A LIEN IN THE AMOUNT
SPECIFIED IN THE ENERGY REMITTANCE REPAYMENT
AGREEMENT SHALL BE RECORDED ON THE PROPERTY
TO SECURE THE AGREEMENT.

25987.13.  

The owner of an eligible real property shall include
all of the following information in the application:

(a) The name, business address, and email address of the owners
of the eligible real property.

(b) The names of all entities that hold a secured lien on the
eligible real property and their contact information.

(c) The total dollar amount of liens that have been recorded
against the eligible real property.

(d) An appraisal of the value of the eligible real property that
has been conducted within the past six months or during an
appropriate timeframe consistent with industry practices for
underwriting of nonresidential buildings.

(e) A detailed description of the project to be funded.

(f) The name of the financial institution providing interim
financing for the project or the warehouse line of credit developed
pursuant to Section 25987.26.

(g) The structure of the loan financing the project.

(h) Any information that the commission or third-party
administrator requires to verify that the owner will complete the
project.

(i) An analysis performed by an energy efficiency specialist to
quantify the costs of the project, and total energy and water cost
savings realized by the owner or his or her successor during the
effective useful life of, and estimated carbon impacts of, the project,
including an annual cashflow analysis.

(j) Copies of an application that have been made for energy
efficiency incentives identified pursuant to subdivision (d) of
Section 25987.19 for any applicable retrofits.

(k) Other information deemed necessary by the commission or
the third-party administrator.

(l) The total amount of the loan requested showing any and all
adjustments to reduce the loan amount after all federal, state, local,
and ratepayer-funded incentives have been applied.

25987.14.  

In addition to the information required under Section
25987.13, an applicant shall provide in the application a detailed
description of all of the following:

(a) The eligible real property.

(b) The transactional activities associated with the project,
including the transactional costs.

(c) Other information deemed necessary by the commission or
the third-party administrator.

25987.15.  

(a) The third-party administrator shall make
recommendations to the commission regarding the approval or
disapproval of an application.

(b) The commission may approve and accept an applicant into
the program if both of the following conditions are met:

(1) The applicant is a qualified applicant.

(2) Prior to receiving funding for renewable energy
improvement, the applicant shall show both of the following:

(A) Evidence of intent to make feasible energy efficiency
upgrades recommended by the analysis required pursuant to
subdivision (i) of Section 25987.13.

(B) Evidence of intent to enroll in eligible demand response
programs, if appropriate.

(c) The commission shall determine appropriate guarantees
necessary to ensure cost neutrality of the improvements that may
include the requirement that the owner of the eligible building
obtain insurance issued by an A.M. Best “A” or better rated
insurance carrier or a similar product as approved by the
commission.

25987.16.  

(a) Upon the mutual agreement of the participant
and the third-party administrator, the third-party administrator
shall establish an annualized schedule for the repayment with
monthly repayment installments required by the energy remittance
repayment agreement, including the interest charged, administrative
cost fee, and loan loss reserve fee.

(b) (1) The period for repayment of the energy remittance
repayment agreement shall not exceed the effective useful life of
the improvements or 20 years, whichever is shorter.

(2) The calculated effective useful life of the building energy
efficiency and renewable energy improvements, shall be calculated
using methodologies adopted by the commission, in consultation
with the Public Utilities Commission.

(A) The commission shall hold at least one public hearing on
the useful life of the improvement to take public and industry
comments on the commission’s determinations.

(B) The commission shall update the useful life of improvements
as new information becomes available and when new technologies
become available and shall make this information publicly available
on its Internet Web site.

(C) The commission shall remove any improvements from its
information on improvements if the improvement is no longer
available or if the commission determines that manufacturer defects
disqualify the improvement from loan eligibility.

(c) The loan servicer shall collect the repayment installments
that become due and payable. Funds collected shall be remitted to
the commission. A repayment installment is delinquent upon the
failure of the participant to pay any installment due and payable
pursuant to the schedule for repayment. The loan servicer shall
notify the board of the delinquency.

