Amended in Senate June 5, 2014

Amended in Assembly April 23, 2014

Amended in Assembly March 28, 2014

California Legislature—2013–14 Regular Session

Assembly Bill No. 2597

Introduced by Assembly Member Ting

(Principal coauthor: Senator Pavley)

February 21, 2014

An act to amend Sections 26052, 26055, 26060, 26061, 26062, and 26063 of the Public Resources Code, relating to energy.

LEGISLATIVE COUNSEL’S DIGEST

AB 2597, as amended, Ting. Energy: PACE program.

Existing law authorizes a public agency and a property owner to enter into voluntary contractual assessments to finance the installation of distributed generation renewable energy sources or energy or water efficiency improvements that are permanently affixed on real property (PACE financing program).

Existing law requires the California Alternative Energy and Advanced Transportation Financing Authority to establish a Property Assessed Clean Energy (PACE) Reserve program to assist local jurisdictions in financing, among other things, the installation of distributed generation renewable energy sources or energy or water efficiency improvements on residential projects. Existing law requires the authority, in considering the eligibility of a public agency’s PACE financing program for assistance under the PACE Reserve program, to consider whether the PACE program provides a loan that is less than 10% of the value of the property.

This bill would begin delete authorize end delete begin insert require end insert the begin insert authority to consider whether a end insert PACE begin insert financing end insert program begin delete to provide end delete begin insert provides end insert financial assistance that is less than 15% of the value of the property, for up to the first $700,000, and less than 10% of the remaining value of the property above begin delete $700,000 end delete begin insert $700,000, and whether the PACE financing program limits the total mortgage-related debt and PACE financing from exceeding the value of the property end insert .

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

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

SECTION 1.  

The Legislature finds and declares all of the
following:

(a) Property Assessed Clean Energy (PACE) financing programs
are voluntary contractual assessment or voluntary special tax
programs that finance the installation of distributed generation
renewable energy sources, electric vehicle charging infrastructure,
or energy or water efficiency improvements.

(b) The PACE risk mitigation program is intended to provide
an additional safeguard for both existing and new residential PACE
financing programs to expand in California.

(c) The PACE risk mitigation program is intended to remove
any additional risk to the first mortgage lender and federal
mortgage enterprises, such as Fannie Mae and Freddie Mac,
resulting from the existence of a PACE assessment on a property
in foreclosure or forced into sale for unpaid taxes.

SEC. 2.  

Section 26052 of the Public Resources Code is
amended to read:

26052.  

“Applicant” means, for the purposes of Article 2
(commencing with Section 26060), a public agency as defined in
paragraph (3) of subdivision (c) of Section 5898.20 of the Streets
and Highways Code, or an entity administering a PACE financing
program on behalf of and with written consent of a public agency,
and, for the purposes of Article 3 (commencing with Section
26070), a financial institution providing a loan pursuant to that
chapter to finance the installation of distributed generation
renewable energy sources, electric vehicle charging infrastructure,
or energy or water efficiency improvements.

SEC. 3.  

Section 26055 of the Public Resources Code is
amended to read:

26055.  

“PACE program” means a program established by an
applicant that is financed by the PACE bond or a PACE assessment
regardless of funding sources.

SEC. 4.  

Section 26060 of the Public Resources Code is
amended to read:

26060.  

(a) The authority shall develop and administer a PACE
Reserve program to reduce overall costs to the property owners
of PACE bonds issued by an applicant by providing a reserve of
no more than 10 percent of the initial principal amount of the PACE
bond.

(b) The authority shall develop and administer a PACE risk
mitigation program for PACE financing to increase its acceptance
in the marketplace and protect against the risk of default and
foreclosure.

SEC. 5.  

Section 26061 of the Public Resources Code is
amended to read:

26061.  

To qualify for assistance pursuant to this chapter, the
PACE program shall require all of the following:

(a) The interest rate on the PACE bond does not exceed a
percentage as determined by the authority to be appropriate.

(b) Minimum legal financing structure and credit underwriting
criteria as determined by the authority are met.

(c) Proceeds of the PACE bonds are used to finance qualified
energy and water efficiency, electric vehicle charging
infrastructure, and clean energy improvements.

(d) The improvement financed is for a residential project of
three units or fewer, or a commercial project that costs less than
twenty-five thousand dollars ($25,000) in total.

SEC. 6.  

Section 26062 of the Public Resources Code is
amended to read:

26062.  

An applicant shall submit to the authority an application
providing a detailed description of the PACE program, a detailed
description of the transactional activities associated with the PACE
bond issuance, including all transactional costs, information
regarding any credit enhancement or insurance associated with the
PACE program, and other information deemed necessary by the
authority.

SEC. 7.  

Section 26063 of the Public Resources Code is
amended to read:

26063.  

(a) In evaluating eligibility, the authority shall consider
whether the applicant’s PACE program includes the following
conditions:

(1) Financing recipients are legal owners of underlying property.

(2) Financing recipients are current on mortgage and property
tax payments.

(3) Financing recipients are not in default or in bankruptcy
proceedings.

(4) Financing is for less than 15 percent of the value of the
property, up to the first seven hundred thousand dollars ($700,000)
of the value of the property, and is for less than 10 percent of the
remaining value of the property above seven hundred thousand
dollars ($700,000).

(5) The property is within the geographical boundaries of the
PACE program.

(6) The program offers financing for energy or water efficiency
improvements, electric vehicle charging infrastructure, or clean
energy improvements.

(7) Improvements financed by the program follow applicable
standards of energy efficiency retrofit work, including any
guidelines adopted by the State Energy Resources Conservation
and Development Commission.

begin insert

(8) The total mortgage-related debt and PACE financing on the
underlying property does not exceed the value of the property.

end insert

(b) In evaluating an application, the authority shall consider all
of the following factors:

(1) The use by the PACE program of best practices, adopted by
the authority, to qualify eligible properties for participation in
underwriting the PACE program.

(2) The cost efficiency of the applicant’s PACE program,
including bond issuance, credit enhancement, or insurance.

(3) The projected number of jobs created by the PACE program.

(4) The applicant’s PACE program requirements for quality
assurance and consumer protection as related to achieving
efficiency and clean energy production.

(5) The mechanisms by which savings produced by this program
are passed on to the property owners.

(6) Any other factors deemed appropriate by the authority.