(d) (1) The board shall collect the repayment installments that
are delinquent. Funds collected shall be remitted to the commission.
The collection provisions contained in the Fee Collection
Procedures Law (Chapter 4 (commencing with Section 55121) of
Part 30 of Division 2 of the Revenue and Taxation Code), to the
extent feasible or practical, shall apply to the collection of the
delinquent repayment installments. For the purposes of chapter,
reference in the Fee Collection Procedures Law to “fee” shall
include the repayment installment imposed by this chapter and
references to the “fee payer” shall include a participant required
to pay the repayment installment imposed pursuant to this chapter.
For the purposes of collection, a delinquent repayment installment
is a final liability of the participant.

(2) The board shall assess liquidated damages on the delinquent
repayment installment of 10 percent of the unpaid installment.
Within 60 days of a failure to pay the delinquent repayment
installment, the board shall issue a demand letter to the participant,
with written notice provided to the commission, and provide the
participant with 30 days from the date of the demand letter to cure
the delinquency before the board commences further action to
collect a delinquent repayment installment.

(3) The board may periodically consult with the commission
on the status of the energy remittance agreements with outstanding
delinquent repayment installments. If the board deems that
available remedies to collect the delinquent repayment installments
on an energy remittance repayment agreement have been exhausted,
to the extent feasible or practical, and the delinquency cannot be
cured, the board shall inform the commission in writing. At a
business meeting, the commission may declare the entire
outstanding energy remittance repayment agreement balance,
including any interest due, liquidated damages assessed, and costs
of collection incurred, immediately due and payable and direct the
board to take action to satisfy the energy remittance repayment
agreement lien. The board may contract with a foreclosure service
provider to carry out the foreclosure on behalf of the commission.

(4) Revenues generated from the sale of the eligible real property
shall be distributed to satisfy liens on the eligible buildings in
accordance with the priority of the liens as provided by law.

(5) The board shall perform the collection of delinquent
repayment installments and the foreclosure duties imposed by this
chapter as a ministerial function on behalf of the commission.

(6) The board may prescribe, adopt, and enforce guidelines
relating to the collection of the delinquent repayment installments.
The guidelines adopted pursuant to this section shall be exempt
from the Administrative Procedures Act (Chapter 3.5 (commencing
with Section 11340) of Part 1 of Division 3 of Title 2 of the
Government Code).

(e) Upon the full repayment of the balance of the energy
remittance repayment agreement lien, accrued interest, and
liquidated damages, the commission shall record with the county
in which the eligible real property is located a release of the energy
remittance repayment agreement lien.

25987.18.  

(a) Prior to approving an application for inclusion
into a loan portfolio and the recordation of the energy remittance
repayment agreement lien, or a modification of an approved
application, the commission shall conduct a public meeting on the
proposed application or modification.

(b) The commission shall post a notice of the hearing on the
commission’s Internet Web site and provide the notice, in writing,
to all lienholders of the eligible building no later than 30 days prior
to the public meeting.

(c) The notice shall specify all of the following:

(1) The name of the qualified applicant.

(2) The address of the eligible real property.

(3) The amount required to be repaid secured by the energy
remittance repayment agreement lien proposed to be recorded
against the eligible real property.

(4) The date and place of the public meeting.

(5) The schedule for repayment of the contractual energy
remittance and associated costs as agreed upon between the
qualified applicant and the commission.

(6) The interest rate assessed pursuant to the energy remittance
repayment agreement.

(7) A detailed description of the proposed modification, if
applicable.

(d) The notice shall inform the lienholder that any complaints
or objections to either the approval of the application and the
recordation of the energy remittance repayment agreement lien on
the eligible real property or the modification of an approved
application shall be submitted, in writing, to the commission not
less than 10 days prior to the public meeting.

25987.19.  

In evaluating the eligibility of an applicant, the
commission shall consider the creditworthiness of the applicant
and the effectiveness of the improvements applying the following
criteria, which may include, but not be limited to, all of the
following:

(a) Whether applicants are legal owners of the underlying real
property.

(b) Whether applicants are current on any outstanding mortgage
and property tax payments.

(c) Whether applicants are in default or in bankruptcy
proceedings.

(d) Whether applicants have applied for incentives, if they are
available, through the energy efficiency programs offered by an
electrical or gas corporation or a publicly owned utility.

(e) Whether improvements financed by the program follow
applicable standards including any guidelines adopted by the
commission.

25987.20.  

(a) The commission shall approve an application
at a business meeting. Upon approval of an application, the
commission shall record the energy remittance repayment
agreement lien against the eligible real property.

(b) The commission shall specify the amount required to be
paid pursuant to the energy remittance repayment agreement lien,
the schedule of repayment that details the monthly repayment
installment amount and due date, and the interest rate charged.

(c) The commission shall approve a modification of an approved
application at a business meeting.

25987.21.  

(a) The energy remittance repayment agreement
lien recorded pursuant to this section shall have a prominent header
on the document that reads “Energy Remittance Repayment
Agreement Lien” in 14-point type and contains all of the following
information related to the affected real property:

(1) The assessor’s parcel number.

(2) The owners of record.

(3) The legal description.

(4) The street address.

(5) The amount of the lien.

(b) The energy remittance agreement lien shall have the force,
effect, and priority of a judgment lien from the time of recording
in the county where the real property is located.

25987.22.  

(a) No later than 30 days after the approval of an
application, the commission or the third-party administrator shall
record with the county in which the eligible real property is located
the energy remittance repayment agreement lien. The third-party
administrator shall notify the commission upon the recordation of
the energy remittance repayment agreement lien.

(b) Within 60 days of the notice of recording of the energy
remittance repayment agreement lien, the commission shall include
the approved application in a portfolio posted on the commission’s
Internet Web site.

25987.23.  

(a) The commission shall deposit into the
Nonresidential Real Property Energy Retrofit Debt Servicing Fund
established pursuant to Section 25987.38, or the accounts within
the fund, any moneys collected pursuant to this chapter.

(b) This chapter shall not be construed to require investor-owned
utilities or municipal utilities to serve in the role as a third-party
private guarantor or loan servicer or otherwise provide credit
support for the loan program.

25987.24.  

(a) A local government that has issued revenue
bonds pursuant to a program providing financial assistance to
owners of nonresidential buildings undertaking a renewable energy,
water efficiency, or energy efficiency retrofit improvement on the
real properties may apply to the commission for participation in
the program.

(b) Upon the approval of an application submitted by the local
government, the authority may purchase all those outstanding
revenue bonds issued by the local government.

(c) Upon the purchase of the revenue bonds issued by the local
government by the authority, the authority succeeds to all rights
conferred upon the bondholder by those revenue bonds and the
local government shall remit revenue that is used to secure those
revenue bonds to the commission.

25987.25.  

(a) To the extent that the commission determines
necessary to effectively complete the duties specified by this
chapter, the commission shall do all of the following:

(1) (A) Analyze and evaluate standards for nonresidential
energy building retrofits previously developed by various national
and international organizations to provide uniformity and
transparency for financial institutions evaluating loan proposals
for energy improvements to nonresidential buildings. To the extent
that the commission determines necessary, this evaluation shall
be completed not later than January 1, 2016.

(B) The evaluation shall review existing protocols or a
combination of elements of existing measurement protocols and
shall be made available in an electronic format to financial
institutions and local governments initiating loans pursuant to this
chapter.

(2) Develop, in consultation with the Department of Real Estate
and representatives from the commercial real estate industry, a
model energy aligned lease provision that modifies, upon the
agreement between the owner and tenants of eligible real property,
a commercial lease agreement allowing the owners to recover the
costs of the renewable energy, water efficiency, or energy
efficiency retrofit improvements that result in operational savings
based on the useful life of the retrofit while protecting tenants from
underperformance of the building energy efficiency improvements.

(3) Develop a request for proposal to contract with one or more
financial institutions to secure a short-term, revolving credit facility
(warehouse line of credit) for the purpose of creating an interim
financing mechanism for the loans that would be aggregated for
the purposes of issuance of a revenue bond pursuant to Section
25987.29. The warehouse line of credit shall be drawn by the
third-party administrator for origination of direct loans to qualified
applicants.

(b) In implementing this chapter, the commission shall do all
of the following:

(1) Consult with the Public Utilities Commission, representatives
from the investor-owned and publicly owned utilities, local
governments, real estate licensees, commercial builders,
commercial property owners, small businesses, financial
institutions, commercial property appraisers, energy rating
organizations, and other entities the commission deems appropriate.

(2) Hold at least one public hearing.

(3) Adopt guidelines and standards for the purposes of
implementing this chapter at a publicly noticed meeting offering
all interested parties an opportunity to comment. For the initial
adoption of the guidelines and standards, the commission shall
provide a written public notice at least 30 days prior to the meeting.
For the adoption of any substantive change to the guidelines and
standards, the commission shall provide a written public notice at
least 10 days prior to the meeting. Notwithstanding any other law,
guidelines or standards adopted pursuant to this section shall be
exempt from the requirements of Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code. In implementing the requirements of this chapter, in the
interest of promoting consistency across the demand-side
management programs statewide, the commission shall seek to
harmonize these requirements, to the greatest extent practicable,
with the rules and requirements of the Public Utilities Commission
for its nonresidential energy efficiency, distributed generation,
demand response, and other demand-side management programs.

(4) Establish loan limits for each type of eligible improvements
for commercial or public buildings.

(5) Establish standard metrics for estimating performance of
eligible improvements for different building types to be used in
underwriting loans made pursuant to the program.

(6) Establish standard assumptions to be used for estimating the
energy benefits of improvements that shall include a reasonable
assumption for the cost of kilowatthours and therms and a
reasonable assumption of future expectations of the rate these costs
will increase.

(7) Establish those standards, guidelines, and procedures,
through regulation, including, but not limited to, standards of
creditworthiness for qualification of program applicants, that are
necessary to ensure the financial stability of the program and
otherwise prevent fraud and abuse.

(8) Establish those measurement and verification standards
necessary to ensure that the building energy efficiency
improvements financed pursuant to this chapter are realized at a
level specified by the commission.

(9) Consider reliance on existing trade certifications or licensing
requirements applicable to occupations that perform the work
contemplated under this chapter.

(10) Establish qualifications for the certification of contractors
to construct or install building energy efficiency improvements.

(11) Contract with a party, public or private, to do any of the
following:

(A) Ensure that appropriate and reasonable steps are taken to
monitor and verify the quality and longevity of building energy
efficiency improvements financed pursuant to this program and
measure the total energy savings achieved by the program.

(B) Determine the median, average, and aggregate amount
financed by an applicant for eligible improvements to different
building types under the program. Make data on program
participation publicly available in a timely manner and in an
aggregate format that would not provide identifying information
about individual customers of the electrical and gas corporations
and include, at a minimum, the types of energy efficiency measures
installed, the location of each customer receiving ratepayer-funded
energy efficiency assistance, the amount of funds expended at each
site, the expected annual energy savings and reduced energy usage
expected in kilowatthours or therms. Unless the affected person,
customer, or entity consents, the information, data, and reports
required to be provided pursuant to this section shall not include
any of the following:

(i) Personal information as defined in subdivision (e) of Section
1798.80 of the Civil Code.

(ii) A customer’s electrical or gas consumption data as defined
in subdivision (a) of Section 8380.

(iii) Other information excluded from public disclosure pursuant
to the California Public Records Act (Chapter 3.5 (commencing
with Section 6250) of Division 7 of Title 1 of the Government
Code).

(12) Adopt a standard notice and disclosure form for the
purposes of Section 25987.27.

25987.26.  

Credit issued under the warehouse line of credit
shall not be deemed to constitute a debt or liability of the state or
of any political subdivision thereof, or a pledge of the full faith
and credit of the state or of any political subdivision, but shall be
payable solely from the funds provided therefor. All credit
instruments shall contain a statement to the following effect:

“Neither the faith and credit nor the taxing power of the State
of California is pledged to the payment of principal and interest
on this credit instrument.”

25987.27.  

(a) From the date upon which financial assistance
is approved by the commission pursuant to Section 25987.20 and
for all subsequent transactions entered into pursuant to this chapter,
a seller of real property subject to an energy remittance repayment
agreement shall deliver to the buyer an energy remittance
repayment agreement notice and disclosure as adopted by the
commission pursuant to paragraph (12) of subdivision (b) of
Section 25987.25.

(b) (1) Upon the delivery of the completed notice and disclosure
form to the buyer of real property, the seller and his or her agent
is not required to provide additional information relative to the
energy remittance repayment agreement.

(2) The information in the notice and disclosure form is deemed
sufficient to provide notice to the buyer of the existence of the
energy improvements and of the energy remittance repayment
agreement lien.

(3) The commission or the third-party administrator shall report
periodically, but no less often than once annually, on the number
and amount of loans that are made available in areas of the state
where climate conditions are more extreme and in disadvantaged
communities.

25987.28.  

No later than June 30, 2016, and no later than June
30 of every fifth year thereafter, the California State Auditor shall
conduct, or cause to be conducted, a performance audit of the
program. Notwithstanding Section 10231.5 of the Government
Code, the California State Auditor shall prepare a report and
recommendations on each audit conducted and present the report
and recommendations to the President pro Tempore of the Senate
and the Speaker of the Assembly.

 

Article 3.  Nonresidential Real Property Energy Retrofit Bond

 

25987.29.  

The authority, on behalf of the commission, may
incur indebtedness and issue and renew negotiable bonds, notes,
debentures, or other securities of any kind or class. All
indebtedness, however evidenced, shall be payable solely from
moneys received pursuant to this chapter and the proceeds of its
negotiable bonds, notes, debentures, or other securities and shall
not exceed the sum of two billion dollars ($2,000,000,000).

25987.30.  

The Legislature may, by statute, authorize the
authority to issue bonds in excess of the amount provided in
Section 25987.29.

25987.31.  

(a) On a semiannual basis, the authority shall
conduct a meeting to adopt a resolution authorizing the issuance
of negotiable bonds, notes, debentures, or other securities
(collectively called “bonds”) for the purposes of generating
sufficient moneys to fund the approved applications in the portfolio
at the time of the meeting or to repay an outstanding balance of
the participant on whose behalf the commission has provided funds
through the warehouse line of credit. In anticipation of the sale of
bonds as authorized by Section 25987.29, or as may be authorized
pursuant to Section 25987.30, the authority, on behalf of the
commission, may issue negotiable bond anticipation notes and
may renew the notes from time to time. The bond anticipation
notes may be paid from the proceeds of sale of the bonds of the
authority in anticipation of which they were issued. Notes and
agreements relating to the notes and bond anticipation notes
(collectively called “notes”) and the resolution or resolutions
authorizing the notes may contain any provisions, conditions, or
limitations that a bond, agreement relating to the bond, and bond
resolution of the authority may contain. However, a note or renewal
of the note shall mature at a time not exceeding two years from
the date of issue of the original note.

(b) Every issue of its bonds, notes, or other obligations shall be
general obligations of the authority payable from revenues or
moneys received pursuant to this chapter. Notwithstanding that
the bonds, notes, or other obligations may be payable from a special
fund, they are for all purposes negotiable instruments, subject only
to the provisions of the bonds, notes, or other obligations for
registration.

(c) Subject to the limitations in Sections 25987.29 and 25987.30,
the bonds may be issued as serial bonds or as term bonds, or the
authority, in its discretion, may issue bonds of both types. The
bonds shall be authorized by resolution of the authority and shall
bear the date or dates, mature at the time or times, not exceeding
30 years from their respective dates, bear interest at the rate or
rates, be payable at the time or times, be in the denominations, be
in the form, either coupon or registered, carry the registration
privileges, be executed in a manner, be payable in lawful money
of the United States of America at a place or places, and be subject
to terms of redemption, as the resolution or resolutions may
provide. The sales may be a public or private sale, and for the price
or prices and on the terms and conditions, as the authority shall
determine after giving due consideration to the recommendations
of any participating party to be assisted from the proceeds of the
bonds or notes. Pending preparation of the definitive bonds, the
authority may issue interim receipts, certificates, or temporary
bonds that shall be exchanged for the definitive bonds. The
authority may sell bonds, notes, or other evidence of indebtedness
at a price below their par value. However, the discount on a security
sold pursuant to this section shall not exceed 6 percent of the par
value.

(d) A resolution or resolutions authorizing bonds or an issue of
bonds may contain provisions that shall be a part of the contract
with the holders of the bonds to be authorized, as to all of the
following:

(1) Pledging the moneys collected pursuant to this chapter from
the portfolio of approved applications that are funded by the bonds,
to secure the payment of the bonds or of any particular issue of
bonds, subject to the agreements with bondholders as may then
exist.

(2) The setting aside of reserves or sinking funds, and the
regulation and disposition of the reserves or sinking funds.

(3) Limitations on the right of the authority or the commission
or their agent to restrict and regulate the use of the project or
projects to be financed out of the proceeds of the bonds or any
particular issue of bonds.

(4) Limitations on the purpose to which the proceeds of sale of
an issue of bonds then or thereafter to be issued may be applied
and pledging those proceeds to secure the payment of the bonds
or the issue of the bonds.

(5) Limitations on the issuance of additional bonds, the terms
upon which additional bonds may be issued and secured, and the
refunding of outstanding bonds.

(6) The procedure, if any, by which the terms of a contract with
bondholders may be amended or abrogated, the amount of bonds
the holders of which must consent to the amendment or abrogation,
and the manner in which that consent may be given.

(7) Limitations on expenditures for operating, administrative,
or other expenses of the authority or commission.

(8) Defining the acts or omissions to act that constitute a default
in the duties of the authority or commission to holders of its
obligations and providing the rights and remedies of the holders
in the event of a default.

(e) The authority, the commission, and any person executing
the bonds or notes shall not be liable personally on the bonds or
notes or be subject to personal liability or accountability by reason
of the issuance of the bond or note.

(f) The authority shall have power out of any funds available
for these purposes to purchase its bonds or notes. The authority
may hold, pledge, cancel, or resell those bonds, subject to and in
accordance with agreements with bondholders.

(g) The commission, the authority, and the board may enter into
a memorandum of understanding providing for the transfer of
energy remittance payments between the three agencies in
furtherance of this chapter.

(h) If there is insufficient project valuation or insufficient
demand for the revenue bonds authorized by this chapter, the loan
servicer shall continue to collect the energy remittance installment
payments that become due and payable and service the loans, and
the board shall continue to collect delinquent repayment
installments. Failure to sell the revenue bonds shall not create any
liability for the state.

25987.32.  

In the discretion of the authority, any bonds issued
under the provisions of this article may be secured by a trust
agreement by and between the authority and a corporate trustee
or trustees, which may be the authority or any trust company or
bank having the powers of a trust company within or without the
state. The trust agreement or the resolution providing for the
issuance of the bonds may pledge or assign the revenues to be
received pursuant to this chapter, to be financed out of the proceeds
of the bonds. The trust agreement or resolution providing for the
issuance of the bonds may contain provisions for protecting and
enforcing the rights and remedies of the bondholders as may be
reasonable and proper and not in violation of law, including
particularly provisions specifically authorized by this chapter to
be included in any resolution or resolutions of the commission
authorizing bonds. Any bank or trust company doing business
under the laws of this state which may act as depositary of the
proceeds of bonds or of revenues or other moneys may furnish
indemnifying bonds or pledge securities as may be required by the
authority. Any trust agreement may set forth the rights and
remedies of the bondholders and of the trustee or trustees, and may
restrict the individual right of action by bondholders. In addition
to the foregoing, any trust agreement or resolution may contain
other provisions as the authority may deem reasonable and proper
for the security of the bondholders. Notwithstanding any other
law, the authority shall not be deemed to have a conflict of interest
by reason of acting as trustee pursuant to this chapter.

25987.33.  

Bonds issued under the provisions of this article
shall not be deemed to constitute a debt or liability of the state or
of any political subdivision thereof, other than the authority, or a
pledge of the faith and credit of the state or of any political
subdivision, but shall be payable solely from the funds provided
by this chapter. All bonds shall contain on the face thereof a
statement to the following effect: “Neither the faith and credit nor
the taxing power of the State of California is pledged to the
payment of the principal of or interest on this bond.” The issuance
of bonds under the provisions of this article shall not directly or
indirectly or contingently obligate the state or any political
subdivision thereof to levy or to pledge any form of taxation or to
make any appropriation for their payment. Nothing contained in
this section shall prevent or be construed to prevent the authority
from pledging its full faith and credit to the payment of bonds or
issue of bonds authorized pursuant to this chapter.

25987.34.  

(a) The authority is hereby authorized to provide
for the issuance of bonds of the authority for the purpose of
refunding any bonds, notes, or other securities of the authority
then outstanding, including the payment of any redemption
premium and any interest accrued or to accrue to the earliest or
subsequent date of redemption, purchase, or maturity of the bonds.

(b) The proceeds of any bonds issued for the purpose of
refunding outstanding bonds, notes, or other securities may, in the
discretion of the authority, be applied to the purchase or retirement
at maturity or redemption of outstanding bonds either on their
earliest or any subsequent redemption date or upon the purchase
or retirement at the maturity thereof and may, pending application,
be placed in escrow to be applied to purchase or retirement at
maturity or redemption on a date as may be determined by the
authority.

(c) Pending use, any escrowed proceeds may be invested and
reinvested by the authority in obligations of, or guaranteed by, the
United States of America, or in certificates of deposit or time
deposits secured by obligations of, or guaranteed by, the United
States of America, maturing at the time or times as shall be
appropriate to ensure the prompt payment, as to principal, interest,
and redemption premium, if any, of the outstanding bonds to be
so refunded. The interest, income, and profits, if any, earned or
realized on any investment may also be applied to the payment of
the outstanding bonds to be so refunded. After the terms of the
escrow have been fully satisfied and carried out, any balance of
proceeds and interest, income, and profits, if any, earned or realized
on the investments may be returned to the authority for use by it
in any lawful manner.

(d) These bonds shall be subject to the provisions of this division
in the same manner and to the same extent as other bonds issued
pursuant to this chapter.

25987.35.  

Bonds issued by the authority are legal investments
for all trust funds, the funds of all insurance companies, banks,
both commercial and savings, trust companies, savings and loan
associations, and investment companies, for executors,
administrators, trustees, and other fiduciaries, for state school
funds, and for any funds which may be invested in county,
municipal, or school district bonds, and the bonds are securities
which may properly and legally be deposited with, and received
by, any state or municipal officer or agency or political subdivision
of the state for any purpose for which the deposit of bonds or
obligations of the state, is now, or may hereafter be, authorized by
law, including deposits to secure public funds if, and only to the
extent that, evidence of indebtedness or debt securities of the
participating party receiving financing through the issuance of
bonds qualify or are eligible for those purposes and uses.

25987.36.  

The state hereby pledges and agrees with the holders
of the bonds and with a participant with an approved application
that the state will not limit, alter, restrict, or impair the rights vested
in the authority or the commission or the rights or obligations of
a person or entity with which the commission contracts to fulfill
the terms of an agreement made pursuant to this chapter. The state
further agrees that it will not in any way impair the rights or
remedies of the holder of the bonds until the bonds have been paid
or until adequate provision for payment has been made. The
authority may include this provision and undertaking for the
authority in its bonds.

25987.37.  

(a) Bonds issued pursuant to this division shall be
exempt from all taxation and assessment imposed pursuant to state
law.

(b) No later than February 1, 2015, the commission shall apply
to the United States Department of the Treasury under the Energy
Tax Incentives Act of 2005 (Title XIII of Public Law 109-58) for
the authority to issue tax advantage bonds under the federal Clean
Renewable Energy Bonds program or any other applicable
programs.

 

Article 4.  Nonresidential Real Property Energy Retrofit Debt
Servicing Fund

 

25987.38.  

(a) The Nonresidential Real Property Energy
Retrofit Debt Servicing Fund is hereby established in the State
Treasury. Notwithstanding Section 13340 of the Government Code,
the moneys in the fund are hereby continuously appropriated to
the authority without regard to fiscal years for the purposes of
paying the principal and interest on bonds issued by the authority
pursuant to Section 25987.29, servicing the warehouse line of
credit, and defraying any direct and indirect costs incurred by the
Treasurer in executing duties required by this chapter.

(b) All interest and income derived from the deposit and
investment of moneys in the fund shall be credited to the fund,
and all unexpended and unencumbered moneys in the fund at the
end of any fiscal year shall remain in the fund.

25987.39.  

The Loan Loss Reserve Account is hereby
established in the Nonresidential Real Property Energy Retrofit
Debt Servicing Fund. The commission shall deposit the portion
of the repayment installation that is the loan loss reserve fee into
the account. Notwithstanding Section 13340 of the Government
Code, the moneys in the account are hereby continuously
appropriated to the authority without regard to fiscal years for the
purposes of paying outstanding balances due under an energy
remittance repayment agreement on a building that has been
foreclosed upon if the proceeds generated from the foreclosure
proceedings are insufficient to pay any past due payments under
the energy remittance repayment agreement, including accrued
interest, liquidated damages, and fees. All interest and income
derived from the deposit and investment of moneys in the account
shall be credited to the account, and all unexpended and
unencumbered moneys in the account at the end of any fiscal year
shall remain in the account.

25987.40.  

The Administration Account is hereby established
in the Nonresidential Real Property Energy Retrofit Debt Servicing
Fund. The commission shall deposit into the account the program
administration fee and liquidated damages collected pursuant to
this chapter. Notwithstanding Section 13340 of the Government
Code, moneys in the account shall be continuously appropriated
without regard to fiscal years to the authority, the commission,
and the board for the costs of implementing this chapter.

 

Article 5.  Miscellaneous

 

25987.41.  

(a) The commission, the board, and the authority
shall be authorized to promulgate necessary regulations to
implement and administer this chapter.

(b) Guidelines for the purposes of implementing this chapter
shall be adopted by the commission, board, or authority at a
publicly noticed meeting offering all interested parties an
opportunity to comment. For the initial adoption of the guidelines
and standards, the commission, board, or authority shall provide
a written public notice at least 30 days prior to the meeting. For
the adoption of any substantive change to the guidelines and
standards, the commission, board, or authority shall provide a
written public notice at least 10 days prior to the meeting.
Notwithstanding any other law, guidelines or standards adopted
pursuant to this section shall be exempt from the requirements of
Chapter 3.5 (commencing with Section 11340) of Part 1 of Division
3 of Title 2 of the Government Code.